Blue Ocean Strategy

Every company endeavours towards one elusive goal and the goal is to conquer the market; to have greater profits and to last. Different players employ different strategies. Some fight on competition, whereas others endeavour to create a niche by differentiating from their competitiors. Kim & Mauborgnes' 2005 unprecedented work Blue Ocean Strategy emphatically questioned this conventional mind set of the Industry to approach competition and creating a niche. Kim & Mauborgne argue seldom does one look for untapped market, an unmet need and for those that successfully value innovate emerge as leaders, the market control that is sustainable with its niche market and can be sustained in the newly found uncontested space, till imitation gives way to crowding of the space.

Red Ocean Strategy focuses on competing in existing market, beating the competition, exploiting an existing demand, making the value cost trade off and aligning the whole system of a company's activities with its strategic choice of quality differentiation or low cost.

The Blue Ocean Strategy on the other hand emphasizes on creating uncontested market space, making competition irrelevant, creating and capturing new demand, breaking the value cost trade off and aligning the whole system of a company's activities with its strategic choice of quality differentiation and low cost.

Kim & Mauborgnes' 2005 Four Action framework, Red Ocean focuses on Eliminate and Reduce, Blue Ocean emphasizes Raise and Create.

In the Cost Structure Reduction, we need to see what costs a lot without adding a lot of value and hence, need to eliminate the same. We also need to look for places wherein we can reduce emphasis.

In terms of Buyer Value, there are avenues which may not cost much, however emphasizing and focusing on the same we can raise the perceived value in the eyes of the customer considerably.
For Creation, look for areas which are not presently focused upon in the industry at the moment; however, addition and/ or creation of the same, the customer would appreciate the same. Is there something unique, different, hitherto unthought of, not focused on before, however, addition, creation of the same, would be seen in a greatly positive light by the customer.

So the idea basically is innovate, Value Innovation. Value Innovation is the simultaneous pursuit of differentiation and low cost. We need to look at the whole picture holistically, referred to as the Ladder of Inference, in its entireity. Then we need to evaluate the Value Factors, we need to critically evaluate the present factors and look over the Halo effect. One needs to see what is it that we are assuming to exist, that which possibly does not exist. Value Innovation is the difference between Perceived benefit and cost. If the cost of adding a particular attribute is less then the value perceived by the customer; in other words value perceived is more then the cost spent in adding that particular attribute, then it is Value Innovation. The conventional Six Paths Framework, talks about reconstructing market boundaries, by focussing on Alternatives, Strategic Groups, Chain of Buyers including Strategic Network, Chain of Buyers including strategic network, Complimentary products and services, Functional or Emotional appeal to buyers and Time.

Structuralist view or environmental determinism works on the premises that a firm is competing within the given industry and the resources and environment for the industry are given. The dynamism or the constantly evolving nature of the surrounding environment is not taken into consideration. The proponents of Blue Ocean argue that the dynamism of the industry and the surrounding environment creates the need to value innovate and create blue ocean. The Blue Ocean views looks at the reconstructionist view by challenging the premises that the boundaries of the market are given and that the frontiers can not be redrawn. There is an extra demand out there which is untapped. The all enigmatic question is how to find that untapped market and create a demand. In other words, how to redraw the market boundaries that are taken as given in the minds of the managers atleast. When viewed from the Blue Ocean Lens, there is a tectonic shift in our approach to the market- from supply we look at the demand side; from competition, we look at Value Innovation, from a zero sum game, we look for ways of Harmonic Progression. The idea then is to innovate, to redraw, to re-create; hence the Blue Ocean approach is the reconstructionist approach.

In this world, where even the spiritualists say that nothing is permanent except change, Blue Ocean Strategy is one step closer to looking at this ever evolving world from the lens of reality. As old songs become classic, new hip hop music becomes a rage; as old fashions fade on the canvas of memory, new styles emerge; then in the ever evolving money chasing market dynamics; how can the analogy of a constant fight to look for hitherto untapped frontiers seem misplcaed. The key then is to create Blue Oceans. And sustainable competitive advantage is not a static, it is a Business strategy on the move.