Blue Ocean Strategy was written with the aim of challenging companies to create uncontested market space by executing a strategy that is both systematic and actionable. It is the author’s contention that many companies could break out of their current competitive, often-times shrinking market, and create new markets that render the competition irrelevant. The cornerstone of the blue ocean strategy is what the authors call value innovation. The conventional wisdom in business is that if a business person increases value to his/her customers through innovation, then that person is also going to be increasing his/her cost. Likewise if a business person uses a strategy that decreases cost he/she is going to have to lessen the value he/she can provide to his/her customer. The blue ocean strategy suggests that a company can pursue both innovation and low cost simultaneously. Value innovation occurs only when companies align innovation with utility, price and cost positions.
The author suggests that if a company understands the principles and strategies behind creating blue ocean markets, it will be able to maximize the opportunities while simultaneously minimizing the risks in the execution of a blue ocean strategy. The strategies fit within what the author calls the four actions framework. A company must identify factors that have under served or compromised value to customers. A company must identify factors that could be created that the industry has never offered. A company must eliminate factors in its industry that are taken for granted even though they no longer add value to the customer. Finally, the company must identify factors that provide products or services to its customers with little or no benefit but increases costs.
One of the key principles of blue ocean strategy is to successfully identify commercial opportunities that will reconstruct market boundaries and break away from the competition. The author has identified six basic approaches to remake the market boundaries. First a company must look across alternate industries that fulfill the same basic purpose as their own industries but is in a different form. Second a company must look across strategic groups within their own industry. Third, a company must look across the chain of buyers, looking at the purchaser, the user and the influencer. Fourth, the company must look across complimentary product and service offerings. Fifth, the company must look at the functional or emotional appeal to the buyer. If a company’s product is traditionally functional then how can it appeal to the emotional buyer, and if the company’s product is primarily sold because of its emotional appeal, how can the company market to the functional buyer. Finally the company must look across time. It must look at trends with the right perspective to take advantage of blue ocean markets.
The challenge with following these principles and strategies is how to influence the majority of people within an organization to want to think outside the box. Many times a company may have an innovative marketer or manager who comes up with a great idea, but lacks the support and structure to implement the idea. With the faced pace environment that we work in, there seldom seems to be time to think deeply and innovatively about blue ocean strategies. The author admits that companies have a tough time translating thought into action, particularly when the blue ocean strategy is a significant departure from the status quo. The author identifies four major hurdles to overcome in order to execute a blue ocean strategy. First, the employees must be made aware that there is a need for a strategic shift. Second, there seldom is an abundance of resources to tap into to execute a new strategy. Third, is the ability to motivate key employees to work hard and fast to accomplish a strategy that may seem unorthodox. Finally, with most companies the political environment is such that most people do not want to change for fear of losing their own power or position.
The bottom line for a company to have a chance at succeeding in the execution of a blue ocean strategy is that trust must be built deep into the ranks of employees. They must feel that the execution strategy is fair. Key employees must be engaged in the process. There needs to be a clear explanation as to why things will be done a certain way. Finally, an expectation of playing by a new set of rules must be instilled.