What Do You Prefer: a Blue Ocean or a Red Ocean Strategy?

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Blue or Red Ocean Strategy
Blue or Red Ocean Strategy

 

A short note about the advantage of a Blue Ocean Strategy.
Imagine you are going to dive. What is more attractive?

Jumping in to a blood filled red ocean? An ocean full of sharks who are fighting to eat and survive?

Or jumping in to a blue ocean? An ocean where you can swim and there is enough space for growth? Probably you would answer that a blue ocean is far more attractive.

But what about your business model? What strategy are you following? Did you also jump in to a blue ocean when you founded your company? Probably not. It’s very likely that you jumped straight in to a red ocean at that time.

My next question is: why? Why didn’t you jump in to an attractive blue ocean where there is enough space to grow your business? I’ll give an example why you should have considered this.

Cirque du Soleil is a classic example of a successful Blue Ocean Strategy. In 20 years they achieved more revenues than the world’s leading circuses Ringling Bros and Barnum & Bailey had in an entire century!

According to Harvard Business Review (http://hbr.org/2004/10/blue-ocean-strategy/ar/1) this is the explanation of their success:

…any new entrant to this business would be competing against a formidable incumbent that for most of the last century had set the industry standard.

How did Cirque profitably increase revenues by a factor of 22 over the last ten years in such an unattractive environment? The tagline for one of the first Cirque productions is revealing: “We reinvent the circus.”

Cirque did not make its money by competing within the confines of the existing industry or by stealing customers from Ringling and the others. Instead it created uncontested market space that made the competition irrelevant.

It pulled in a whole new group of customers who were traditionally non-customers of the industry—adults and corporate clients who had turned to theatre, opera, or ballet and were, therefore, prepared to pay several times more than the price of a conventional circus ticket for an unprecedented entertainment experience.

 

W. Chan Kim and Renée Mauborgne studied over 150 Blue Ocean strategy examples in over 30 industries. Based on their study they wrote an excellent book about Blue Ocean Strategies. Everyone who wants to create a new market space and a sustainable business model, has to read this book!

This book uses many examples to demonstrate how to break out of traditional competitive strategic thinking. The four principles of Blue Strategic thinking are:

  1. How to create uncontested market space by reconstructing market boundaries
  2. Focusing on the big picture
  3. Reaching beyond existing demand
  4. Getting the strategic sequence right.

 

Five examples of companies that created new market spaces in the opinion of Kim and Mauborgne (source: Wikipedia):

  1. Cirque du Soleil: Blending of opera and ballet with circus format while eliminating star performer and animals
  2. Southwest Airlines: offering flexibility of bus travel at the speed of air travel using secondary airports
  3. Curves: redefining market boundaries between health clubs and home exercise programs for women
  4. Home Depot: offering the prices and range of lumberyard, while offering consumers classes to help them with DIY projects
  5. Dyson: Cyclonic Vacuum Cleaners.

 

Conclusions:

Step back and take a good look at your business model. In which market are you fighting and what are you offering? Try to imagine what the unknown market space, untainted by competition looks like. Start reconstructing your business model to enter the Blue Ocean.

And move from the Red Ocean to the Blue Ocean. It’s a far more rewarding path!

 

I wish you a great Blue Ocean!

 

Do you want to know more? Please take a look at:

Wikipedia:       http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
Website:         http://www.blueoceanstrategy.com/

 

There are a lot of tools that you can use. For 2 very useful tools to start with:

 

Refine your business model with these tools:

 

 

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