What Is the Blue Ocean Strategy: Meaning, Steps, and Benefits

In business, competition is often seen as inevitable. However, is it truly necessary? According to W. Chan Kim and Renée Mauborgne in the book Blue Ocean Strategy, the answer is no.

Emphasizing value innovation, the blue ocean strategy expands industry boundaries and operates beyond the known market space, making competition irrelevant. The opposite perspective is the red ocean strategy or space. But what does this all mean?

This article unpacks this idea so that you can focus on entering a brand-new business landscape where the competition remains far behind you. Let’s take a closer look.

What Is the Blue Ocean Strategy?

The Blue Ocean Strategy is a business approach that focuses on creating new market spaces (blue oceans) instead of competing in existing markets (red oceans). Red oceans are typically defined by saturated markets with intense competition while blue oceans are untapped markets with no direct competition.

Key concepts of the Blue Ocean Strategy

The blue ocean shift encourages different thinking and strategies about business and markets. 

Here are three key concepts that underpin this strategy:

• Uncontested market space: Encourages entrepreneurs to create an uncontested market space or a market where competition is irrelevant.
• Value innovation: Focuses on the simultaneous pursuit of differentiation and low cost.
• Rewriting competitive rules: Redefines industry boundaries to unlock new demand.

The Blue Ocean Strategy argues that businesses can create new demand without competing directly with existing players. Instead of differentiating based on price or added value, companies can redefine market boundaries and offer entirely new products or services.

Red Ocean vs. Blue Ocean

With that being said, let’s explore the key differences between red and blue oceans.

Red Ocean	Blue Ocean
Known market space, existing demand.	Unknown market space, new demand.
Focus on beating competition.	Focus on making competition irrelevant.
Shrinking profit pools due to cutthroat competition.	High growth and profitability potential.

In summary, red ocean companies are the business we know today. 

In contrast, blue ocean companies seek to go beyond market boundaries and extend further than the existing market space. They achieve profitability by offering unique value to customers while keeping costs low.

Steps to Implement a Blue Ocean Strategy

Sailing toward a blue ocean market sounds ideal. But it is not without its challenges or essential steps to be followed for success. It requires careful and strategic thinking that shifts away from the shrinking profit pool of the bloody red ocean and focuses on creating a new and unique own market. 

Some suggested steps to heading in this direction are discussed in detail below. 

Step 1: Understand the current landscape

To know how to break through the red ocean noise and proceed into a new business territory, you need to understand the current market dynamics really well. For this purpose, Kim and Mauborgne recommend that you use the Strategy Canvas to map these dynamics. 

You need to analyze the key factors that influence competition and consumer choices in your industry. Assessing existing demand helps you identify which business practices and offerings to move away from, thus allowing you to create a unique market position.

Step 2: Identify pain points and opportunities

Step two involves identifying pain points and opportunities that you can tap into that no one has explored as yet. In order to do this, focus on spotting inefficiencies, frustrations or unmet needs in the current market. 

Once you’ve done this, the step that follows should include looking for ways to address significant pain points and adding value to your future consumers.

Step 3: Apply the four actions framework

Next, it’s time to apply the four-actions framework. 

The primary principles that define it and brief explanations of each one are:

• Eliminate: Remove factors that the industry takes for granted but do not add value.
• Reduce: Minimise aspects that are over-served or unnecessary.
• Raise: Enhance factors that bring significant value to customers.
• Create: Introduce entirely new elements that redefine the market.

Step 4: Develop a value curve

Whether you’re selling a product or a service, it’s now time to redesign your offering based on unique value propositions. 

With the blue oceans strategy, differentiation and affordability in prices go hand in hand. So make sure to use the Strategy Canvas mentioned above to visualise this curve as a way of highlighting differentiation.

Step 5: Test and execute the strategy

With the research and analysis out of the way, you need to act quickly and rapidly test the new strategy for commercial viability. Irrespective of whether you run a small or large business, you need to also ensure that you align your whole system (organisationally) to execute the strategy effectively.

In some cases, you may be an existing business seeking to tap into a blue market. In other cases, you may be an early stage startup that’s ready to launch an offering on the market. Either way, testing and executing and then refining your strategy will be key parts of the process.

Examples of Blue Ocean Strategy in Action

Achieving sustainable growth by entering an entirely new market has been proven to be successful for several innovators around the world. 

The following are just a few examples of blue ocean strategy execution success stories that have brought value innovation to the intended target market:

• Tesla: The automobile industry has come a long way since the use of the horse drawn carriage. In a competitive landscape defined by petroleum driven cars, Tesla emerged as a total innovator and industry leader in the space when it introduced its range of sleek and luxurious electric vehicles. Where all the industry players and competitors operated under the same premise of having fuel drive their vehicles with minor differences in design, power and performance, Tesla stood out for its innovative and forward thinking approach that aligned with global environmental standards, which have been gaining significant traction over the years.
• Netflix: In the entertainment industry, Netflix stands out as a giant today for the way it has revolutionised access to entertainment. Characterised by video rentals and later DVDs, the market has truly reinvented itself over the years with Netflix taking centre stage and leading the way. In the past, rentals involved subscription fees and late fees for non-timely returns. Today, online subscriptions eliminate this challenge, offering on-demand streaming of movies, series, comedy shows and everything in between.
• Apple: While it was not the first player to invent the modern mobile phone, in the mid-to late 2000s, Apple came out with the iPhone — one portable and handheld device that doubled up as a personal computer, entertainment system and connectivity provider. Today, Apple’s market share and global success with its quality products have given it a significant competitive advantage over competitors, enabling the company to charge premium prices for its premium products.
• Uber: Another major player in the profitable blue ocean space is Uber — the ride-hailing app that has evolved to offer a variety of different services such as Uber Eats. Connecting nearby rides to potential passengers via an easy to use app, Uber revolutionised the taxi industry, offering something completely new and unheard of before. Connect with a nearby driver and get to your location safely with a few clicks of a button, easing challenges of waiting on the phone for a cab to be available or addressing the challenge of not having taxis or public transport availability at all.
• Spotify: Lastly, we have Spotify which created a completely unknown market space in the music industry. Listeners can now, for a small cost, log in from any device and listen to their favourite artists and musicians, which get a small cut of the fee. In the past, illegal downloads seriously affected these musicians who felt their rights were not being protected sufficiently while also not being able to profit from their creative efforts. Today, fans and musicians enjoy fair exchanges of creative labour and entertainment thanks to the music streaming platform Spotify.

In the UK, businesses can break free from crowded markets by offering innovative solutions that meet changing consumer expectations. Sustainability goals, digital growth, and regulations like GDPR and net-zero targets are reshaping industries. 

Shifts in work-life balance, demand for ethical sourcing, and the push for financial inclusivity create new opportunities. By focusing on fresh ideas rather than competing on the same old terms, businesses can thrive in a fast-changing economy.

Benefits of Blue Ocean Strategy

Pursuing a blue ocean business strategy offers several advantages. The authors of the well-known study analyzed businesses over the past century across nearly all industries, including those born from innovation and ingenuity. 

Based on their findings, they highlight the following key benefits:

• Competitive advantage: Cutthroat competition results in rivals fighting over the same industry, same customers and at similar customers. However, with a blue ocean approach, it’s possible to break away from this situation of conflicts over existing demand. Instead, it affords entrepreneurs a first-mover advantage in an entirely new market place.
• Increased profitability: Entering new industries with a fresh and new strategy means shifting away from traditional competitive rules. In turn, this creates high value with low-cost structures, which results in sustainable growth. Furthermore, the blue ocean move opens up a larger profit pool compared to red ocean strategies.
• Customer-centric approach: Creating your own blue ocean business is also grounded on the assumption of addressing significant pain points and creating meaningful value for customers. As such, this move results in building strong brand loyalty and enhancing customer satisfaction.
• Innovation and growth: When entrepreneurs create blue oceans, they are encouraged to think creatively and come up with out of the box solutions that challenge industry norms. Driving this innovation opens avenues for growth by tapping into unexplored markets and customer bases by addressing key points and challenges while ensuring long-term commercial viability.

This strategy also reduces the risk of price wars and market saturation. It allows businesses to sustain long-term success. Additionally, it fosters a forward-thinking mindset and encourages continuous adaptation to evolving customer demands and industry trends.

Challenges and Risks of a Blue Ocean Strategy

Blue ocean strategists also recognise that there are challenges and risks in pursuing a blue ocean strategy. 

First of all, it is much easier said than done. Spotting truly untapped markets is a major challenge as is the risk of overestimating demand for new offerings.

Execution and refinement of the strategy are further challenges to contend with. It requires a complete realignment of the organisational structure and culture in order to support innovation. In addition, execution should ensure highly effective communication that conveys the value to target audiences, which can be challenging.

Although blue ocean businesses take time to be reached or surpassed by imitators, competition remains a reality. Over time, imitation can turn a once-unique market into a red ocean, reducing the impact of the original idea. To stay ahead, businesses must continuously innovate and refine their offerings.

Conclusion

The ideas outlined in Blue Ocean Strategy provide a powerful, innovative and original framework for businesses to achieve sustainable growth by creating new market spaces. By encouraging companies to focus on value innovation, competition becomes irrelevant.

However, this is not a one-size-fits-all approach and requires ingenuity, innovation, and creativity. Furthermore, success depends on careful market analysis, creative thinking and effective execution. 

Businesses that do embrace the blue ocean approach can unlock new demand, reduce costs and establish lasting competitive advantages in the business world. Thus, it is a strategy that is worth pursuing.

Frequently Asked Questions

How can small businesses apply a blue ocean strategy without large-scale innovation?

Small businesses can apply Blue Ocean Strategy by focusing on differentiation and value innovation within their existing market. This could mean identifying underserved customer needs, streamlining costs by eliminating non-essential features or creating a unique brand experience that sets them apart from competitors. Even minor shifts in pricing models, distribution channels or service offerings can help businesses.

What are some common mistakes companies make when trying to implement a blue ocean strategy?

One common mistake is assuming that a blue ocean strategy is purely about innovation rather than customer value. Some companies focus purely on creating something new without considering if it really addresses customer pain points. Another mistake is failing to align internal processes with the strategy. Without proper execution, even the most innovative ideas can fail to gain traction. Also, some businesses fall into the trap of mixing blue and red ocean strategies, trying to differentiate while still competing on traditional industry factors, which results in diluting their strategic focus.

How long does it take for an imitator to copy a blue ocean business?

The time it takes for an imitator in the existing industry to copy a blue ocean business varies but it typically ranges from a few months to several years. Factors like industry complexity, intellectual property protections and brand loyalty play a highly influential role in this regard. However, successful blue ocean companies continuously innovate, which can make it difficult for competitors to catch up and replicate their unique value proposition.