“Blue Ocean Strategy” is detailed research of W. Chan Kim and Renée Mauborgne about how the companies cut off from competition creating new markets. In today’s article, we’ll learn what Blue Ocean Strategy is and how to use it.
The authors of the research W. Chan Kim and Renée Mauborgne use the metaphor of the oceans to explain the relationship in the market.
There are people with the same types of needs. And there are companies that equally satisfy these needs. These people and companies have commercial relationships: people pay, companies provide services or sell goods. It is the market. There are a lot of different markets: the market for Internet service providers and the mobile market, the food market, the oil market, the educational services market, etc.
If you are the only company in the market and you have a lot of customers, everything is alright. You dictate prices and define the rules. You attract all the customers, because only you decide their needs. This is a blue ocean – market without competition.
Soon other companies see how well you operate and come to your market. They start to provide the same services to the same people, but cheaper, faster or better. Competition begins, blood is shed. Now, this is a red ocean – competitive market.
The essence of the Blue Ocean Strategy is to come up with a product or service that will guarantee a blue ocean for you.
The strategy means to cease to compete with other companies playing by their rules. Stop trying to do the same, but cheaper, faster or better. Just do not do it.
Instead of stiff competition W. Chan Kim and Renée Mauborgne offer to change the rules of the game and create new markets – blue oceans in which there is no one else. And to be the first one there.
A computer was considered a tool for the office. Apple invented personal computer for home.
Blue oceans are created constantly, although no one thinks about them this way. But each time when the revolutionary product appears in the market – welcome to the blue ocean.
To create a blue ocean, you need a new demand. How to get it:
1. Review the portrait of a buyer
Focus not on those who are already in your market, but on those who are not. Find out those who do not buy your product and why.
Australian winemaker Casella Wines studied who does not drink wine in America. It turned out that nearly all the middle and working class don’t do it – and it is a huge market. Why they do not drink wine? Because it is difficult for them to choose it, they do not understand the taste of wine and do not distinguish between the geographical indications. The wine market is too complex for ordinary Americans. Winemakers compete with each other, but in fact it has no point for 90% of people.
Australians produced a simple democratic wine: fresh fruit flavor, without geographical problems, with little choice. This wine is easy to choose and easy to drink as well. There is no need to be a sommelier to enjoy it. During the year a new Australian brand has become the fastest growing brand of wine in the United States. With incredible overcrowding wine market.
The secret of Casella Wines is to fight not for those who already drink wine, but for those who still do not do it.
2. Review the market stereotypes
You’ll easily find the blue ocean if you go away from the stereotypes that arise when looking at the market.
Curves sportswear company looked at the situation in the fitness market: expensive fitness centers, spas, showers with saunas, expensive trainers and so on. It’s a big deal to go to a fitness. “Breake everything” – said Curves. Make small cheap rooms, common showers, easiest simulators and develop a system of circuit training that gives everyone enough space and time.
Competition intensifies when people think the same concepts. One fitness club opens spa and juice bar. The neighbor looks at him and opens two spas and a healthy food restaurant. The third opens all this plus shop supplements. Everyone looks at each other and no one looks at the consumer. This is the right way to the red ocean.
3. Pay attention to the related products
Make sure to use the entire chain of goods and services. What products customers often buy with your goods? What problems do they have? How to solve them? Look beyond the boundaries of what is traditionally considered your product. Look at it with the customer’s eyes.
Ikea is, in fact, a well-known furniture salon. But it sells everything for the home: knives and cups, light bulbs, soft toys, slippers, flowers, bamboo stalks etc. It would not be so interesting to visit Ikea, if there were only rows of sofas.
When the producer looks beyond the boundaries of his product, he falls into the blue ocean.
4. Change the emotional component of the product
Some products are sold through emotions and rituals – beauty salons, tea ceremonies, expensive restaurants, expensive watches, and exclusive clothes. One way to create a blue ocean is to change, add or take away the emotional component of the product.
Starbucks was an ordinary coffee shop and became a local social club with board games.
The Swatch were the expensive luxury watches and became the simple watches for the youth.