According to the book Blue Ocean Strategy finding an opportunity in the blue ocean makes a company shift its strategic focus from customers to non- customers, and from competitors to alternatives. To be successful a company should stop choosing between differentiation and cost leadership, and should strive to achieve both, value and low cost.
What is the Approach Behind Blue Ocean Strategy?
The approach behind Blue Ocean Strategy lies in redefining the current issues being faced by a particular industry, and then finding suitable alternatives based on the options available to open up a whole new dynamic space in a completely new market. For achieving this a company should shift its actual focus towards exploring the blue ocean waters.
This can be done if a company thinks differently and tries to reconstruct buyer value elements. This also involves resisting the urge to benchmark the competitors who are trying various strategies to find their way in the tough competitive red ocean.
How to Break Out of a Red Ocean?
Do you remember how your adults used to tell you ‘Doing the same thing again and again would not fetch you better results.’ The book Blue Ocean Strategy emphasizes on the same fundamental. The book outlines that a company can break out of a blue ocean by looking across the set defined boundaries of their respective industries in a systematic way.
Courtesy- stratx-exl.com
What New Boundaries are needed to create a Blue Ocean?
The book asks the companies to look across alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functional- emotional orientation of an industry, and even across time.
Let us look at all the above-mentioned factors in a very short and crisp way.
Looking Across Alternative Industries
Blue Ocean Strategy explain the difference between alternatives and substitutes. The book defines substitutes as those products that offer the same functionality or core utility.
On the other hand, it outlines that alternatives are those products or services that have similar purpose but different functions. Many big companies like Net Jets have made a strong foothold for themselves by looking at other strategic alternatives available to them.
Intuit created a blue ocean for itself by eliminating the use of a CPA, a complicated financial software, or a pencil for accounting purposes. Intuit looked at the dilemma of the customer and created Quicken software.
It is a financial software package that is easy for the users to understand and work with. It looked across its industrial boundaries to create a new successful market for itself by combining the simplicity of a software, ease of using a pencil and low pricing as a strategy to create that ocean.
Looking Across Strategic groups within Industries
Strategic groups can be defined as groups that are built in a graded order based on two interesting dimensions price and performance. Curves, a Texas based women’s fitness company practiced this theory to break away from the traditional strategic groups within the fitness industry, and hence created a blue ocean for itself.
What Strategic Changes were made by Curves?
Traditional fitness companies focus on providing their customers with a full range of fitness equipment, trendy juice bars, lockers, shower area, and sauna. All these factors add on to the cost of the service and the consumer has to pay the price.
Curves came up with a totally different experience for their customers, and this led to their immense success. In a typical Curves health club, the machines in the exercise room were arranged in a circle, so that the customers could face each other. This encouraged communication among the club members and improved the overall experience.
The club used hydraulic machines which were easy to use and safe. There were no mirrors on the wall, and undoubtedly no men staring at women practicing their exercise routine.
Members could complete their workout in a quick thirty minutes and save on a lot of time.
So, by not focusing on providing extra services like a shower area or a sauna or a spa the facility lowered its costs and passed on the benefits to their business partners, and this made the whole thing a huge new success
Looking Across the Chain of Buyers
Most of the times companies forget to look beyond their traditional buyer group. The company has to find out who the final customer is.
Canon used this strategy and focused on office secretaries who actually used their personal desktop copier, instead of focusing on purchase manager who were the actual buyer group for the industry.
They shifted their focus from the corporate purchasers who looked for fast, durable machines that could be easily managed. This helped Canon to create a blue ocean for itself by focusing on end users with their small, easy to use desktop copiers and printers.
Looking Across Complimentary Product and Service Offerings
Complimentary product and service offerings affect the value of your actual product. The company has to provide a total product or service solution to the customer. A job half done is almost as good as a job not done.
Take the example of a cinema hall with a baby-sitting facility. How many customers do you think would rush there to watch their favorite movie?
Looking Across Functional and Emotional Appeal
Apart from price and function a company sometimes uses emotional appeal to reach the buyers.
Look at your favorite brands like Maggie, Dairy Milk or Pediasure, and you would feel that this is one tool that most of the consumer-oriented companies use to define their strategic position in a competitive market.
The best strategy would involve shifting the current focus of the industry towards the other side. For e.g., a functionally driven industry could use some emotional expertise to create a blue ocean for itself.
Cemex a cement producing company created a blue ocean for itself by breaking away from the traditional focus on functionality. It focused on the emotional side of the business and became a huge success.
Looking Across time
Finding insights into trends is valuable for the success of a business. The book outlines that the trends must be decisive to your business, irreversible, and must have a clear trajectory.
Apple launched iTunes at time when there was a trend of huge inflow of illegal music file sharing. Apple observed the trend and utilized the opportunity to launch iTunes which provided features like sound quality, navigating, searching and browsing functions. They kept on innovating the features and this made iTunes one of the most successful strategic launches of the industry.
So, a company should look across the fixed industry parameters to create a blue ocean for itself. A company has to think beyond the conventional boundaries of competition to become a leader in their industry.
