Blue Ocean Strategy

Vs
Red Ocean Strategy

How to Champion Success by Creating

Uncontested Market Opportunities
and Making Competition Irrelevant

By
Anshumali Saxena March 2013
Marketing Change Agent @ Marketing Messiahs
Blue Ocean Strategy
Is about winning without fighting

To fight & conquer in all your battles is not supreme

excellence; supreme excellence consists in breaking the
enemy's resistance without fighting.

A skillful leader subdues enemy's troops without any

fighting; he captures their cities without laying siege to
them; he overthrows their kingdom without lengthy
operations in the field - Sun Tzu in ‘ Art of War’
Conventional Strategy
DIFFERENTIATION OR LOW COST

Blue Ocean talks about Value Innovation driven

DIFFERENTIATION AND LOW COST

BLUE OCEAN STRATEGY IS A TIDAL WAVE THAT CHANGES

MARKET DYNAMICS FOREVER & TILTS BALANCE OF MARKET
POWER IN FAVOUR OF VALUE-INNOVATION LED GAME-CHANGER
 A Bolt from the Blue! BLUE OCEANS’ Strategy success-
story- Inspired our Kingdom of Dreams
 A one time accordion player, stilt – walker, and fire
– eater, Guy Laliberte is now CEO of CIRQUE DU
SOLEIL, one of Canada’s largest cultural exports.
Created in 1984 by a group of street performers in
less than 20 years. CIRQUE DU SOLEIL has
achieved a level of revenues that took RINGLING
BROS. and BARNUN & BAILEY – the Global
Champion of the circus industry – more than 100
years to attain.

 To achieve stellar success through Blue Ocean

Strategy you don’t need big bang credentials but
an uncommon approach to tap common sense
driven latent customer aspirations to create the
Big Bang a wow-success-wave
Remarkable, rapid growth in a Declining
Market given up for Dead

It was not achieved in an attractive industry but rather in a declining industry in which
traditional strategic analysis pointed to limited potential for growth.

Alternative forms of entertainment- ranging from various kinds of urban live

entertainment to sporting events to home entertainment-cast an increasingly long
shadow.

All you need to succeed is a lifelong passion of your parent industry and an ocean of
undiluted and unconquerable optimism that motivates you and your core team
Blue Ocean Strategy’ Success Mantra: Nothing’s
Impossible in front of Human Ingenuity
Another compelling aspect of CIRQUE DU
SOLEIL’s success is it did not win by taking
customers from the already shrinking circus
industry.

Instead it created uncontested new market

space or they called BLUE OCEANS that
made the competition irrelevant. One of the
1st CIRQUE Productions was titled “We
reinvent the circus”.

“The only way to beat the competition is to stop

trying to beat the competition.”
 2 Players of Market Universe_ Red Ocean Practioners &
Blue Ocean Innovators:

1. Red Oceans
 all the industries in the known market space.

 industry boundaries are defined and accepted.

 companies try to outperform their rivals to grab a

greater share of existing demand.

 market space gets crowded, prospects for profits

and growth are reduced.

 products become ordinary commodities with

cutthroat competition turning red oceans bloody.

Example: PC industry prior to iPADs

2. Blue Oceans
 untapped market space

 demand creation and

opportunity for highly

profitable growth
 competition is irrelevant

 uncharted
Blue Oceans - a feature of Business life, past & present
100 years ago Recent Past

Automobiles MFOs for HNI Wealth

Music recording Smart phones
Aviation DTH
Petrochemicals Biotechnology
Organised Health care Penny auction sites
Management consulting Movie multiplexes
The Business Landscape Change Is A Global Reality

Industries never stand still. They continuously evolve. Operations

improve, market expand and players come and go.

History teaches us that we have a hugely underestimated capacity to

create new industries and re-create existing ones.

Yet the overriding focus of strategic thinking has been on competition-

based tried markets & existing business strategies. Corporate strategy is
heavily influenced by its roots in military strategy.

Strategy is about confronting an opponent and fighting over a given

piece of land that is both limited and constant.
Blue Ocean Imperative For Creating Wow-Successes

Accelerated technological advances have substantially improved

industrial productivity and have allowed suppliers to produce an
unprecedented array of innovative products & services.

The result is that in many industries, supply exceeds demand. The

trend toward globalization compounds the situation.

Trade barriers between nations &regions are dismantled as

information on products and prices becomes instantly & globally
available, niche markets and havens for monopoly continue to
disappear.
Game-changers Create Great Value in Business Eco-System

Blue Ocean strategy driven Theory of Increasing Returns increasingly

replacing Theory of Diminishing Returns.

No permanent winners who can monopolize success despite their

massive economic muscle and seemingly invincible status.

Google upstaging Microsoft, Facebook upstaging Google

Human enterprise & not business segment characteristics
that drive breakthrough successes
it shows that the strategic move and not the company of the industry, is the right
unit of analysis for explaining the creation of blue oceans and sustained high
performance.

Strategic move is the set of managerial actions and decisions involved in making a
major market – creating business offering.

Compaq, for example was acquired by Hewlett – Packard in 2001 and ceased to
be an independent company. As a result, many people might judge the company as
unsuccessful. This does not, however, invalidate the blue ocean strategic moves
that Compaq made in creating the server industry.
Industry ranged from hotels, cinema, retail, airlines, energy,
computers, broadcasting and construction to automobiles and steel.

We analyzed not only winning business players who created blue

oceans but also their less successful competitors.

The creators of blue oceans, surprisingly didn’t use tcompetition as

their benchmark. Instead they followed a different strategic logic
-value innovation. Value innovation is the cornerstone of blue ocean
strategy. We call it value innovation because instead of focusing on
beating the competition, you focus on marking the competition
irrelevant by creating a new benchmark n value for buyers and your
own company.
Value innovation: Cornerstone of Blue Ocean Strategy

Value innovation is created in the region where a company’s actions favorably

affect both its cost structure and its value proposition to buyers.

Cost savings are made by eliminating and reducing the factors an industry
competes on.

Buyer value is lifted by raising and creating elements the industry has never
offered. Overtime, costs are reduced further as scale economies kick in due to
the high sales volumes that superior value generates.
 Cost

Value
innovation

Buyer Value

Whole system approach makes success of blue oceans sustainable.

In contrast, innovations such as production innovation can be achieved

at the subsystem level without impacting company’s overall strategy.
VALUE INNOVATORS
 Monitor competitors but do not use them as
benchmarks
 Do not focus on competing
 Do not offer certain product and services features
just because that is what their rivals are doing
 Must not be constrained by what it already has. It
must ask, what would we do if we were starting
anew?
 Think in terms of the total solution customer’s
sought, even if that is beyond industry’s traditional
offerings.
Red Ocean Strategy Blue Ocean Strategy
Value Innovation- Making Business Breakthroughs
Successful & Repeatable
Value innovation is based on the view that market boundaries & industry
structure are not fixed and can be reconstructed by the actions and beliefs
of industry players.

This is RECONSTRUCTIONIST VIEW STRATEGY as it always involve

both opportunity and risk, be it a red ocean or a blue ocean initiative. The
playing field is dramatically imbalanced in favor of tools and analytical
frameworks to succeed in red oceans.

Red Oceans will continue to dominate company’s strategic agenda even

as the business imperative for creating blue oceans takes on new urgency.
Impact of Creating Blue Oceans
ANALYTICAL TOOLS & FRAMEWORKS

Effective blue ocean strategy should be about risk minimization and not risk taking.

The value curve is the basic component of the strategy canvas, is a graphic
depiction of a company’s relative performance across its industry’s factors of
competition.

To reconstruct buyer value elements in crafting a new value curve, they developed
the four actions framework.
Blue Ocean Success Framework
CIRQUE DU SOLEIL, provides another snapshots of this
tool in action and shows what it reveals.

ELIMINATE RAISE
- star performers - unique venue
- animal shows
- aisle concession sales
- multiple show arenas
CREATE
REDUCE - theme
- fun & humor - refined environment
- thrill & danger - multiple productions
- artistic music & dance
 3 Complementary qualities for Effective Blue Oceans strategy

FOCUS – every great strategy has focus, and a company’s strategic

profile of value curve, should clearly show it.

DIVERGENCE – when a company’s strategy is formed reactively as it tries

to keep up with the competition, it loses its uniqueness.

COMPELLING TAGLINE – a good strategy has a clear – cut and

compelling tagline. A good tagline must not only deliver a clear message
but also advertise an offering.
 RECONSTRUCT
The 1st principle is to RECONSTRUCT
MARKET BOUNDARIES

6 basic approaches to remaking market boundaries called SIX

PATHS FRAMEWORK.

PATH 1: LOOK ACROSS ALTERNATIVE INDUSTRIES

Alternatives – products or services that have different functions and
forms but the same value-innovation purpose.
Colgate offers the expertise of Dentists for Free Oral Healthcare
checkups.
PATH 2: LOOK ACROSS STRATEGIC GROUPS WITHIN
INDUSTRIES
Strategic groups are a group of companies within an industry that
pursue a similar strategy.
Ex: Shantanu & Nikhil created the blue ocean of “high sportswear
fashion where non existed”.

PATH 3:LOOK ACROSS THE CHAIN OF BUYERS

Purchasers who pay for the product or service may differ from the
actual users, and in some cases there are important influences.
Ex: Bloomberg became one of the largest & most profitable
business information providers in the world.
PATH 4: LOOK ACROSS COMPLEMENTARY PRODUCTS AND SERVICE
OFFERINGS
Analyse what happens before, during and after the product is used.
e.g. Secure B2B e-sourcing for SMEs from China with drop-shipping
services by Alibaba.com.
PATH 5: LOOK ACROSS FUNCTIONAL OR EMOTIONAL APPEAL TO BUYERS
2 possible bases if appeal:
Rational – e.g. branded, authentic Jewelry by Tanishq
Emotional – e.g. T20 carnival IPL from BCCI

PATH 6: LOOK ACROSS TIME

Managers can actively shape their future and lay claim to a new Blue
Ocean e.g. Magi Noodles strategy with 8 years of business losses inbuilt at the start
3 PRINCIPLES - CRITICAL TO ASSESSING TRENDS

1. Must be decisive to your business

2. They must be irreversible
3. They must have a clear trajectory

Example: Apple Inc

FOCUS ON THE BIG PICTURE, NOT THE NUMBERS

Focus on Big picture, not the numbers is a principle that is

key to mitigating the planning risk of investing lots of time but
delivering only tactical red ocean moves.

Develop alternative approach to existing strategic planning

process that is based not on preparing a document but on
drawing a breakthrough strategic canvas.
 4 STEPS OF VISUALIZING STRATEGY
1. VISUAL 2. VISUAL 3. VISUAL STRATEGY 4. VISUAL COMMUNICATION
AWAKENING EXPLORATION FAIR

-compare your -go into the field to -draw your “to be” strategy -distribute your before and after
business with your explore the six paths to canvass based on insights strategic profiles on one page
competitors by creating blue oceans from the field for easy comparison.
drawing “as is” observations.
strategy canvass. -observe the distinctive -support only those projects and
advantage of -get feedback on operational moves that allow
-see where your alternative products alternative strategy your company to close the gaps
strategy needs to and services canvass from customers, to actualize the new strategy.
change. competitors customers
-see which competitors and noncustomers.
you should eliminate
create or change. -use feedback to build the
“to be” future strategy.
 REACH BEYOND EXISTING DEMAND
2 Conventional Strategy Practices:
1. Focus on existing customers
2. Drive for fines segmentation to accommodate buyer differences

3 TIERS OF NON-CUSTOMERS
1st tier – “soon-to-be” noncustomers who
are on the edge of your market, waiting to 3RD
jump ship. 2ND TIER
TIER
1ST
TIER
2nd tier – “refusing” noncustomers who
YOUR
consciously choose against your market. MARKET

3rd tier – “unexplored” noncustomers who

are in the markets distant from yours
GET THE STRATEGIC SEQUENCE RIGHT
Buyer utility
Is there exceptional buyer
utility in your business idea? No  Rethink
These 1st two
YES
steps address the
Price revenue side of a
Is your price easily accessible to company’s
the mass of buyers? business model
No  Rethink
YES
Cost
Can you attain your cost target
to profit at your strategic price?
No  Rethink
YES
Adoption
What are the adoption hurdles in
actualizing your business idea?
Are you addressing them up
front? No  Rethink
YES

A commercially viable BOS idea

BUILD EXECUTION INTO STRATEGY

Execution Principles
 Overcome key organizational hurdles
 Cognitive, limited resources, motivation and political hurdles

- Hot spots, cold spots and horse trading

 Build execution into strategy
 Fair process is a key variable that distinguishes successful

blue ocean strategic moves from those that failed

Examples:
1. IPL 3. Maggi Noodles
2. Cirque du Soleil 4. iPAD/iPhone
3Es of Strategic Fair Process
 Engagement – means involving individual in the strategic
decisions that affect them by asking for their input and allowing
them to refute the merits of one another’s ideas and assumptions.

 Explanation – means that everyone involved and affected should

understand why final strategic decisions are made as they
are.

 Expectation clarity – requires that after a strategy is set,

managers state clearly the new rules of the game.
 SUSTAINABILITY & RENEWAL OF BLUE OCEANS
• Value innovation does not make sense to a company’s conventional logic

• Blue Ocean Strategy may conflict with other company’s brand image

• Natural Monopoly: The market often cannot support a second player

• Patents or legal permits block imitation

•High volume leads to rapid cost advantage for the value innovator, discouraging
followers from entering the market.

• Network externalities discourage imitation

• Imitation often requires significant political, operational, &cultural changes.

• Companies that value – innovate earn brand buzz and a loyal customer following that
lends to shun imitators.
Individuals can create Blue Ocean to re-invent themselves
or even their companies

Sportswoman Marie Kom:

Showbiz Superstar Amitabh Bachchan

Steve Jobs - iPAD

Ratan Tata _ Nano car

Guts to Glory Blue Ocean Strategy Mission Necessities
When there is will there is a way too – Desire, Discipline & Dedication

Fortune favours the brave: Stay true to the course & be ethical always