Blue Ocean StrategyMost models of s

Blue Ocean Strategy
Most models of strategy focus on how to gain advantage over your competitors, or how you can do what you do better than your competitors. Blue Ocean Strategy is different…
It operates at the product development stage and focuses on creating brand new markets. With Blue Ocean Strategy you are not focused on being better than or beating your competitors, you are focused on making the competition of no importance to your business. Thus, blue oceans are defined as uncontested marketplaces where the new needs of existing or new customers are met. The term ‘Red Ocean’ is often used to refer to the strategy of competing in existing markets with a number of existing competitors. You can think of a red ocean as all the industries that exist today. The Blue Ocean Strategy aims to promote innovative thinking, because we no longer use competitors as our benchmark, instead concentrating on finding new markets and opportunities beyond current market boundaries. We are aiming to open up new markets rather than compete directly with our current nearest competitors.

When to use Blue Ocean Strategy
If you focus on how to beat the competition as part of strategy development this will typically lead you to a red ocean strategy. If desired, senior management should deliberately steer strategy towards Blue Ocean to avoid red ocean strategy and weakening all the players in the existing marketplace. The desired result from blue ocean strategic thinking is a completely new value curve, as a result of launching a completely new product or finding new angles of opportunity within the existing market.

How to use Blue Ocean Strategy
It is important to note that Blue Ocean Strategy is not a prescribed series of steps which can be followed and it is therefore not easy to implement, rather, it is a concept which can be kept in mind to help focus your strategic efforts on blue oceans. One way to get started is by answering the following four questions:
1. What problems does the industry take for granted which we should eliminate?
2. Which aspects of our industry should be reduced well below the industry standard?
3. Which aspects should be promoted far above the industry standards?
4. What should be offered that the industry has never offered?
Essentially we are looking at addressing customer needs rather than competing with our competitors. There are also 6 blue ocean principles which we can use to help us create these blue ocean marketplaces.
• Principle 1: recreate market boundaries by searching for commercially viable blue oceans.
• Principle 2: focus on the big picture, not the detailled figures.
• Principle 3: don’t think about existing customer demand, think beyond it.

• Principle 4: think about strategic sequencing. Focus your efforts on building a strategy that ensures long-term growth.
• Principle 5: overcome organizational hurdles.
• Principle 6: embed execution into the strategy. Build employee motivation and use their competencies to execute the strategy.

 Blue Ocean Strategy Example
The best example of Blue Ocean Strategy that I know of is that of Apple launching the iPhone. Before Apple launched the iPhone there were a number of analysts who predicted Apple’s imminent failure in the handset market, after all, competing with phone manufacturers was not like competing with PC manufacturers – handset manufacturers were much more dynamic organizations releasing new handsets almost weekly, and they also had strong existing business relationships with all of the cellular operators.
In addition to this handsets were subsidized meaning that consumers did not pay for them except by signing up to a monthly call plan.
What the analysts did not realize is that by entering the handset market Apple would dramatically redefine the market, by creating a product so well designed, so user friendly, and thus so desirable, that consumers would be willing to hand over their hard earned cash to get hold of one.
This is a great example of Blue Ocean Strategy as Apple created a brand new market whereby customers were actually willing to pay for their devices (a first) if they were great. There is a great article by Chris Dixon with some fascinating and intelligent comments on Apple’s entry into different markets here, which provides much more detail on the example I’ve given.

Red Ocean Strategy
Red Ocean Strategy is a head to head battle where the players of a particular segment compete with each other remaining in the same market space i.e. within the boundaries of the same industry on the principle of ‘competitive advantage’. Characteristics: Deals with all the industries in existence today. Market space is known as it has been created and contested. Industries’ boundaries are defined and accepted. Competitive rules are known. Opportunities for growth and profit are reduced. Works on the principle of competitive advantage. Low cost or differentiation. Beat the competition. Exploit existing demand.
Red Ocean Strategy is a strategy designed to gain the greatest possible number of customers and to sell as many of their products. These companies advertise their products in every way possible. The fight between the two companies is a constant. Some of these companies are trying to create exclusive product lines to increase the range of the brand.



 Red Ocean Strategy Example
Dell’s MP3 Player
Recently, Dell has been testing a digital music player that ties to software for a range of portable PCs and lets users download and organize music and movies from various online sources. According to the Wall Street Journal’s July 30th Market Section, the software would connect the device to an online subscription service that Dell expects to launch later this year. The key advantage of Dell’s MP3 Player will be that it allows consumers to download songs and movies, and then move them between devices like PCs and cell-phones. Apple’s digital music strategy doesn’t always allow this functionality. Michael Dell is trying to move out of the Crimson Red Ocean of PCs into a broader range of consumer markets. The problem is that he has picked an Ocean within this space which is also red, and not blue.
Apple Owns the MP3 Player Marketspace
Companies that dominate other arenas, such as Sony and Microsoft, have tried to move into the MP3 Player marketspace, and they have failed miserably here. Quite simply, Apple owns this marketspace! According to the industry analyst NPD Group, Apple owned 71% of the MP3 player market in the 1st quarter of 2008. Its closest rival, SanDisk, had 11%, while software heavyweight Microsoft had a 4% market share with the Zune. This is textbook domination and the type of market share I discuss in my forth-coming book, Owning Marketspace.
Because Apple is so dominant in this market, even a peripheral attack is inherently a Red Ocean. If Dell wants to think Blue Ocean via consumer markets, it should look elsewhere. While the MP3 player market is a large and lucrative space, it’s maturing quickly and is blue only to Apple. Moving into it and competing with Steve Jobs will require a massive amount of resources, especially in marketing – an area where Apple excels.
I am willing to talk with blog participants live via phone for free consultations. I am also available to companies, businesses and organizations for consulting engagements and speaking opportunities. For any of these request, E-mail me . I will help my readers in any way possible – I want to share my knowledge and expertise.
Mike Bolden marketing expert and blue ocean strategist – writing to inform, enlighten, and inspire. Author of forth coming book, “Owning Marketspace”. Available for consulting and speaking engagements.

Blue Ocean vs. Red Ocean
The following table is useful in highlighting the different focus areas between Red Ocean and blue ocean strategy:
Red Ocean Strategy Blue Ocean Strategy
Existing market focus New market creation
Beat competition Make competition irrelevant
Capture more of existing demand Create new demand
Make a value/cost tradeoff Disprove the value/cost tradeoff