Blue Ocean Strategy (by Robyn Logan)
Blue Ocean Strategy, by W. Chan Kim and RenŽe Mauborgne
I just love this book. (http://www.blueoceanstrategy.com) It is one of those business books I keep coming back to - and not because I am necessarily looking for help with my business - but because I find it pleasurable to read the various case studies of marketing creativity contained in its covers.
“Blue Ocean Strategy” is not new to the bookshelves, in fact it is a couple of years old now, but the message remains current. The authors, INSEAD professors Kim and Mauborgne advocate an approach to marketing that takes you outside traditional thinking. They draw a distinction between traditional strategic thinking - which they call “red ocean” strategy and a new, more creative approach, which they call “blue ocean” strategy.
A ‘red ocean’ is based on traditional strategic thinking (e.g. Harvard’s strategy guru Michael Porter). It is about creating a vision and some targets and then working out a way to make those “Five P’s” work to your advantage. Much of the language has a history in military combat and much of the energy is devoted to ÒbeatingÓ the competition.
What then is a BLUE OCEAN STRATEGY?
The authors explain the difference between ‘Red Ocean’ strategy and ‘Blue Ocean’ strategy as follows:
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company’s activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company’s activities in pursuit of both differentiation and low cost.
A blue ocean then, is created by looking outside traditional marketing concepts and identifying new aspects to existing markets, or new markets altogether.
A good example of this kind of thinking is Cirque du Soleil - instead of competing in the traditional circus market and either lowering their price or altering their position, the directors looked at the core elements of “circus” (i.e. big top, acrobatics etc.) and then reinvented them in the entertainment market. Cost savings were made by eliminating and reducing the factors an industry normally competes on (use of animals for e.g.) and buyer value was lifted by raising and creating elements the industry has never offered (dance, theatre for e.g.) The result was a whole new business model, out there in the market on its own - no direct competitors and a new and hungry market.
Here are some examples more quoted in the book:
Some Red Ocean cases:
* Airline industry price wars result in bankruptcies and low profit margins. Southwest Airlines creates a new market by offering the speed of air travel with the low cost and flexibility of driving.
* Golf equipment industry competes to win a greater share of existing golf customers. Callaway Golf creates “Big Bertha”, a golf club with a large head that attracted new customers to golf that had been frustrated by the difficulty of hitting the ball.
* The cosmetic industry creates a red ocean with models, expensive advertising, and promises of youth and beauty. The Body Shop creates a blue ocean that lasts more than a decade by creating functional cosmetics that defied the industry which sold emotionally appealing cosmetics.
* The wine industry gluts the market with a red ocean of thousands of brands competing on the finest oaks and tannins and legacy winery names. Casella wines creates [yellow tail], a blue ocean wine that succeeded by eliminating complexity, elitism and consumer confusion and creating a fun simple image that non-wine drinkers could enjoy.
Examples of strategic moves that created blue oceans of new, untapped demand:
- NetJets (fractional Jet ownership)
- Cirque du Soleil (the circus reinvented for the entertainment market)
- Starbucks (coffee as low-cost luxury for high-end consumers)
- Ebay (online auctioning)
- Sony (the Walkman - personal portable stereos)
- Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan (1984)
- Computers: Apple personal computer (1978) and Dell’s built-to-order computers (mid-1990s).
What can you do?
How can you start thinking about your current business in a “blue ocean” way? My first recommendation would be to buy the book, my second is to make a good coffee (or herbal tea!) and give it a good read.
Good luck!