Blue Ocean Strategy

BLUE OCEAN STRATEGY

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The blue ocean strategy is a methodology used to create a new company or business, where the objective is to create a new market and avoid direct competition. Instead of competing in a saturated market, a new business opportunity is sought by creating a unique and differentiated offer. The blue ocean strategy is based on identifying opportunities in unexplored markets and creating a unique value proposition for consumers. This is achieved through innovation and differentiation, creating a value proposition that is difficult for competitors to imitate.

In order to implement the blue ocean strategy, four key steps must be followed

  1. Create a strategy canvas: To identify opportunities in the unexplored market, a detailed analysis of the market, potential customers and competition should be carried out. A strategy canvas should be created, which serves as a guide for decision making.
  2. Identify the value offer: Once you have a thorough understanding of the market and competition, you must identify the unique value proposition for consumers. This may include product or service innovations, changes in distribution or business model.
  3. Create an implementation strategy: after identifying the value proposition, a detailed implementation strategy must be created, including the allocation of resources, definition of objectives and action planning.
  4. Evaluate and adjust: Finally, the success of the strategy must be evaluated and adjustments made as necessary. The blue ocean strategy is a continuous process of innovation and differentiation.

In short, the blue ocean strategy is an innovative methodology that allows companies to create a new value proposition for consumers in an unexplored market, thus avoiding direct competition and generating a sustainable competitive advantage.

success stories applying blue ocean strategy

The blue ocean strategy has been applied in a number of companies and has led to the success of many of them. The following are some examples of success stories:

  1. Cirque du Soleil: is a Canadian entertainment company that revolutionised the circus industry. Instead of competing with other existing circus companies, they created a new live entertainment market that combined elements of circus, theatre and music into a unique audience experience. The result was a highly profitable and world-renowned company.
  2. Yellow Tail case: is an Australian winery that applied the blue ocean strategy to the wine industry. Instead of competing in traditional wine markets, they decided to create a new market for consumers who were intimidated by the wine selection process and wanted a wine that was accessible and easy to drink. They created a low-cost, easy-to-drink wine that was widely marketed in the US and European markets, leading to great success.
  3. Nintendo Wii: the blue ocean strategy was also applied in the video game industry with the launch of the Nintendo Wii console. Instead of competing directly with other existing video game consoles, Nintendo decided to create an entirely new market for casual gamers who were not attracted by high-tech and complex games. The Wii stood out for its unique and easy-to-use motion controller, which made it a huge success.

The blue ocean strategy has been successfully applied in a variety of industries and has led to the creation of new markets and profitability for many companies. It is a strategy that seeks to create new markets rather than compete in existing markets and has proven to be effective in generating innovation and growth.

Advantages of applying the blue ocean strategy

THE BLUE OCEAN STRATEGY HAS SEVERAL ADVANTAGES FOR COMPANIES, AMONG THEM:

  1. Creation of new markets: the blue ocean strategy focuses on creating new markets, rather than competing in existing markets. This allows companies to find new business opportunities and increase their growth potential.
  2. Reduction of competition: By creating a new market, companies can reduce competition and establish a leading position in the market. This allows them to set higher prices and increase their profitability.
  3. Innovation: the blue ocean strategy encourages innovation and creativity, as companies must think outside the box to create a new market. This can lead to the creation of new products and services that did not previously exist.
  4. Improving brand image: By creating a new market, companies can enhance their brand image by being seen as innovative and disruptive. This can help attract new customers and increase the loyalty of existing ones.
  5. Cost reduction: By creating a new market, companies can reduce the costs associated with competing in an existing market, such as advertising and aggressive marketing. This allows them to focus on creating value for customers and increase their profitability.

The blue ocean strategy offers companies a way to grow and prosper by focusing on creating new markets and business opportunities rather than competing in existing markets. It consists of create your company without confronting the companies that are already therei.e, do not enter into competition by looking for a strong differentiation in your product/service. Knowing how to practice it in your new company will be a great help for you to grow faster!!! In a RED OCEAN ("with a lot of blood") the companies compete with each otherThe blue one, however, consists in find an environment or sector where there is no competition. In other words, a blue ocean where no one is fishing. Also, it may be because there is no business, no customers... The lasting success of many companies does not originate from battles with competitors, but in the creation of "blue oceansnew untapped market spaces that offer good opportunities for growth.

For more information, we recommend this book (see +)!

This methodology refers to a thesis published in 1990 by W. Chan Kim and Renée Maubourgne. It reflects two oceans: the red oceans, which are already existing and fully saturated markets, and the blue oceans, which are spaces for innovation and the creation of new habits.

The objective is to focus on the latter through four principles

  • Create a new product or service that does not exist and therefore has no competitor and no reference.
  • It is not going to produce much profit at the beginning, so do not focus on market data, the important thing is to think long term.
  • The expansion of demand must be constant, seeking points of convergence between existing customers and those who are not yet customers. This allows you to constantly expand the ocean.
  • The viability of the project is key. Therefore, it is important that potential customers have a compelling reason to consume our product or service.

FROM THE BLUE OCEAN TO THE CESSPIT THERE IS ONLY ONE STEP

We are living in a time of incredible opportunities for startups, but also of intense global competition: Dozens of new companies are created every day, and the probability of two of them competing in a similar market is very high. This pushes them to a kind of paroxysm in the search for the famous blue oceans...

What better promise than an uncharted territory full of great opportunities, free of competition and waiting for whoever is brave enough to go for it. There are other reasons as well: As we are told in Whittle Idea's great article 'Is your startup idea already taken?' the following situation often happens: 

"The entrepreneur comes up with a great idea for an innovative product that will change the market, tells someone about it, and that person says that there is already a product that does that. Result: The entrepreneur discards the idea and starts looking for a market where there is no competition and the product is the undisputed leader".

This line of thinking is absolutely disastrous, as it kills many good ideas before they are born. I am not saying that it is a good approach, to take the most extreme case, to "do a Facebook", but there are many markets where, despite the existence of many competitors, there is still a segment of users that nobody is serving. There are several reasons for this, as we saw when we talked about how to re-segment markets: because the customers' needs are not being served well enough, or because they are being served too much for the price they are willing to pay... but the important thing is that they are markets with competition in which there are still unserved users.

BLUE OCEANS?

In fact, the best known blue oceans (Nespresso, Cirque du Soleil, etc.) have been created by re-segmenting a niche, not by creating a new market. So why do we insist on creating a new market? The answer is probably a misunderstanding of what a blue ocean is, as most people equate it with creating a new market, rather than the correct definition:

"Creating new demand in unclaimed market space".

In other words, a blue ocean may involve creating a new market or, as is often the case, a niche in an existing market. Unfortunately, becoming obsessed with looking for a blue ocean has many risks, and as my friend Pedro Bisbal of CVBAN often says: "From the blue ocean to the cesspit is only one step" or, in other words, the most common thing is that this new market is free of competition because there are no customers in it, or worse still, because consolidated companies have not had the capacity to open up this market.

Does that mean we should abandon all hope? Not at all. it means that if we are determined to exploit this new market (keep telling ourselves that it is a blue ocean?) several factors must be taken into account:

  1. TIME: It is important to be aware that disruptive innovations usually take time to reach and surpass the market shares of the dominant players with incremental approaches, and that means several years with marginal revenues... with the economic impact that this entails. can we hold on?
  2. RESOURCES: We must bear in mind that opening a new market implies a significant, sustained and high-profile consumption of resources in marketing. It is necessary that customers know that the new market exists and that they are aware of the needs covered by the product.
  3. LEADERSHIP: The reason behind the obsession with blue oceans is the first-mover advantage, which is often short-lived. Or was Facebook the first social network, or Amazon the first online bookstore?
  4. BARRIERSIn line with the above, the only way to make the first-mover strategy valuable is to be able to generate huge barriers to entry for the competition, usually through the use of well-designed defensive strategies around intellectual property and huge marketing expenditures (e.g. Nespresso).

If we are aware of this and we have the necessary resources to open a new market... go ahead! If this is the case for most startups, the time has come to make an honest assessment of whether we are in a cesspit, and if we really are in a new market, whether we have the resources to withstand the "planting season".

Is it not better to consider re-segmenting a market or making a fast-follower move in a market where someone else has made the large outlays necessary to open it up?

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Jaime Cavero

Presidente de la Aceleradora mentorDay. Inversor en startups e impulsor de nuevas empresas a través de Dyrecto, DreaperB1 y mentorDay.
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