Apple won over millions of music listeners who had been pirating music by offering higher-quality sound along with search and navigation functions. Apple made iTunes a win-win-win for the music producers, music listeners, and Apple by creating a new stream of revenue from a new market while providing more convenient access to music. You need to make an appointment and talk with a bank manager, then provide a handful of documents to open an account. It is costly to maintain an account that is linked with diverse yet mostly irrelevant financial services. The Eliminate-Reduce-Raise-Create (ERRC) Grid above shows how Marvel was able to break the value-cost trade-off, i.e., strategic actions that created unprecedented value at low cost.
Reach Beyond Existing Demand
Taught at INSEAD Business School, this strategy is considered a part of strategic management, advocating that companies shouldn’t compete against each other but instead forge their own path. Bob Stanke is a marketing technology professional with over 20 years of experience designing, developing, and delivering effective growth marketing strategies. The first-level tier merely buys for a company out of necessity while the second-level tier is completely adamant about buying because of loyalty to an alternative. Kim and Mauborgne noted the Canadian circus company Cirque du Soleil as an example. Coursera instructor, Guest Lecturer @ Product School and Telerik Academy. Product manager with deep experience in building innovative products from zero to millions of users.
It found that municipalities could offer stationary downtown locations, such as bus stops, where people tended to wait a few minutes and hence had time to read and be influenced. It introduced street furniture with integrated advertising panels that were offered free to municipalities including maintenance and upkeep. Mass of refusing noncustomers flocked towards JCDecaux and the idea took-off as a profitable medium of advertisement. For example, JCDecaux15, a vendor of French outdoor advertising space pulled the mass of refusing noncustomers into its market by creating a new concept in outdoor advertising called “street furniture”. Settlers are the other extreme businesses whose value curves conform to the basic shape of the industry’s. As me-too businesses, Settlers will not generally contribute much to a company’s future growth.
The role of UI/UX design in successful IoT projects: how user experience affects the effectiveness of IoT solutions
Fair process builds execution into strategy by creating people’s buy-in up front. By exercising fair process in the strategy formulation phase, people develop trust that a level playing field exists, inspiring voluntary cooperation during the execution phase. Together, these first two steps address the revenue side of a company’s business model. By thinking in terms of solving the major pain points in customers’ total solution, there could be an opportunity to create a blue ocean. Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of a new blue ocean. Strategic groups refer to a group of companies within an industry that pursue a similar strategy.
Viewers could provide a few mood prompts and their viewing preferences, and AI would generate an animated movie or TV series tailored just for them. Tipping point leadership builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise a disproportionate influence on performance. The key is conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate influence in an organization.
Nondisruptive Creation: An Alternative Path to Innovation and Growth?
A regular airline with a conventional offering cannot come up with such a tagline unless there is focus and divergence. Up until 2000, the United States had the third-largest aggregate consumption of wine worldwide with an estimated $20 billion in sales. Founded in 1939 as a comic book company, Marvel plodded along in its first few years at a time when superheroes had fallen out of fashion. Their only well-known character was Captain America, invented specifically to encourage Americans to support WWII. By the 1960s, Marvel’s unoriginal, ‘me-too’ comic book division was almost closed down. It was at this point that three middle-aged men – Stan Lee, Jack Kirby, and Steve Ditko – decided to build a new type of superhero, one that was human first and superhero second.
Porter’s Generic Strategies: An Overview of Competitive Advantage
The SWOT analysis and strategy canvas are great tools to systematically and visually capture your market assessment. Then, the size of the customer segment will be mainly in the realm of the guestimates, and you might be off by far. Focusing on a market that is too small may result in unable to build a sustainable business model. Less competition One of the main advantages of the Blue Ocean strategy is avoiding the competition, at least initially.
- A company must avoid outsourcing this step or substituting it with intelligence reports.
- By 2018, it had become the fastest-selling home video game system of all time in the U.S. and outsold every other console over Christmas that year.
- By the end of 2005, yellow tail’s cumulative sales were tracking at 25 million cases.
- Blue Ocean Strategy is about reconstructing market boundaries to break from the competition and create blue oceans.
- Note that there are three tiers of noncustomers that can be transformed into actual customers.
Ford created a new manufacturing process for mass-producing standardized cars at a fraction of the price of its competitors. Blue ocean is an entrepreneurship industry term created in 2005 to describe a new market with little competition or barriers standing in the way of innovators. The term refers to the vast “empty ocean” of market options and opportunities that occur when a new or unknown industry or innovation appears. The US wine industry in 2000 faced intense competition, mounting price pressure, increasing bargaining power on the part of retail and distribution channels, and flat demand despite overwhelming choice. French fintech Nickel found a blue ocean in the crowded French retail banking sector by identifying noncustomers and developing a strategy to attract them. Within just two years, HealthMedia had created a blue ocean so compelling that Johnson and Johnson swooped in and purchased the company for US$185 million.
The chart below summarizes the distinct characteristics of competing in red oceans (Red Ocean Strategy) versus creating a blue ocean (Blue Ocean Strategy). Blue oceans denote all the industries not in existence today – the unknown market space, unexplored and untainted by competition. Like the ‘blue’ ocean, it is vast, deep and powerful – in terms of opportunity and profitable growth. A French entrepreneur, Hugues Le Bret, saw hidden pain points that customers and noncustomers accepted as given when using banking services. So he created Nickel, a simple and convenient banking service at low cost that looked beyond current bank customers and reached low-income earners and other people excluded by legacy banks.
- Mass of refusing noncustomers flocked towards JCDecaux and the idea took-off as a profitable medium of advertisement.
- Overall, blue ocean markets have several characteristics that innovators and entrepreneurs love.
- By the simultaneous pursuit of differentiation and low cost, Value Innovation creates a leap in value for both buyers and the company.
- These three criteria serve as an initial litmus test of the commercial viability of blue ocean ideas.
- A car, on the other hand, can provide comfort during muddy patches or bumpy roads.
For example, tapping the noncustomers from the first level would require making the product irresistible while those in the second level would need presenting the product as if it is the best choice. Customers in the third level need convincing about the necessity of the product. In the reconstruction of market boundaries, there is a need to find new opportunities and possibilities beyond the established conventions or outside the norms of existing industry and market. What this principle asserts is that for an organization to explore new opportunities and find new markets, it must break away from conventions and ignore boundaries. As your company navigates today’s competitive landscape, you need an Always-On Strategy to continuously bridge the gap between current and desired business outcomes. Quantive brings together the technology, expertise, and passion to blue ocean strategy meaning transform your strategy and playbooks from a static formulation to a feedback-driven engine for growth.
At each stage, managers can ask a set of questions to gauge the quality of buyers’ experience. For example, for a very long time, tooth whitening was a service provided exclusively by dentists and not by oral care consumer-product companies. Similarly, Bloomberg7 found a blue ocean by shifting its focus from the IT managers to whom it sold trading software to actual traders and analysts. For Southwest Airline, it could be – “The speed of a plane at the price of a car – whenever you need it.”.
Market size uncertainties Estimating a market that doesn’t exist comes with an order of magnitude more uncertainty than estimating existing markets. When approaching a new customer segment, all previous findings and learnings are invalidated, and customer problem fit and solution problem fit should be researched separately. This could be a time-consuming exercise, but skipping it might result in approaching the audience with a product that they don’t need. Imagine that Netflix is considering using AI to create unique-to-the-viewer, on-demand entertainment experiences.
The Marvel blue ocean example illustrates how a company used differentiation and low cost to restore its blue ocean business. By entering the motion picture industry and value innovating the motion picture production model, Marvel restored its blue ocean to become the most profitable movie franchise in history. Chan Kim and Mauborgne often use the analogy of red and blue oceans to describe the blue ocean strategy. In contrast to the Blue Ocean Strategy, the Red Ocean represents existing markets where businesses compete fiercely for a share of limited demand. This competition often leads to commoditization, price wars, and diminishing returns. Compared to red ocean, blue ocean strategy represents a significant departure from the status quo.