Your Blue Ocean Strategy

Blue Ocean Strategy centers on creating demand rather than exploiting existing demand. Companies adopt a Blue Ocean Strategy when competing in their current market is undesirable due to: 

• Mature Players

• Established Low Cost and Differentiated Products

• Low Margins/Profits

• Commoditization of products

These bloody the water with competition and turn it into a Red Ocean.

We may assume that Blue Ocean Strategies play out in the world of Technology companies, but the focus is actually an innovation on Value: 

• AirBnB creating a platform for people to rent out their unused space. 

  • Technological Innovation: Low, the internet and platforms already existed. 

  • Value Innovation: High, people were now able to extract consistent value from otherwise static spaces.

• Trader Joes creating a grocery retailer that focused on a differentiated shopping experience with private label, high-quality, but affordable products. 

  • Technological Innovation: None, grocery had been around for a century. 

  • Value Innovation: High, consumers received great value at low cost due to Trader Joe’s private label branding. They also received a fun and interesting shopping experience due to localization of stores and a hyper-attentive staff. 

• Southwest Airlines creating a low-cost, regional airline. The company removed the baggage of high-cost carriers like meals and airline classes, and instead focused on speed and customer service. 

  • Technological Innovation: None, commercial jets had existed for decades before the company was founded. 

  • Value Innovation: High, consumers received friendly service and marginally quicker travel in exchange for much cheaper airfare. 

Blue Ocean Strategy requires a firm to pursue both differentiation and low-cost strategies at once, not choose between the two.

How can you apply Blue Ocean Strategy in your personal life? 

Example: Low Cost Coding Instruction for Seniors

• Low Cost: Person X is great at programming — and can give lessons much cheaper than institutional players who have got tons of overhead. 

• Differentiation: Person X realizes that even though their firm is a cheaper alternative to encumbents, they still have a strong hold on the target market. Person X focuses their attention on an underserved audience, who will benefit from a cheaper rate: senior citizens on a fixed income. 

If the strategy sticks, Person X will own the Low Cost, Senior market. And for at least a short period, they’ll likely have limited competition. They’ll be swimming in a wide open Blue Ocean.

In the example above, you’ll see there is really no technical innovation — all the tools already existed. Person X innovated on value, bringing an underserved market a value proposition they didn’t have before. 

Blue Ocean Strategies are tough, they require a deep understanding of the current market and current players. Further, the strategies may not stick. Delta launched Song Airlines to compete with Southwest and JetBlue, but ended up failing.

However, if they do work, the strategist behind the Blue Ocean gets to reap massive rewards until the competition catches up. 

Go Create Demand. 

PK