Outperform 99% of your competition - BLUE OCEAN STRATEGY

Summary

The 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.