Blue Ocean Strategy is about value innovation in general, in which no emphasis is put on reducing the speed to market. Unlike many conventional approaches to strategy formation, Chan Kim and Mauborgne chose not to focus on the competition, but on the customer. In their logic, as much attention is paid to value creation as to innovation. This leads to a new concept: value innovation.
The combination of these two ensures that innovation is not only driven by technology, but by what is better for customers. Value Innovation is only spoken of when companies gear their innovation activities to utility, cost and price. This means, for instance, that companies generally have to abandon the competition-based theories, such as the Generic Strategies of Porter.
These state, for example, that companies must make a choice between low costs and differentiation. Managers who want to develop Blue Ocean Strategies strive for differentiation and low costs at the same time. If there are improvements in utility or price, or costs, the value to the consumer will increase. Even when the cost structure is improved, costs will be reduced. Together, these measures will enable value innovation that benefits both the customer and the organisation. The red oceans are all industries and sectors that currently exist: the well-known market.
In red oceans, borders have long been defined and accepted. The competitive rules of the game are well known, and the whole thing works smoothly. In such an environment, companies try to outperform other companies in order to control a larger part of the existing market. As the market space becomes full of providers, profits and growth are inhibited.
At a certain point, products are seen as raw materials, which leads to bloody competition. The blue oceans, on the other hand, are all industries that do not exist or are known today. This is the unknown market. Completely unaffected by competition, in blue oceans demand is created instead of fought.
In such an environment, there is ample opportunity for growth that is both rapid and profitable. In these blue oceans, competition is irrelevant. The rules of the game have yet to be drawn up, there are no large market share holders, and there is sufficient potential. A blue ocean is an analogy, to describe the deeper potential that can be found in environments where no company has ever been present.
A blue ocean is deep, powerful and large, as is the potential for profit. In order to discover how value innovation can be achieved, the Blue Ocean Strategy Canvas is used. Chan Kim and Renee Mauborgne.
The framework has two purposes. The first objective is to record the current state of affairs in the current market. This includes identifying factors on which players in the industry are competing. In order to help entrepreneurs to think innovatively about the products they make in relation to the industry, the same researchers developed the 4 Actions Framework.
The six principles show how to reconstruct market boundaries, focus on the big picture, reach beyond existing demand, get the strategic sequence right, overcome organizational hurdles, and build execution into strategy.
Upending traditional thinking about strategy, this landmark book charts a bold new path to winning the future. Click Here to download this document as a PDF. When you can answer yes to each of these you likely have a viable Blue Ocean Strategy. Theorizing a novel, blue ocean approach to business strategy is one thing, executing it effectively is quite another. The challenge of strategy execution is common across both red and blue oceans, but with the additional burden of breaking the status quo in the blue ocean.
As you can see, a deep understanding of organizational behavior and strategic HRM is vital to strategic success. Getting all staff on-board with a new strategic vision is difficult. To get your colleagues working with you, and not against you, follow these 3 principles. So there you have it; a whistle-stop tour of Blue Ocean Strategy. Hopefully this has helped you to re-think your own business strategy and focus on working smarter, not harder.
If you want to find out more about Blue Ocean Strategy I would highly recommend picking up the book. It isn't a taxing read and should give you all you need to formulate strategy in your organization. Skip to content. August 22, Ronan Martin. The given example in the book is of Yellow Tail wine. Briefly, these are: Look across alternative industries Look across strategic groups within industries Look across the chain of buyers Look across complementary product and service offerings Look across functional or emotional appeal to buyers Look across time Focus On The Big Picture This step involves building a new strategy canvas, while leaving traditional strategic tools out of the picture.
However, Kim and Mauborgne have outlined a 4-step process to visualizing strategy: Visual Awakening - draw your current value curve and see where it needs to change Visual Exploration - explore the 6 paths to blue oceans and decide which factors you should eliminate, create or change.
Visual Strategy Fair - draw your ideal strategy canvas and get feedback from stakeholders Visual Communication - distribute your before and after curves to illustrate the new strategic direction of the business Reach Beyond Existing Demand The conventional wisdom is to compete by focusing marketing efforts on tightly defined market segments.
There are 3 groups of non-customers that be turned into customers. Soon-to-be: These sit on the edge of the market, but are generally not customers of the industry Refusing: These are buyers who could use your industries offerings as a way to fulfil their needs, but have chosen against it.
Unexplored: These are buyers that are completely unrelated to your current market.
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