Outperform 99% of your competition - BLUE OCEAN STRATEGY
Summary
TLDRThe Blue Ocean strategy proposes creating new uncontested market spaces with no competition, as opposed to struggling in competitive 'red oceans' where companies fight over limited customers. It utilizes innovative 'value innovation' to provide higher value at lower cost. Analysis tools like the strategy canvas and four actions framework (eliminate, reduce, raise, create) are used to develop new offerings. Six practical tips called the six path framework also help uncover blue ocean opportunities, including looking across substitute industries, complementary offerings, buyer groups, trends, etc. Overall, the Blue Ocean strategy aims to make the competition irrelevant by creating new demand and market growth.
Takeaways
- 😀 The market is divided into two oceans: blue ocean (uncontested market space) and red ocean (crowded with competition). Blue oceans offer more opportunities for growth.
- 👍 Value innovation means providing higher value to customers while reducing costs. This is key to blue ocean strategy.
- 📈 A study found that blue ocean launches brought 61% of profits while red ocean launches brought only 39% despite being more numerous.
- 📊 The strategy canvas captures what the competition offers and the value customers receive on horizontal and vertical axes respectively.
- ✂️ The four actions framework poses key questions to develop a blue ocean strategy: Eliminate, Reduce, Raise, Create.
- 🔍 Six practical tips called the six path framework help identify blue ocean opportunities.
- 🎯 The main idea is to create new market space and make the competition irrelevant.
- 📉 Reduce costs through eliminating and reducing factors the industry takes for granted.
- 📈 Raise value by improving factors valued by customers above the industry standard.
- ✨ Create new value factors the industry has never offered before.
Q & A
What are the two oceans that the market is divided into according to the Blue Ocean Strategy?
-The two oceans are the blue ocean, which represents untapped market space with no competition, and the red ocean, which refers to existing competitive market space.
What is value innovation?
-Value innovation refers to providing higher value to customers at a lower cost. It is a new way of thinking that increases value while reducing costs.
How did Casella Wines use the four actions framework to create a blue ocean?
-Casella Wines eliminated non-essential factors like complexity and aging, reduced the wine selections to just two varieties, raised prices but kept them below premium wines, and created an easy-drinking wine called Yellowtail aimed at non-wine drinkers.
What were the results of Casella Wines' blue ocean strategy with Yellowtail?
-In just two years, Yellowtail became the fastest growing wine brand in Australian and US history. It brought non-wine drinkers into the market while also attracting drinkers from budget wines and more expensive wines.
What is the six path framework?
-The six path framework provides six practical tips to identify blue ocean opportunities: 1) Look across functional/emotional appeal 2) Look across alternate industries 3) Look across complementary products/services 4) Look across strategy groups 5) Look across the chain of buyers 6) Look across time.
How did Toyota create a blue ocean with its Lexus brand?
-Toyota offered the quality and luxury of high-end German cars like Mercedes and BMW but at much lower, economy car prices. This attracted buyers from both the luxury and economy car markets.
How did Novo Nordisk shift the insulin industry focus from doctors to patients?
-They developed an easy to use insulin pen so patients no longer had to struggle with complex insulin injections. This provided higher convenience and value to users.
What trends can provide blue ocean opportunities when looked across time?
-External trends like rapid growth of the internet and increased environmental awareness are examples. Using insights into how these trends will impact your industry can uncover new value for customers.
What is the key message or thesis of the Blue Ocean Strategy?
-The main idea is to create new market space and break away from competition by making the competition irrelevant. Instead of fighting over existing demand in a crowded market, you can tap into hidden demand.
How can identifying substitutes help uncover blue oceans?
-Looking at substitute products from other industries that satisfy the same customer needs can spark innovative new offerings. You can combine the best elements of substitutes to provide greater value.
Outlines
😊 What is the Blue Ocean Strategy and how companies can create it
The Blue Ocean strategy involves creating uncontested market space and making the competition irrelevant. It is based on the concepts of value innovation - providing higher value to customers at lower cost. The strategy canvas and four actions framework are key tools used to develop a Blue Ocean strategy. Companies like Casella Wines used these tools to create the wildly popular Yellowtail wine brand which brought new non-wine drinkers into the wine market.
😀 Four action framework - Eliminate, Reduce, Raise and Create
The four actions framework provides a systematic way to develop a Blue Ocean strategy. It poses four key questions to challenge an industry's factors that are taken for granted. Eliminate - Which factors should be eliminated, Reduce - Which ones should be reduced well below industry standard, Raise - Which factors should be raised well above industry standard, and Create - What new factors should be introduced that the industry has never offered before.
🧐 Six practical tips to identify Blue Ocean opportunities
The six path framework provides practical tips to uncover Blue Ocean opportunities - 1) Shift appeal from functional to emotional or vice versa 2) Look across alternate industries 3) Consider complementary offerings in the full customer experience 4) Combine most attractive factors across strategic groups within an industry 5) Look across the chain of buyers 6) Identify trends over time that can inspire new value.
😊 Summary of key ideas from Blue Ocean Strategy book
The main idea of the Blue Ocean Strategy is to create new uncontested market space and make competition irrelevant. This can lead to highly profitable growth and value innovation. The book provides frameworks and tips on how to systematically analyze the market to uncover these new opportunities.
Mindmap
Keywords
💡Blue Ocean Strategy
💡value innovation
💡four actions framework
💡strategy canvas
💡non-customers
💡functional appeal
💡emotional appeal
💡six paths framework
💡red ocean
💡trade-off
Highlights
The market is divided into two oceans - a blue ocean and a red ocean
Creating a blue ocean can lead to better profits and growth
Value innovation means providing higher value to customers at a lower cost
The four actions framework poses four key questions to develop a blue ocean strategy
The purpose of eliminating and reducing is to reduce costs
Raising and creating are focused on generating new value
Yellowtail created a new market by appealing to non-wine drinkers
The main idea is to create a new market by breaking from the competition
The six paths framework helps identify blue ocean opportunities
Look across emotional versus functional appeals
Consider substitute industries that serve the same need
Analyze complementary products that affect perceived value
Combine factors attractive to different strategic groups
Understand all groups involved in the buying decision process
Identify industry trends and how they may shift value
Transcripts
regardless of what business you're in or
what job you are doing you're always
competing with others if you want to
dominate the market and outperform 99 of
your competitors then the book called
The Blue Ocean strategy is exactly what
you need I have personally read this
book two times and will definitely read
it a few more times in the future if you
are an entrepreneur then this is the
type of book you need to study like a
school textbook not just read and forget
about it
in this video I'm going to share the key
ideas from the book with you so let's
get started
imagine you're about to dive your diving
instructor meets you and gives you two
options you can either dive into a vast
and pristine ocean where the water is
Crystal Blue and there is an abundance
of marine life and there are not many
other divers around which means you can
move around easily
or you can dive into an ocean where the
water isn't clear and the surrounding is
crowded with many other divers who are
trying to experience the same things as
you are
you can still experience a few nice
things but you have to be quicker than
the other divers which would you choose
obviously the first option right
starting a business is like diving and
most entrepreneurs unfortunately choose
the second option
according to this book The Market is
divided into two oceans a blue ocean and
a red ocean the blue ocean is exactly
like the first option there is no
competition the rules of the game
haven't been set yet and there's a lot
of opportunity for profitable growth on
the other hand the red ocean is crowded
with many businesses all competing for
the same customers and resources in the
red ocean the rules of the game are
known and companies try to outperform
each other to grab as much of the
existing demand as possible but as the
market becomes more crowded profits and
growth get smaller and smaller products
become generic and the competition is so
intense that water turns red with the
blood of competitors and creates the red
ocean
today it's becoming harder and harder
for companies to be profitable they are
fighting over the same limited customers
and resources if you've noticed products
are becoming more and more similar to
each other for example people used to be
very loyal to Brands like tide for
laundry detergent or Colgate for
toothpaste but now if some other brand
is on sale they might switch to that
instead it's getting harder and harder
to stand out from the crowd a study was
conducted to see the impact of creating
blue oceans versus competing in red ones
the study analyzed 108 companies and
their new business launches out of the
108 companies studied in the research 86
of them were simply improving their
existing product within the existing
Market space these launches brought 39
percent of total profits the remaining
14 of the companies focused on creating
a blue ocean they came up with new and
Innovative products the market had never
seen before these companies generated an
impressive 61 percent of total profits
this data clearly shows that creating a
blue ocean can lead to better profits
and growth now let's see what the Blue
Ocean strategy is exactly and how you
can apply it the Cornerstone of the Blue
Ocean strategy is something called value
innovation which basically means
providing higher value to your customers
at a lower cost
I can almost hear you saying how can a
company provide higher value to the
customer while reducing its cost doesn't
higher value mean higher costs
the answer is no value innovation is a
new way of thinking which provides
higher value at a lower cost let me
explain it with an example
the wine market is one of the most
competitive markets in the USA But
despite that the Australian wine company
called Casella wines became the number
one wine thanks to value innovation
Casella Wine's first analyzed the market
by using a blue ocean tool called
strategy canvas the strategy canvas is a
simple framework that helps you to
understand two important things about
the market what your competition is
offering to the customers and what value
customers are getting for their money
the strategy canvas is like the
screenshot of the market you are
freezing everybody and taking a picture
the information about the competition
and their offerings is captured in the
horizontal axis and the information
about the value the customers receive is
captured on the vertical axis for
example in the case of price a higher
score indicates a higher value to the
customer premium wines all have the same
conventional strategy which is to offer
a high price and high quality across all
factors budget wines on the other hand
have a low price and low quality across
all factors
after analyzing the market costella
wines used the second and most important
blue ocean tool called four actions the
four actions framework poses four key
questions to develop a Blue Ocean
strategy eliminate reduce raise create
number one eliminate which factors that
the industry takes for granted should be
eliminated number two reduce which
factors should be reduced well below the
industry's standard three raise which
factors should be raised well above the
industry's standard
four create which factors that the
industry has never offered should be
created
the purpose of the first two questions
is to reduce costs if you remember a few
minutes ago we were discussing how is it
possible to increase the value while
reducing the costs well this is where
the cost savings comes from
reducing the cost is half of the job you
still need to create new value and that
is where questions number three and
number four come in raise and create
now back to our example here is how
Casella wines applied the four actions
framework to create a blue ocean
eliminate
they eliminated all the factors the wine
industry had long competed on such as
complexity and aging with the need for
aging eliminated they also eliminated
costs on Oak barrels and Storage
reduce they dramatically reduced the
range of wines offered creating only two
white chardonnay and a red Shiraz the
Simplicity of offering only two wines
reduced the costs further plus it made
the wine selection process easier for
non-wine drinkers raise they removed all
technical jargon from the bottles and
created a simple and non-traditional
label they also raised their prices
above the budget wines but below the
premium wines
create they mainly focused on
non-customers of wine such as beer and
cocktail Drinkers and found out that
many of them rejected one because of its
complicated taste and difficulty to
select using this information they
created a wine called yellowtail that is
easy to drink easy to select and fun the
wine promised to jump from the glass
like a kangaroo the result is that
yellowtail appeared to a broad group of
alcoholic beverage consumers
in just two years yellowtail emerged as
the fastest growing brand in history of
both the Australian and the U.S wine
Industries it became the number one
imported wine into the United States
surpassing the wines of France and Italy
what's more yellowtail didn't just steal
sails from competitors it grew the
market the wine brought non-wine
drinkers into the wine market novice
wine drinkers started to drink wine more
frequently budget wine drinkers moved up
and drinkers of more expensive wines
moved down to become consumers of
Yellowtail the main idea of the Blue
Ocean strategy is to create a new market
by breaking away from the competition in
other words making the competition
irrelevant
but where do you actually look to find
ideas for creating a blue ocean
here are six practical tips that can
help you to identify blue ocean
opportunities the authors call this six
path framework
path number one look across functional
or emotional appeal to buyers
every industry companies compete based
on two bases of appeal functional or
emotional functional appeal means
offering a product or service based on
its usefulness and price while emotional
appeal means offering a product or
service based on feelings for example
coffee is a functional product but
Starbucks turned it into an emotional
product by creating a unique experience
around it Starbucks isn't just a place
where you get coffee it's also a place
where you can relax and forget about
your problems get some work done or meet
your friends
quite opposite to Starbucks a Japanese
barber shop called Quick Beauty created
a blue ocean by Shifting the industry
from an emotional one to a highly
functional one in Japan the time it
takes to get a man's haircut hovers
around one hour why a long process of
activities is undertaken to make the
hair cutting experience a ritual
numerous hot towels are applied
shoulders are rubbed and massaged
customers are served tea and coffee and
the barber follows a ritual in cutting
hair including special hair and skin
treatments such as blow drying and
shaving the result is that the actual
time spent cutting hair is a fraction of
the total time moreover these actions
create a long cue for other potential
customers QB house changed all that it
recognized that many people especially
working professionals don't wish to
waste an hour on a haircut
QB house Stripped Away the emotional
service elements of hot towels shoulder
rubs and teen coffee and reduced special
hair treatments to focus mainly on basic
Cuts QB house also eliminated the
traditional time-consuming wash and dry
practice by creating the air wash system
so to summarize tip number one if your
industry competes on functionality and
see how you can make it emotional if the
opposite is true and everybody competes
On Emotion then see how you can make
your product functional path number two
look across alternate Industries
a company doesn't just compete with
other companies in their own industry
but also with companies in other
industries that offer similar products
or Services different products or
Services can be substitutes for each
other because they provide the same
function or utility but come in various
forms there are opportunities for
companies to innovate and offer
Something New by looking beyond their
own industry and considering
alternatives
for example to sort out your personal
finances you can use Financial software
hire an accountant download an app or
use pen and paper the software the
accountant the pen and paper and the
financial app are largely substitutes
for each other they have different forms
but serve the same function helping
people manage their financial affairs
another interesting example you probably
know that Ford Model T was the first
mass-produced affordable car that
revolutionized the car industry this was
all possible because Henry Ford used an
assembly line production system where
one worker did only one single task
Henry Ford got the idea of the assembly
line production from visiting a
slaughterhouse and grain factories in
other words he looked at alternative
Industries to create a blue ocean
opportunity when people make purchasing
decisions they often think about their
options unconsciously they consider what
they want and how they can achieve it
however when companies sell products or
Services they don't always think about
how their customers are making
trade-offs across different Industries a
company called netjets observed that
business Travelers in the airline
industry had two choices they could fly
on a commercial airline or the company
could purchase its own aircraft
companies choose commercial airlines
because it's cheaper buying your own
aircraft and maintaining it is quite
expensive on the other hand buying your
private aircraft provides benefits such
as cutting total travel time avoiding
busy airports and allowing Executives to
arrive more energized and productive
netjets created a new way of air
traveling called fractional jet
ownership this means customers don't buy
a whole private jet but only a small
part of it this makes it a lot cheaper
than buying a whole jet plus you don't
have to change planes or wait in line at
the airport it only takes a few minutes
to go from your car to take off you can
complete trips much faster and arrive at
your destination energized and fresh
the final result is that buyers get the
convenience of a private jet at the
price of commercial airline travel
netjets created a new market by
combining the best parts of private jets
and commercial airlines and eliminating
everything else
this made them a multi-billion dollar
company and they are still the biggest
in the business so tip number two is to
look at industries that are alternative
to yours especially focus on the key
factors that cause customers to switch
from your industry to another industry
path number three look across
complementary product and service
offerings
for example in the movie theater
industry the ease and cost of getting a
babysitter and parking the car affects
the perceived value of going to the
movies by offering a babysitting service
a movie theater could tap into this
hidden value and create a blue ocean
by considering the entire customer
experience including what happens before
during and after the use of a product
you can uncover New Opportunities
despite its importance to British
culture the British tea kettle industry
had been struggling to make a profit
until Philips Electronics came along and
turned the red ocean blue Phillips
realized that the problem people had
with brewing tea wasn't with the tea
kettle itself but with the water used to
make the tea the tap water had a mineral
called lime scale that built up in the
kettle as it boiled and then ended up in
the tea people had to use a spoon to
scoop out the lime scale before drinking
their tea the tea kettle industry didn't
think this was their problem but
Phillips saw an opportunity to create a
new product that solved this issue and
made the tea kettle more valuable to
buyers this helped Philips create a new
market space in the tea kettle industry
so tip number three to discover a blue
ocean opportunity is to look at the
entire customer experience and analyze
what happens before during and after
they use your product
path number four look across strategy
groups within the same industry
a strategy group is a group of companies
within an industry that pursue a similar
strategy for example online shoe stores
versus physical shoe stores they both
serve the same need choose another
example the luxury car market versus the
economy car market both fall within the
same overall industry automobiles but
they pursue very different strategies
for serving the same need and because of
that they don't see each other as
competition thinking that luxury car
buyers wouldn't be interested in
economic cars and vice versa but the
truth is that customers can trade up and
buy more expensive options or trade down
and buy cheaper options you only need to
understand the factors that determine
customers decisions to trade up or down
for example people who buy expensive
cars are interested in luxury on the
other hand people who buy economic cars
are concerned about the price
the Blue Ocean strategy would be to
produce a car that is a luxury but the
price is not so much higher than the
economic car price this way the economic
car buyers can trade up and luxury car
buyers can trade down this is exactly
what Toyota did with its Lexus offering
the quality of high-end cars such as
Mercedes and BMW at economy car prices
by doing that Lexus captured customers
from both segments not just that it also
Drew many new customers to the market so
tip number four for creating a blue
ocean is to combine the most attractive
factors of different groups within your
industry
path number five look across the chain
of buyers
creating a blue ocean can also be
achieved by looking across the chain of
buyers in the industry there are often
multiple groups involved in the buying
decision including purchasers users and
influencers for example the
pharmaceutical industry primarily
targets influencers such as doctors
while the clothing industry targets
users by gaining new insights into how
to redesign the product to appeal to
different buyers companies can create a
blue ocean Market Novo Nordisk a Danish
insulin producer wanted to create a blue
ocean in the insulin industry the
industry had always focused on doctors
as the key influencers in insulin
purchasing decisions however Novo
Nordisk saw an opportunity to create a
blue ocean by Shifting the industry's
focus from doctors to patients
themselves they found that insulin
supplied to diabetes patients presented
significant challenges in administering
patients had to handle syringes needles
and insulin and administer doses
according to their needs which was
complex and unpleasant this led Novo
Nordisk to develop the novopen the first
user-friendly insulin delivery solution
that looked like a pen the pen contained
an insulin cartridge that allowed the
patient to easily carry roughly a week's
worth of insulin the pen had an
integrated click mechanism making it
possible for even blind patients to
control the dosing and administer
insulin patients could take the pen with
them and inject insulin with ease and
convenience without the embarrassing
complexity of syringes and needles this
Innovative insulin delivery system
shifted the industry landscape and
transformed Novo Nordisk from an insulin
producer to a Diabetes Care company
today almost 30 years after its initial
blue ocean strategic move Novo Nordisk
Remains the global leader in Diabetes
Care and around 70 percent of its total
turnover comes from this offering
path number six look across time
all Industries are subject to external
trends that affect their business over
time for example think of the rapid rays
of the internet or the global movement
toward protecting the environment by
looking at these Trends in your industry
you can find Blue Ocean opportunities
for example as Netflix saw internet
Broadband explode it realized that fast
and real-time streaming of movies would
soon be able to take off this Insight
inspired Netflix to create a blue ocean
for itself so can you identify the
trends that have a high probability of
impacting the industry you are in how
will they change your industry using
this information can provide higher
value to your customers and create a
blue ocean for yourself
this is it for this video hope it was
useful if you are an entrepreneur who is
always busy feels burnt out and doesn't
see results despite the hard work then
check out the video you see on your
screen it's the summary of a book called
who not how this book will save you so
much time and increase your income
thanks for watching
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