1. Introduction
When companies are engaged in the same strategies of just competing and following the line of the red ocean, as their demand decreases and their growth realizes that they need to innovate in order to grow and find a new market, with the blue ocean strategy it is possible to To achieve this, since the competition is no longer irrelevant, new factors are created that benefit and customers see them with more value, by creating the strategy and following the steps of creating a single market, making competition irrelevant, creating and catching new demand, break rules and align the rest of the organization with their strategic choice: differentiation and low cost.
the blue Ocean Strategy
2. Ocean Blue Strategy
The blue ocean strategy is based on leaving aside the destructive competition that can be generated between companies, when you want to fight for the same market, the strategy serves to be a winner in the future, innovating and expanding the horizons of the market.
The two most common competitive situations in industries are red oceans and blue oceans. Most companies are represented by red oceans, blue oceans symbolize business ideas that are still unknown.
Comparison of the blue ocean strategy with that of the red ocean
The red ocean strategy leads companies to compete in existing markets where they fight to be the company that stands out the most, this fierce competition turns the waters red, they manage to compete with each other by modifying or lowering prices.
Every time more companies appear in the competitive market, the possibilities of growth and profit are diminishing.
The blue ocean strategy makes companies look for a new market, ensuring that there is no rivalry between them, they manage to create and capture new demand. The strategy is based on aligning all the activities of the organization with the objective of reducing costs and increasing the value of products. Doing so creates opportunities for profitable and sustained long-term growth.
To define a good blue ocean strategy three criteria are needed:
- FocusDivergenceA strong message to communicate to the market
An example of a successful company that used the ocean blue strategy is the famous Cirque du Soleil. It was created in Canada in 1984.
Realizing that the market was already riddled with traditional circuses that only competed with each other, to bring in the best stars and raising costs precipitously, and not only was that the problem, also the low demand that already existed in the market for this kind of show. The circus achieved its success with the combination of the traditional as is the tent, the clowns, and the acrobatics and the intellectual of the theater.
Cirque du Soleil focused not only on fun for children but for the whole family and all ages, achieving an innovative show created a blue ocean.
2.1 Create new consumption spaces
Blue oceans are defined by a space in the market that has not yet been explored, with this opportunity to be innovative, a greater profit is achieved.
Blue oceans are the result of traditional companies breaking their limits and going beyond their own goals.
In the blue ocean, their priority is not to compete with other companies, it is irrelevant since the rules of the game have not yet been set. It is necessary to go beyond competition and create new blue oceans.
2.2 The continued creation of blue oceans
To ensure that industries do not stagnate and become stranded, to ensure that they are continually evolving.
Most companies prefer to have competition strategies in red ocean type scenarios. That they are oriented to compete in the same limited market. Having the possibility of creating new market spaces that have not yet been explored.
2.3 Value innovation: the key to the blue ocean strategy
The concepts of value and innovation are emphasized, you cannot have value without innovation since you do not tend to focus on creating blue oceans. Innovation without value refers to what a customer is willing to accept and pay not for the pleasure of doing it but for the need they do not give a value to the product.
Value innovation is achieved when innovation is aligned with utility, price and costs. It is a new way of thinking and executing strategies. It breaks the competition by creating a blue ocean.
2.4 Analytical tools and frameworks
Focusing on risk minimization is an effective blue ocean strategy, it challenges red ocean dogmas the tradeoff between cost and value.
It is commonly accepted by companies, since creating greater value will also have a higher cost, or create reasonable value at a low cost. Looking for a difference with the low cost.
2.4.1 The strategic canvas
The factors on which the industry competes must be placed on the horizontal axis.
The vertical axis captures the level of supply that buyers have along all of these key factors. A high score shows that the company invests heavily in the factor to offer more to the buyer. By joining the different points the value curve is formed. In the scheme, how products are handled is compared, with this strategy sales can be increased, although it is not possible to enter a new market.
2.4.2 The framework of the four actions
It is possible to build a new value curve with this framework, the buyer's value elements are considered.
Four questions are proposed to challenge the strategic logic of an industry and its business model.
- What factors of those that the industry conceives as established should be eliminated? Factors with less importance have to be eliminated, those that keep us from being of real value to the client. What factors should be reduced to standards lower than those accepted by the industry? Eliminate the factors that are the consequence of a race to eliminate a competitor. What factors must be increased above the levels considered by the industry? Eliminate factors that condition buyers. What factors never before considered by the industry should be created? Discover new sources of value for buyers.
2.4.3 The Delete, Reduce, Increase, Create grid
It serves to complete the grid whose function is to establish actions that will generate a new value curve.
In order to give an example of this tool we will see the case of Cirque Du Soleil.
2.5 Reading the value curve
When the industry results in all three criteria, this is defined as a good blue ocean strategy, the three criteria mentioned above, focus, divergence, and a compelling message to communicate to the market.
When a business is complex in its implementation and execution, its structure is high cost, which means that the curve lacks focus.
When you do not know how to differentiate a market, it is because there is no divergence.
And when you don't have a forceful message, the company cannot take off because it lacks innovation.
When the curves of values are interwoven and are similar, it tells us that only the red ocean strategy is used, its strategy is limited and they are only based on competing against the others.
When all the factors are analyzed and it shows that the levels are high, this shows that you only have a large investment.
When the curve is zigzag we have to ask ourselves if there is coherence of the strategy.
2.6 The six principles of the blue ocean strategy
They are divided into four principles of formulation and two principles of execution. Each of these principles mitigates some risk factor.
2.7 Reconstruction of market boundaries
This first principle is focused on breaking with competition through the construction of market borders. The challenge we have is that we must be able to locate the opportunity that will lead us to the success of the company without getting lost among an infinity of possibilities.
Six basic approaches to achieve viable business ideas.
- Define the industry as competitors do, focusing on the strategy to be the best, Strive to be the best, Focus on the same group of buyers, Define the scope of services and products offered similarly in the industry, Accept the functional orientation of the industry you are targeting at the same point as your competitors when formulating strategies.
2.8 focus on the whole picture, not the numbers
By building a strategic canvas, this process allows people to unlock their creative potential, opening up the possibility of finding business opportunities.
Strategic Canvas Design:
- The strategic profile of the present and future factors that may affect competition in the industry is clearly shown. The strategic profile that current and potential competitors will have can be shown. By showing the strategic profile of the company, its value curve can be visualized.
Methodology to visualize the strategy
1. Visual awakening
- Compare your own business with competitors Establish agreements about the changes required by the current strategy.
2. Visual exploration
- Explore the terrain using the six approaches applying to creating blue oceans. Observe the distinctive advantages of alternative products and services. Evaluate what factors can be removed, created, or modified.
3. Visual strategy
- Draw the strategic canvas based on terrain observations Receive feedback on the strategic canvas from customers Use this feedbeck to build the best strategy
4. Visual communication
- Distribute the previous and current strategic profile in a way that allows an easy comparison. Give support only to those projects and operational movements that allow your company to close the gap with the new strategy.
2.9 Search beyond existing demand
It is about generating greater demand for a new offer, by doing this the risk of scale is minimized, by creating a new market.
The paradigm of two strategies that traditional companies follow must be broken, one is to stay with current customers and the other is the tendency to thinly segment. You must target those who are not yet your customers.
2.10 Correctly establish the strategic sequence
Correctly implementing the strategy sequence significantly reduces the risk inherent in adopting a certain business model.
Correct implementation of the blue ocean strategy sequence
3. Conclusions
Using the blue ocean strategy allows us not to wear ourselves out as a company, as we are competing against other companies that are in the same market, as Cirque Du Soleil did, he no longer wanted to continue with the idea of traditional circuses that They only competed with each other seeking to improve the same acts as always and hiring new stars generating a high cost of production, they decided to innovate in the circus industry by combining circus acts with theater, thus achieving a new market that not only included children if not people of all ages.
4. Bibliographic References
Chan Kim, W., & Mauborgne, R. (2005). Blue Ocean Strategy. Harvard Business School Press.
In the following video, Professor Fernando Doral Fábregas, from the Business and Management School, presents the main elements of the blue ocean strategy and explains the differences between red and blue oceans. Good complement to continue learning about this topic of business strategy and innovation.
