The Ocean Blue strategy (blue ocean) has its beginning in the book "Blue Ocean Strategy"by W. Chan Kim and Renée Mauborgene, which defends the value of innovation when opening new markets, separating them from the existing competition in the most exploited business areas; In other words, the option of creating winning strategies is proposed, based on "non-competition", something that can only be achieved through the exploration of unknown or new territories, this is symbolized by a blue ocean. There is also a red ocean, but this represents the opposite, destructive struggles between companies and departments.
Key concepts.
To facilitate the reading process towards the topic “ocean blue”, the following concepts are presented:
"Administrative strategy, which is characterized by creating new markets and going further than the established demand and whose main tool is innovation." (Quiñones, 2014)
"This strategy is used by most companies and industries today, in these, the limits and competencies are established, this in order to overcome the competitor and gain a position in the market." (Wikipedia, 2018)
What is the blue ocean strategy?
This strategy represents the ideas that aim to establish markets that do not arise today in addition to being viable, this is because they are long-term profitable growth opportunities, normally these are born by the red oceans. The blue ocean is referred to as untapped market space, and therefore creates an opportunity for profitable growth, which has many advantages.
The blue ocean and the red ocean
They are different strategies, developed to find out how good ideas can cause greater demand, in addition to acting in competitive markets.
The red ocean refers to high competition, that is, a space in which what is obtained is at the expense of others, either by improving quality or lowering prices. The blue ocean starts from the red to place itself in unknown waters, carrying out new ideas. In the blue ocean there are no competencies, while in the red ocean, competition is a rule.
The transition from the blue ocean arises from the red ocean and needs to be done with imagination. It consists of separating the important from the urgent and including improvisation, the blue ocean does not offer what is being demanded, rather something much better. The red ocean belongs to the sector of used ideas and known merchandise. As the competitors increase, the profit decreases and this means that the fighting will get fierce; For this reason, the blue ocean is known as a virgin space, that is, not investigated and has high amounts of value for those who enter it. It constitutes all that could be, the unknown. The creation of demand begins in its waters.
What is preventing the arrival of the blue ocean?
Despite all the advantages that this strategy represents, it is not yet known with certainty how to turn the methods and equipment to calibrate, experiment and analyze decisions used throughout the Red Ocean strategy process into a blue ocean. Companies have learned to compete but the supply is growing more and more, the key is to invent a demand by putting energy into ideas that are no longer part of a vicious circle, that is, more of the same. Regarding customers, monotony prevents them from considering new forms of consumption. To achieve a fresh demand, the focus must be taken away from the competition, finding other alternatives.
The book "blue ocean strategy" and its authors
This book was so successful that it became a bestsellerand in a worldwide phenomenon, it has been translated into 43 different languages, its sales reach 3.5 million copies and it has won several awards. There is an updated version, which develops and narrates the stages that need to be followed to use this strategy, thus renouncing competencies and establishing different labor markets and transforming the ideas that are had about competitiveness.
- Chan Kim is co-director of the French Institute INSEAD, is part of the World Economic Forum and has written a large number of articles on procedures and administration, Kim stands out among the most powerful writers in the field of global strategy; He ranks second in the ranking of the top 50 thinkers in administrative management and has a variety of accolades, for example, the Nobel Prize in Entrepreneurship and Economic Thought, he is a co-writer of the book and co-founder of BOGN. 3
Renée Mauborgne, in addition to being a professor, is a member of INSEAD, the World Economic Forum and is on the board of former President Barack Obama, has written several articles on administration, Mauborgne also has second place in the Top 50 thinkers of the administrative management like Kim, she is also co-author and founder of BOSN.
Tools for the realization of Ocean Blue
To carry out an adequate Blue Ocean strategy, it is necessary to have prior knowledge of these two tools:
- Strategy Canvas:
Strategy Canvas is a very important tool to be able to make an adequate Ocean blue, since with it it is possible to define the starting point.
With Canvas an analysis of the company is carried out, since it gives an idea of the investment in each of the departments and the variables of the industry in which it is operating. The end result of this tool is a curve that shows how to achieve the growth of a company by breaking the limits of the companies in which they compete.
It is necessary to know the term “value curve” to obtain good results when using this tool. The curve drawn, by joining the different points of the variables in the Strategy Canvas, signifies the company's performance against the values of the competition.
- The four actions scheme (ERIC matrix):
This scheme consists of four stages and is the second tool used to carry out the blue ocean strategy. This tool presents 4 patterns to make a new strategic picture in the industry and with this decisions are made in order to make a value offer that is a blue ocean. When we keep in mind which are the main competitors, the next step is to decide which will be our differentiator and for this, this tool has four stages, hence the acronym ERIC.
- Get rid of all that is unnecessary Decrease the irrelevant Increase what is really important Produce the valuable
Steps to carry out the blue ocean strategy
- Information gathering: The first step is to study and specify the variables in which the company invests, in which it wants to enter to obtain a market share. It is recommended to think about those around which the competition is found. Make the Strategy Canvas: This tool consists of drawing a table, placing the variables identified in the first stage on the horizontal axis and the investment amount on the vertical axis of the company for that variable (greater value equals greater investment) ERIC matrix: From the value curve, the search for the difference in relation to the competition is carried out, taking into account the following points:
- Eliminate: The possible variables that could be eliminated are considered, that is, no longer take them into account Reduce: The variables that need to reduce their investment below the average made by the company Increase: The variables that need to increase their investment above of the average carried out by the company Create: What new products and innovations will I bring to the market.
- Draw the final conclusions: Once the four actions are known, it is necessary to ask ourselves about the characteristics of the Strategy Canvas of a company that seeks to innovate in value. When selecting the strategies that we will follow, for this we must consider the following:
- Focus: There are different variables that we can focus on and emphasize, if we work with these we will be able to break the market habit by creating differentiation, that is, a brand or something that distinguishes us from the others. Clear message to have a strong strategy. Non-contradiction: The company in question has knowledge about the degree of complementarity of the different variables with each other and places the same level of value on the other variables.
It is necessary to emphasize that defining an Ocean Blue strategy is not that easy, but a key point to achieve it is to identify the key factors for which an industry is competing makes it a little easier.
The eight key points of the Ocean Blue strategy
According to Arroyo (2015) the key points behind the Ocean blue strategy are the following:
- It is based on data: Because it is a study with a duration of ten years of more than 150 strategic movements in which more than 30 companies interceded from the year 1880 to 2000. Follow the differentiation and low cost: This is a strategy “and and” not a “either of the two - or”. It makes an indisputable market space: That is, it does not seek to exceed the performance of the competences, it pretends that this is irrelevant with the reconstruction of the borders of the companies. Gains power through tools and frameworks: With these two it is possible to break the link with the competition and create a blue ocean Provides a step-by-step process: From an assessment of the current situation, the 6 paths to new markets, how to transform non-customers into new customers.Opportunities are increased and risks are minimized: Allows you to experience the commercial viability of your ideas and opinions Makes execution strategies: Processes and tools are included, easy to communicate and understand Shows how to achieve a win-win: Value, utility and people; to ensure that the organization is aligning around current strategies and generates profits for each of the participants.to ensure that the organization is aligning around current strategies and generates profit for each of the participants.to ensure that the organization is aligning around current strategies and generates profits for each of the participants.
Why is it necessary to carry out the Ocean blue strategy?
Most of the companies that want to enter the existing market find what is known as the Ocean red (red ocean). When the value curve of an industry converges with that of the competition it is a sign that it is trapped within the familiar Red Ocean of competition. But fortunately this has a solution.
The markets that are in constant competition and predominate today have a similar characteristic: the majority of their products are commodities for buyers, this refers to the fact that their existence is so great that their own abundance presses the price to the low.
When adding value to services is not enough because it is so easy for the competition to imitate, the market's response is simple: adjust your costs to stay in the competition.
If the value has already been added and is still not enough to be competitive, we must ask ourselves the following: How can we get out of this vicious circle? The answer to this is innovation in value.
Innovating in value is a very strategic response that allows a certain number of industries to generate profitability levels higher than the traditional competition.
Value innovation, unlike technological innovation, arises when industries align innovation with a price and profit strategy. Or what is the same, to pursue the difference and cost control simultaneously, to follow the strategy of the blue ocean, the opposite of the red ocean.
An example of innovation in value is that of Nintendo, this company created a blue ocean strategy with Wii, combined video games and sports and thus created a new category of players, families.
Innovation in value shows that courage has a great reward: if you are willing to break the limits of the markets, it is likely that you will be able to create new customers that consume new needs and that you will be able to reduce and differentiate costs at the same time.
In short, following a blue ocean strategy provides us with the following advantages:
- A free space for competition is created in the markets Creates and accepts new demand Breaks the dilemma: cost or value Makes competition inconsequential
The 3 levels of non-consumers
This consists of 3 levels, starting from our own market, according to Arroyo (2015) they are the following:
- First level: In this are the people who buy in the smallest quantities and by necessity Second level: This group of people does not usually like the merchandise or products offered by companies Third level: This last group has never taken their products as a dilemma to what their market offers.
Examples where the Ocean blue strategy has been applied
As already mentioned, Ocean blue's strategy consists of studying and observing the market as well as the trends that arise in it and the needs that consumers present in order to identify a new segment of the abandoned market, in the Which, we can be the pioneers and creators and thus not have any competition since we were the ones who started with the innovation of a product and it was possible to satisfy the unmet needs of consumers. To make this concept clearer, we present two examples of companies that used this strategy and were totally successful.
- Baby Wipes:
These products are in a very competitive framework, more and more brands are emerging that offer or promise different things but they have been more of the same, but recently a new use emerged for this product in the female department, the innovation of these was, use this product to remove makeup from women's faces. This is a small example of the blue ocean strategies in which the industry was more successful inventing these new "makeup remover wipes" than instead of fighting in a market in which there are countless products and brands that offer more. of the same and offer no differentiation.
- One of the best-known companies that decided to apply this strategy is Cirque Du Solei, when it detected that children are not the ones who pay the entrance to the circus and that this market is totally saturated and this prevents its growth, due to this the only An option that could save them was innovation, so they decided to create a circus for adults in which they put on incredible shows with live music, this circus managed to break the classic paradigms by not presenting animals in the circus.
The really important thing about Ocean blue's strategy is to identify a new market segment and with this, innovate and create differentiations in the products offered to customers since it is useless to continue fighting for a place in the market that will probably disappear in a short time By not showing any difference from all the products offered, it is best to create new markets.
Thesis proposal.
Evaluation of the theses in the area of the line of generation and application of knowledge in Innovation and Administration of Intellectual Capital of the Master in Administrative Engineering of the Technological Institute of Orizaba.
Objective.
Find out if the theses carried out by MIA students Within this line of research, they are found within the blue or red ocean, for a better use of the research topic.
Thanks.
I thank my family, for giving me all the support and the drive to continue day by day, to the Technological Institute of Orizaba for opening its doors to me and allowing me to continue my studies with the Master in Administrative Engineering and Doctor Fernando Aguirre y Hernández for motivating me with their Knowledge in the Administrative Engineering Foundations seminar to carry out each of the assigned articles.
Conclusion.
Based on everything discussed above, we can conclude the following principles of the blue ocean:
- Go further from existing demand Focus on the global idea and not on the numbers Ensure the commercial possibility of the blue ocean Establish new spaces for consumption
Once these 4 points are applied, you can proceed to the strategy. Giving way to the blue ocean is not a static process, when a company embarks on these strategies, sooner or later other companies may appear on the horizon. This is why companies must learn not to rejoice in current successes. To be able to navigate and, above all, to survive successfully in an oversaturated market, it is necessary to remain on permanent alert.
The blue ocean breaks all the paradigms that were established by the red ocean, which only focuses on competition as an organizational strategy and that most of the time competition becomes something really dirty and unfair and in my opinion this is what humanity needs the least today, for this very reason the blue ocean is essential to improve quality in both organizations and human values.
Bibliography.
Arroyo, T. d. (February 23, 2015). Gestiopolis. Obtained from
Krell, H. (nd). Ilvem, Brain training Method. Obtained from
Quinones, NJ (2014). OPENING OCEANS: A STRATEGY FOCUSED ON INNOVATION FOR THE GENERATION OF VALUE. Militar University of New Granada.
Roastbrief. (March 5, 2015). Roastbrief. Retrieved from
Udiz, GR (2013). Sage. Retrieved from
- Chan Kim, Renee Mauborgne. (1990). Blue Ocean Strategy. In RMW Chan Kim, Blue Ocean Strategy. Harvard Business Press.
Wikipedia. (March 16, 2018). Wikipedia, the free encyclopedia. Obtained from
“The blue ocean strategy, created by W. Chan Kim and Renée Mauborgne, both professors at the INSEAD Business School, in 1990, seeks to put aside competition between companies, expanding the market through innovation. What companies need to be successful in the future is to stop competing
This is the name given to books, records, video games, among others, which, thanks to the great acceptance they have among the public, become part of the best-seller lists. 3 Blue Ocean Global Network.
Master in Administrative Engineering.
