Since the inception of the internet, there has been an unprecedented increase in the number of businesses across different industries. Technology and the ease of conducting business in the 21st century have disrupted different industries, and this has led to an increase in the number of businesses across the globe.
Daily, new businesses spring up across different industries, each trying to compete and get their share of the market. But as they emerge, they are frequently faced with the challenge of operating and surviving in a highly competitive and usually oversaturated market. Therefore, they are either forced to compete at high costs or carve out a niche to compete strategically in their market. This brings us to the concept of the blue ocean strategy.
What is the blue ocean strategy?
The blue ocean strategy is a concept introduced by Chan Kim and Renée Mauborgne in 2005. It is a strategy centered around competing strategically by addressing and capturing value in an uncontested market space called the blue ocean.
This concept is a direct contrast to competing in a red ocean – an already congested marketplace with very heated competition among businesses in a bid to capture market share.
In the blue ocean strategy, instead of focusing on building advantages over the competition, there is a shift of attention from supply to demand. Focus is moved from the competition to creating innovative value to unlock new demand and to achieve differentiation at a low cost.
Creating a Blue Ocean
In their book Blue Ocean Shift, Chan Kim and Renée Mauborgne highlight five steps for creating a blue ocean for your business.
Step 1: Select the right scope for your blue ocean initiative and build your people’s confidence; this is the starting point in the blue ocean shift. At this stage, you emphasize working out which problems, opportunities, market, product, or service you’re going to tackle. This step emphasizes targeting the right areas to address and assembling the right sets of individuals for these tasks.
Step 2: Get clear about the current state of play; the next step of action is understanding the current mode of operation in your industry. The simple purpose of this step is to have a clear picture of how things are currently done in your market to help strategically steer away from the blood-red competitive market to a clear-cut blue uncontested space.
Step 3: Identify the hidden constraints that you can turn into opportunities; this step is focused on uncovering the hidden pain points that limit the current size of the industry and discovering an ocean of non-customers and why these customers tend to stay away from your industry. Identifying this will assist you in unlocking great value for your business.
Step 4: Go from the big picture to creating practical blue ocean options; now it’s time to move from the picture to implementation. At this phase, you take practical steps to eliminate and reduce costs while raising and creating value for your newly identified customers.
Step 5: Launch your blue ocean move; this final stage involves rapidly testing the new strategy in the market and refining it to maximize its potential.
With the steady increase in the number of businesses, the blue ocean strategy and these simple five steps are a good way for these different businesses to strategically operate and stay relevant, by carving out niches for themselves to capture value for themselves and their market.