Blue Ocean Strategy, Create New Markets and Leave the Competition Behind | Renée Mauborgne | WOBI

Summary

This insightful discussion contrasts red ocean and blue ocean strategies in business. Red ocean strategies focus on competing within existing market structures, often leading to intense competition and reduced margins. In contrast, blue ocean strategies seek to create new market spaces by innovating and reshaping industry structures, allowing companies to unlock new demand and financial success. The speaker highlights the sustainable nature of blue ocean strategies, exemplified by companies like Cirque du Soleil and JC Deco, which redefine their industries while achieving both differentiation and cost-effectiveness.

Takeaways

• 📊 The research distinguishes between 'Market Competing' (red ocean strategy) and 'Market Creating' (blue ocean strategy), highlighting different approaches to competition and growth.
• 🔍 Companies following a red ocean strategy operate under the existing industry structure, focusing on competing for market share rather than creating new demand.
• 🌊 Blue ocean strategy allows companies to reshape the industry's structure and create new markets, leading to unlimited opportunities.
• 💡 Successful market creators redefine competition by aligning their strategies to create new demand rather than just fighting for existing customers.
• 🏆 In red ocean strategy, companies must either be the most differentiated or the lowest cost player, which can limit growth opportunities.
• 💸 Blue ocean strategy emphasizes achieving both differentiation and low costs, even in high-cost environments, such as developed countries.
• 🤝 Sustainable blue ocean strategies align value propositions with profit propositions, motivating both buyers and partners effectively.
• 🕒 Blue ocean strategies are challenging to imitate, as evidenced by Cirque du Soleil, which remains unique even after 20 years.
• 🎮 The video game industry example shows how Nintendo created a blue ocean with the Wii, attracting new demographics and expanding market demand.
• 🪑 JCDecaux transformed outdoor advertising by redefining the industry, combining aesthetic improvement with effective advertising space, demonstrating successful market creation.

Q & A

What is the main difference between market competing and market creating?

Market competing refers to strategies within an existing industry structure, often characterized by intense competition and shrinking margins. In contrast, market creating involves developing new markets or 'blue oceans,' where opportunities are more abundant, allowing companies to innovate and reshape their industries.

What are 'red ocean' and 'blue ocean' strategies?

Red ocean strategies focus on competing within existing markets, leading to intense competition and minimal differentiation. Blue ocean strategies aim to create new market spaces, providing unique value propositions that allow companies to achieve both differentiation and low costs.

How do companies that create blue oceans approach industry structure?

Companies that create blue oceans do not accept the existing industry structure as given. Instead, they shape their strategies to redefine the industry's structure, allowing them to innovate and meet unaddressed customer needs.

Why is blue ocean strategy considered sustainable and hard to imitate?

Blue ocean strategy is seen as sustainable because it aligns the value proposition for customers with the profit proposition for the company and the motivation of employees and partners. This alignment creates a unique business model that is difficult for competitors to replicate.

Can you provide an example of blue ocean strategy in action?

The example given in the video is Nintendo's Wii, which entered the competitive video game market and appealed to a broader audience, including senior citizens. This created a blue ocean by expanding the customer base and demand for the industry.

What role does differentiation play in red and blue ocean strategies?

In red ocean strategies, differentiation often results in higher costs and narrower customer bases. Blue ocean strategies seek to achieve differentiation while also maintaining lower costs, broadening market appeal and accessibility.

How did JC Decaux redefine the outdoor advertising market?

JC Decaux transformed the outdoor advertising industry by introducing outdoor furniture as advertising space, which improved urban aesthetics and created a new growth market. This innovation allowed them to dominate a previously unattractive and small industry.

What implications do these findings have for companies trying to innovate?

The findings suggest that companies need to rethink their approach to competition and strategy. Instead of only seeking differentiation or cost leadership, they should explore opportunities to create new markets and align their value propositions in innovative ways.

What are the strategic moves referred to as market competing?

Market competing strategic moves involve trying to win existing customers from competitors, often resulting in fierce competition and a focus on either being the most differentiated player or the lowest cost provider within the current market.

What is the significance of aligning the value, profit, and motivation propositions in blue ocean strategy?

Aligning these propositions ensures that all aspects of the business model work together to create unique value for customers, generate sustainable profits for the company, and motivate employees and partners, leading to long-term success and reduced imitation risk.

Outlines

00:00

🎯 Understanding Market Strategies: Red Ocean vs. Blue Ocean

This segment discusses the distinction between two strategic approaches in business: Market Competing (Red Ocean) and Market Creating (Blue Ocean). It highlights that Red Ocean strategies involve intense competition within existing markets, leading to shrinking margins and a need for differentiation or cost reduction. In contrast, Blue Ocean strategies focus on creating new markets with less competition, allowing companies to innovate and reshape their market environment. The discussion emphasizes the importance of aligning the value proposition, profit proposition, and employee motivation to ensure sustainable competitive advantages. Notable examples include Nintendo's Wii, which expanded the gaming demographic, and JC Deco, which transformed outdoor advertising by integrating it with urban infrastructure, enhancing city aesthetics while creating profitable advertising opportunities.

Keywords

💡Market Competing

Market competing refers to the traditional approach where companies strive to outperform their rivals within the existing industry structure. This strategy often leads to intense competition, reducing profit margins as companies fight for the same customers. In the transcript, it is described as a 'red Ocean strategy' where companies accept the industry's constraints and attempt to carve out their share of the market.

💡Market Creating

Market creating is the approach where companies innovate to establish new markets and opportunities, often leading to a 'blue ocean' of untapped potential. This concept is central to the video as it contrasts with market competing, emphasizing the ability to reshape industry structures rather than merely conforming to them. For example, the transcript highlights how companies employing this strategy can unlock financial success by attracting new customers.

💡Red Ocean Strategy

Red Ocean strategy refers to the approach of competing in an existing market space characterized by fierce rivalry. The term symbolizes the bloody competition among businesses striving to capture a larger share of the market, which leads to diminishing profits. The speaker mentions that virtually every industry today operates in this environment, underscoring the challenges faced by companies trying to differentiate themselves while battling established competitors.

💡Blue Ocean Strategy

Blue Ocean strategy denotes the pursuit of creating new, uncontested market spaces that make the competition irrelevant. The video argues that by focusing on innovation and value creation, companies can establish a blue ocean, exemplified by Cirque du Soleil's unique entertainment model. This strategy allows businesses to achieve both differentiation and cost-effectiveness, which is crucial for sustainable success.

💡Value Proposition

The value proposition outlines the unique value a company offers to its customers, encompassing what differentiates it from competitors. In the context of the video, aligning the value proposition with profit and motivation strategies is crucial for sustaining a blue ocean strategy. This alignment ensures that companies not only attract customers but also maintain their profitability, as illustrated by the speaker's discussion of Cirque du Soleil.

💡Profit Proposition

Profit proposition refers to the way a company plans to earn revenue and sustain its financial health. In the transcript, it is highlighted that a successful blue ocean strategy requires a strong alignment between the value proposition and profit proposition, ensuring that customer needs are met while generating income. This concept is essential for companies aiming to thrive in new market spaces.

💡Market Structure

Market structure pertains to the characteristics and organization of a market, including the number of firms, product differentiation, and barriers to entry. The video emphasizes that traditional market competing strategies often take these structures for granted, while market creating strategies involve reshaping these structures to benefit the company. The speaker argues that industry structures are not fixed but can be reconstructed to create new opportunities.

💡Differentiation

Differentiation involves distinguishing a company's products or services from those of its competitors. In a red ocean strategy, companies often focus on becoming the most differentiated or the lowest-cost provider to gain a competitive edge. However, the transcript suggests that blue ocean strategies allow companies to achieve both differentiation and low cost by innovatively reshaping market dynamics.

💡Outdoor Advertising

Outdoor advertising refers to advertising that reaches consumers while they are outside their homes, often through billboards, posters, and other forms of media. The transcript provides the example of JC Deco, a French company that transformed outdoor advertising by integrating it into urban environments, thereby creating a blue ocean within a previously stagnant industry. This approach showcases how innovation can lead to new market opportunities.

💡Industry Dynamics

Industry dynamics describe the forces and trends that shape the behavior of companies within a specific market. The video underscores the importance of understanding these dynamics in order to shift from red ocean to blue ocean strategies. By recognizing and adapting to these changes, companies can create new demand and opportunities rather than merely competing for existing ones.

Highlights

The interaction discusses the distinction between companies that succeed in market creation versus those that fail.

Two sets of control groups were established to confirm differences between market competing and market creating.

Market competing strategies lead to intense competition and shrinking margins.

Market creating strategies allow companies to carve out new spaces in their industries, referred to as blue oceans.

Companies following blue ocean strategies reshape the structure of their environments rather than accepting existing industry norms.

Red ocean strategies focus on dividing existing demand among competitors, while blue ocean strategies seek to create new demand.

Red ocean strategies require either differentiation or low-cost positioning to succeed.

Blue ocean strategies enable firms to achieve both differentiation and low cost simultaneously.

A significant example is Cirque du Soleil, which has maintained its unique position for over 20 years.

Blue ocean strategies involve aligning the value proposition, profit proposition, and people proposition for sustainability.

The video game industry serves as an example where Nintendo's Wii created a blue ocean by appealing to diverse user groups.

JC Decaux transformed the outdoor advertising market by redefining it, creating growth and enhancing city aesthetics.

The discussion emphasizes the importance of innovation and adaptability in business strategies.

Success in market creation is linked to the ability to rethink industry structures and customer demand.

Understanding market dynamics is crucial for navigating competitive landscapes and identifying growth opportunities.

Transcripts

[Music]

how about in those ahe had Market

creating strategic moves is there a

difference between those that

succeeded and those that attempted but

failed so we had two sets of control

groups first it had to be that there was

a difference between Market competing

and Market creating which we confirmed

there is a difference in how companies

approach strategy and then the second

one in those companies attempting to

create new markets is there a difference

systematic pattern between those that

were able to succeed and unlock

Financial results and those that failed

and again we found a pattern and what I

want to do today is share with you um a

little bit about how what is that

pattern look like and what we found so

we found two sets of findings the first

set of findings was that we called these

Market competing strategic moves

basically red Ocean strategy because in

almost every industry that we could find

and virtually every government today

will tell you that they're operating in

the red increasingly intense competition

margins are shrinking harder to get new

Investments um more competition and we

called markets creating strategic moves

the blue ocean because the opportunities

for all of us out there were unlimited

and there were sets of companies despite

what was happening in the industry were

carving out and creating this new

space the differences that we found were

that conceptually companies that were

Market creating Market competing what

they did is they took the structure of

their industry for granted it's tough

and they built their strategy based on

it but companies that created new

markets created blue oceans they said I

am going to have my strategy shape the

structure of my environment because

indust indry structures are not given

they are not a product of nature they're

a product of our minds we have created

them and they can be reconstructed in

your

favor in red Ocean strategy because I

accept the structure of my industry I

spend my time fighting to divide

existing demand winning compet customers

from my competition Blue Ocean strategy

does that but they say wait a minute the

amount of people in the universe is so

broad versus what my industry attracts

how can I create new demand to grow my

industry and under red Ocean strategy

they say the only way to succeed is to

be the most differentiated player or the

lowest cost player but if I'm

differentiated I have a high cost

structure of course right high price

point meaning fewer people can buy it

Blue Ocean strategy says no by

reconstructing markets changing the

fundamental basis of strategy even in

high labor cost countries like

Italy or the us or Europe or Japan I can

achieve differentiation and low cost so

that was the first set of findings our

research found when we looked at the

difference the second set of findings we

found and why we called it Blue Ocean

strategy and not blue ocean marketing

was that a strategy to be sustainable we

found and to be not imitated many people

come to us and they say ah Blue Ocean

strategy great idea but you know it

should be imitated very fast but look at

cir to solay today over 20 years later

still people fire a tough time to

imitate what they're doing and the

question is because Blue Ocean strategy

is about the alignment of the value

proposition that makes buyers win profit

proposition which is how the company

wins and earns money and people

motivating the people and the partners I

have to work for me now of course under

red Ocean strategy they need alignment

as well but they try to align those

three propositions to be be either

differentiated or low cost but Blue

Ocean strategy says we're going to align

those three but to achieve

differentiation and low costs so our

exports have value around the world and

so we retain our Import in our local

domestic markets as

well if you look at the video game

industry I just mentioned it a bloody

red industry very tough competitors

you've got Sony you've got Microsoft and

then Nintendo comes with a Wii and it

creates a blue ocean has both uh both

the uh diff most differentiated profile

out their lowest cost structure even

though it's being produced in Japan and

the United States and at the same time

pulled in senior citizens as users kids

that used to only like to do Sports they

became users of it and it grew demand

for the whole industry as

well in the outdoor advertising industry

these B you know the um when you're on

the highway you see these panels that go

up advertising for something or whatever

very red ocean very small very

unattractive relatively unprofitable

advertising um part of the industry and

yet JC Deco the French company comes out

creates a blue ocean and dominates in

turn creating Outdoor Advertising

through outdoor furniture in almost all

the major cities of the world and it's

what you see when you're sitting on bus

stations or stops or the metro stops or

in airports JC Deco redefine that space

made Outdoor Advertising a growth Market

where almost every major city in the

world sees that company um as a chance

to improve the Aesthetics of its City

and it and the uh public services that

it offers while giving JC too great new

advertising space that it gets contracts

on again a red ocean Small industry JC

Deco redefines

it