03.18.09 | A Wide Blue Ocean of Opportunity

Like the ebb and flow of ocean tides, our current economic crisis represents both great challenges and equally great opportunities. The blue ocean is where companies can catch the wave of the merging economy. If we exercise our power of choice, we can make the best of this crisis. Blue Ocean Strategy is one such approach to navigating the turbulent economic waters. From the book by the same title, Blue Ocean Strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant. In the red ocean, firms pursue either differentiation OR low cost. In the blue world, the goal is to create new markets by leveraging value AND differentiation.

What is a Blue Ocean Strategy? The authors explain by comparing to traditional strategic thinking or Red ocean strategy:

1. DO NOT compete in existing market space. INSTEAD create uncontested market space
2. DO NOT beat the competition. INSTEAD make the competition irrelevant
3. DO NOT exploit existing demand. INSTEAD create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD 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 align the whole system of a company’s activities in pursuit of both differentiation AND low cost.

A blue ocean is created in the region where a company’s actions favourably affect both its cost structure and it value proposition to buyers. Cost savings are made from eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.