When you develop a strategy for a new venture, expand or change an existing company, do you adopt a Red Ocean or Blue Ocean strategy? If you’re not familiar with the terms, let me explain.
In 2005, Kim and Mauborgne, professors at INSEAD, introduced the distinction in Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Michael Porter , a Harvard professor, originated the 5 Forces model to describe how a company develops strategy, noting that one was rivalry of incumbents. They fight over similar clients with similar weapons (e.g., airlines today increasingly compete on price, times and fewer amenities). When they compete, they sometimes end up in a “bloody” war – turning the ocean “red”. Kim and Mauborgne, suggest thinking “outside the box” and focus on customers who might not yet be served with new products that are neither lower priced (e.g., discount vs. full-serve airlines) or product “richer” (Mercedes Benz vs. Buick), but rather rethink the value offering to include some of both (e.g., iTunes, Smart Phones). For instance, after hundreds of years of circuses with animals and clowns that serve children and their parents, Cirque du Soleil, developed a completely different kind of “circus entertainment” for adults. In the world of billboard outdoor advertising, with limited options and limited impact, JCDecaux created “street furniture”, such as bus shelters with moving ads, to offer more cost-effective outdoor advertising.
As an innovation advocate, I provide workshops (through Vistage and Presentation Excellence Group) to help participants unleash their creativity for product, process and new market innovations, as well as help companies forge cultures to spur the ongoing adoption of innovations. Accordingly, I invited a speaker to discuss the concepts in the book with my Vistage CEOs at Board meeting.
Now, the authors have advanced their model to help more companies develop Blue Ocean strategies. In Blue Ocean Shift: Beyond Competing, they provide a set of tools that can be used to go after these opportunities and share more examples. For instance, the Four Actions Framework allows you to break the traditional trade-off between product differentiation and lower cost by listening to customers and non-customers who help you work through four questions:
- Which factors that the industry takes for granted can be eliminated?
- Which factors should be reduced below the industry’s standard?
- Which factors should be raised well above the industry standard?
- Which factors that the industry never offered should be created?
One example of a company that adopted the Blue Ocean strategy is citizenM, which created the new market space of affordable hotels – which offer the features of a 5-star hotel for 3-Star prices. Focused on the needs of today’s business travelers, they discovered that these customers did not value traditional hotel’s extra lobby space, personnel to run it, and food services, but did value location, quick check-ins using kiosks and phones, high quality sleeping environment, and unique, compelling communal living spaces. The result is a new, growing chain of hotels with high occupancy.
If you’re open to expanding your product line and market reach by rethinking industry’s approach to serving customers, which often takes “pain” for granted (e.g., standing in the rain for a taxi vs. Uber-type services), read the book! Then share your thoughts and experiences.
(If you want your company to adopt the Blue Ocean Shift framework and forge new product and services, and/or enter new markets, we’ll be providing hands-on workshops starting in 2018!)
This is an interactive workshop, called “How to Capture and Capitalize on ‘Blue Ocean’ Opportunities” is designed so participants leave with a plan-outline. We’re offering it to Vistage groups, Association and corporations who have conferences focused on creativity and innovation, etc. Interested? Sign up here.