Creating Blue Ocean from Red Ocean

Creating Blue Ocean from Red Ocean
Written by Richard San Juan for Gaebler Ventures

We take a look at Blue Ocean Strategy, a strategic framework developed by W. Chan Kim and Renée Mauborgne.

As an entrepreneur, imagine sitting at a beach and gazing towards to the seemingly limitless blue ocean. What comes to mind?
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Hopefully, the prospect of having unlimited boundaries to sail boats comes up.

Now, apply that same thinking to a particular market sector.

An aspiring entrepreneur should see it as a potential limitless consumer base where one can market their product or service. More often than not, however, there are sailboats that populate the ocean.

Let's say the boats are colored red. If there are too many red boats milling around in the ocean, then it almost becomes like a red ocean.

The goal of the blue ocean strategy is to stay clear of the red ocean market and head into blue waters. This strategy, developed by W. Chan Kim and Renée Mauborgne, is a form of business strategy that tries to make competition (the sailboats) irrelevant by creating new markets (blue ocean).

Putting the metaphors aside, it is important to define what exactly is blue ocean and red ocean.

Blue oceans are markets or industries that have not been discovered yet and have not been marketed to. In blue oceans, there is no competition and demand can be created. Therefore, there is the potential for exponential growth once it is tapped into.

In contrast, a red ocean market is heavily competitive and saturated with competitors that fight each other to grab a bigger slice of existing demand. Oftentimes in this type of market, profits shrink due to dwindling market shares as a result of price reductions. In addition, with the market already having been explored for a long time, there is no more new demand left to market to. Consequently, the goods and services become commodities.

The Path to the Blue Oceans

Now that you know that blue oceans are better, you are probably asking: How do I, as an entrepreneur, get there?

Great question! How does one get out of the red ocean market where there is very little existing demand and make ones way to more profitable waters?

One word: innovation.

Innovation is indeed the central focus of the blue ocean strategy and one that entrepreneurs and small business owners should be aware of. There have been numerous companies that have utilized this strategy to achieve success.

Past examples have shown that blue ocean strategy usually emerges within an industry saturated with red ocean thinking.

An example of this is AMC Theaters. It was an ingenious move due to the fact that the theater industry was already full of entrenched competitors. AMC Theaters was already established as a market leader in the theater industry, but still enabled itself to create growth and new demand by introducing the megaplexes concept, which sometimes consists of thirty screens in one location.

Another example of blue ocean strategy was the formation of Cirque du Soleil. The major focus of its strategy was to reduce its cost structure by getting rid of traditional costly circus acts such as animal acts and aisle concessions. This paved the way for Cirque du Soleil to provide a unique and profitable circus experience to many customers where they fused ballet and circus acts.

Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.

Blue Ocean Strategy - A Company Caught in the Red Ocean

A Company Caught in the Red Ocean

When a company's value curve converges with its competitors, it signals that a company is likely caught within the red ocean of bloody competition. A company's explicit or implicit strategy tends to be trying to outdo its competition on the basic of cost or quality. This signals slow growth unless, by the grace of luck, the company benefits from being in an industry that is growing on its own accord. This growth is not due to a company's strategy, however, but to luck.

Source: Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne, Page 42

Blue Ocean Strategy - Value Curves

A Blue Ocean Strategy

The first question the value curves answer is whether a business deserves to be a winner. When a companPy's value curve, or its competitors', meets the three criteria that define a good blue ocean strategy - focus, divergence, and a compelling tagline that speaks to the market - the company is on the right track. These three criteria serve as an initial litmus test of the commercial viaility of the blue ocean ideas.

On the other hand, when a company's value curve lacks focus, its cost structure will tend to be high and its business model complex in implementation and execution. When it lacks divergence, a company's strategy is a me-too, with no reason to stand apart in the marketplace. When it lacks a compelling tagline that speaks to buyers, it is likely to be internally driven or a classic example of innovation for innovation's sake with no great commercial potential and no natural take-off capability.

Source: Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne, Page 41

The 4 Ways To Grow Your Business In 2008

Blue Ocean Strategy Articles : The 4 Ways To Grow Your Business In 2008 by Mark B.


I dont know about you but I am sick and tired about hearing and reading about how the world in which we live in is such a terrible place. Yes, it is far from ideal but does turning on the television, radio or picking up a newspaper only to hear of recession, poverty and strife really help us?

I for one, suspect it doesnt and whilst I am not suggesting you should bury your head in the marketing sand and assume everything is rosy and perfect in the world, I am suggesting that if you approach 2008 and beyond with the right attitude and mindset your chances of success will increase. And so with it will the chances of you and your customers being more successful.

The truth is many of your competitors and your customers are worried about what the New Year and the future holds for their businesses and livelihoods. There is nothing wrong with being concerned about a possible worldwide recession, falling house prices and rising interest rates to name a few things but likewise there will also be great opportunities for companies to flourish even in the hardest of times. In fact, I would argue that it is in the times of hardship that companies with the skills to out market their competitors will really see the greatest benefits.

You see, marketing when times are good is a lot easier as companies have more money to spend on marketing, advertising and on promoting their business. And customers (and potential customers) have more disposal income and are therefore more likely to buy products and services.

However, when times are tough every cent or penny is accounted for and counts more than ever so companies who can differentiate their products and services better than their competition have a much better chance of being successful. And whilst money and cash flow might be at the forefront of most companies minds I certainly would not encourage a total shift in your marketing strategy to focus on the cheapest is best route. People and businesses ultimately want value for money from the products and services they buy and this applies equally in times of hardship as it does when times are good.

2008 for the global economy and for you and I might be tough. It might be a struggle but if you dwell on the negatives that are constantly thrown at you I guarantee this will have an adverse effect on your business.

The New Year for many people is a time for change and new opportunities. From wanting to lose weight and give up tobacco on a personal level to wanting to increase your profits and grow your business on a professional one.

For smart marketers 2008 holds amazing opportunities so my tips for success this year are:

Tip 1 for Success in 2008

Focus on the positives and dont get drawn into all the negative hype that is thrown at you from the media or politicians

Tip 2 for Success in 2008

Surround yourself with likeminded positive people

Tip 3 for Success in 2008

Become truly great at marketing your product or service (or find someone to do it for you)

Tip 4 for Success in 2008

Remember that YOU are ultimately what will make the difference between the next 12 months and beyond being successful or not.


Source: Blue Ocean Strategy, Business Strategy information at articlesbase.com

Blue Ocean Strategy For Startups, Part 2

Blue Ocean Strategy For Startups, Part 2 by Edward Donoghue

In the previous article we discussed the necessity of identifying uncontested market spaces - where competitors are rendered irrelevant.

We discussed that in order to do this, we must pursue value innovation - recognizing the value system behinds people's market choices structuring enterprise resources into a superior, innovative alternative.

But how? What metric do we use to build these superior, innovations?

Blue Ocean Strategy gives us this metric.

This metric lets us recognize how other enterprises are positioned, and to identify overlooked niches.

Position Yourself Along the Emotional-Commodity Axis

For example, products are generally seen as either having an emotional appeal or of being merely commodities. By shifting a product's position along this emotional-commodity metric, we often find the uncontested market space we're looking for.

As an example, investment advise has traditionally had a heavy emotional element, heavily based on a personal relationship and trust between the client and the broker. However, enterprises like Charles Schwab and Vanguard Mutual funds, by shifting their offerings more towards the commodity end - offering low-cost, no-frills service - have acquired a huge customer base, people uninterested in the traditional niceties of investment management companies.

Focus on Buyers, Users, or Influencers

Another metric is customer type. Customers can be divided into buyers, users, and influencers. By switching focus from one customer type to another, competitors can often be completely outflanked.

When the financial information vendor, Bloomberg, started, most financial information systems providers focused on buyers. These buyers - purchasing agents in IT departments - tended to value low price and standardized easily maintained machines.

Bloomberg, however, recognized that the users - the traders - were people with high disposable income but little time.

He added features to allow them to do online shopping during downtime on the trading floor. He also added features for easy financial calculations - features most IT purchasing agents were oblivious to.

Think in Terms of Product Line Rather Than Product

A corollary of Blue Ocean Strategy is to improve marketing efficiency and drastically reduce cost structure by thinking in terms of product line rather than product.

Doing so, marketing efforts are not wasted because of the failure of a particular offering.

For example, when Fred Weiss started his web site AllMath.com, a site devoted to math puzzles and exorcises, he met with limited success. He went on to start AllWords.com, which also had limited success. However, he struck it big when he started AllLottery.com, a provider of nationwide lottery data, partially due to the branding of the word "All."

Another example is Black and Decker, the power tool company. Faced with increasing competition and unable to anticipate whether the market would demand electric drills or electric hammers etc. from year to year, they instead built a "meta" tool. A power tool platform which could easily be extended as an electric hammer or electric drill or any one of their tool line.

This meta-product approach, with its standardized parts and flexibility, gave Black and Decker a cost structure far superior to their competitors.

About the Author
Edward Donoghue is the principal of clickTechJobs.com, a cluster of skill specific job boards for IT people, which includes clickStartUpJobs.com.

This article is part of the clickTechJobs job seeker library which offers tips on resume writing, telephone interviewing, outsourcing, difficult bosses, changing careers, etc.

Learn more at http://www.clickTechJobs.com/article_library.php

Source: Blue Ocean Strategy, Business Strategy information at goarticles.com

Blue Ocean Strategy For Startups, Part 1

Blue Ocean Strategy For Startups, Part 1 by Edward Donoghue

Blue Ocean Strategy allows innovative startups to identify uncontested market spaces and render their competition irrelevant.

The principle behind Blue Ocean Strategy is that all markets can be divided into red oceans and blue oceans.

Red oceans are characterized by consensus - a consensus as to who the customer is, who the vendors are, and what the product being sold is.

Consequently, in such a market, selling to the same customers, buying from the same suppliers, making the same thing, there is intense competition and thinner and thinner profit margins.

Seek Uncontested Market Space

Blue Ocean Strategy seeks to escape that. Blue Ocean Strategy seeks to direct ventures towards uncontested market space. Market niches where ventures are positioned so uniquely that competition is rendered irrelevant.

But how? How are these market niches to be recognized?

Value Innovation

To do that requires "Value Innovation." Value innovation is recognizing the values and desires behind the spending choices people make, and then restructuring enterprise resources to provide a superior alternative that is still consistent with those values.

For example, when the theatrical circus, Cirque Du Soleil, began the circus industry was moribund. Rather than just putting together another circus, the founders of Cirque Du Soleil tried to understand the overall value system of people who go out for the evening.

Why do they choose the theater or the movies, as opposed to the circus?

The founders of Cirque Du Soleil found that people viewed the circus as low-brow, juvenile, even crude. The traditional three rings of the circus were a distraction, even annoying.

Also, they were increasingly uncomfortable with the use of animals - more sensitive to the possible abuse behind the entertainment.

Eliminate Elements Which People Do Not Value

So in putting together Cirque Du Soleil, the founders eliminated the three rings, presented the entertainment within a more sophisticated theatrical narrative, and got rid of the animals.

By combining the most valued elements of the theater and the circus, and eliminating the negatives of both, the founders of Cirque Du Soleil were able to create a superior alternative. An alternative which neither circus nor theater can directly contend with.

This article is part of the echoTechJobs job seeker library which offers tips on resume writing, telephone interviewing, outsourcing, difficult bosses, changing careers, employment gaps, etc.

About the Author
Edward Donoghue is the principal of clickTechJobs, a cluster of skill specific job boards for IT people, which includes clickStartUpJobs.

Source: Blue Ocean Strategy, Business Strategy information at goarticles.com

Introduction To Blue Ocean Strategy

Introduction To Blue Ocean Strategy by Ko Su Piow

For twenty-five years, competition has been at the heart of corporate strategy. Today, one can hardly speak of strategy without involving the language of competition: competitive strategy, competitive benchmarking, building competitive advantages, and beating the competition. Such focus on the competition traces back to corporate strategy’s roots in military strategy. The very language of corporate strategy is deeply imbued with military referencesâ€"chief executive “officers” in “headquarters,” “troops” on the “front lines,” and fighting over a defined battlefield.

Blue Ocean denotes the industries that not existence today â€" the unknown market space or market unattained by competition. Blue Ocean strategy provides a systematic approach to making the competition irrelevant. This framework had been presented by Mr. Kim W Chan and Mauborgne Renee in their most sellable book entitle “Blue Ocean Strategy â€" How to Create Uncontested Market Space and Make the Competition Irrelevant”.

Red Ocean & Blue Ocean

Imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all the industries not in existence today. This is the unknown market space.

In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of existing demand. The dominant focus of strategy work has been on competition-based red ocean strategies. As the market space of red oceans gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody. Hence we use the term “red” oceans. Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. The term “Blue Ocean” is an analogy to describe the wider potential of market space that is vast, deep, and not yet explored. It will always be important to navigate successfully in the red ocean by out competing rivals. Red oceans will always matter and will always be a fact of business life. However, with supply exceeding demand in more industries, competing for a share of contracting markets will not be sufficient to sustain high performance. Companies need to go beyond competing in established industries. To seize new profit and growth opportunities, they also need to create blue oceans.

About the Author
ECO MAX Training & Learning Center provides Blue Ocean Strategy workshop for public listed companies, private held company, small businesses and Government body.

The author can be contacted via the web-site http://www.ecomaxmc.com/

Source: Blue Ocean Strategy, Business Strategy information at goarticles.com