The complete guide to blue ocean strategy
Some ideas are revolutionary to the extent that they can influence a large number of people. Great innovations don’t happen out of the blue. It requires perseverance and hard work. While some businesses fail to survive in the competitive market, others thrive as they believe in revolution. Let’s have a look at a distinct and relevant strategy that can help you stand the test of time and think beyond the idea of competition in business.
The findings of professors W Chan Kim and Renee Mauborgne had led to the development of the popular blue ocean strategy. It marked a significant transformation in business and made all people rethink their concepts on the competition. Blue ocean strategy emphasizes the need for redefining the existing assumptions and creating a uniquely new idea. In a nutshell, it is against the idea of competing with rivals and believes in creating a distinct space for the organization where competition is irrelevant.
The blue ocean shift
“Blue ocean shift is a systematic process to move your organization from cutthroat markets with bloody competition—what we think of as red oceans full of sharks—to wide-open blue oceans, or new markets devoid of competition, in a way that brings your people along.” – W Chan Kim
The goal is a shift from competing in the existing crowded market to creating a new market space that is beyond the competition.
Creating a new market
Most of the organizational management believes and works on two basic assumptions: Number one, they have to work according to the given market boundaries and industry conditions without changing them. They should create a business strategy based on these. The second one is the belief of the value-cost trade-off strategy. It involves two methods: offering products/services of greater value to customers for greater cost and greater price or offer products/services of a reasonable value for a lower cost.
The belief is that both of them are not possible at a time. As a result, organizations are required to choose between differentiation and low cost. Blue ocean strategy works by offering things of greater value at a low price.
What is the blue ocean strategy
Blue ocean strategy is a novel business plan which believes that optimum growth happens when the organizations reject the idea of competition. It is about challenging the existing rules and taking the untraveled path for a greater outcome. To put it simply, the Blue Ocean strategy divided the market into two oceans- red and blue.
Red ocean comprises of the existing industries in which most of the organizations fight with each other to make more profit. Blue ocean consists of the industries which are yet to be created and promises increased profit and growth in a healthy way.
The strategy provides analytic tools to shift from the idea of market competition to market creation. The blue ocean theory seems simple, but the main challenges start when you start to execute it. It needs a lot of research to understand the existing market and forming revolutionary and strong ideas to challenge them.
Blue ocean strategy examples
In the work ‘Blue Ocean Shift’, Kim and Mauborgne take the example of an initiative by the government of Malaysia as a suitable example of a blue ocean strategy. Several countries in the world face an increased rate of crimes, overcrowded prisons, and insecurity. It has an adverse impact on the people who had turned to crime as they cannot come out of it.
When the government built more prisons and mixed up petty criminals with hard-core criminals as an alternative to overcrowded prisons, the Malaysian government had a different plan of rehabilitation.
The government of Malaysia introduced the National Blue Ocean Strategy (NBOS) Summit to start innovative strategies for creating a change in the society at a lower cost. The Summit questioned the idea of putting all criminals in the prison and introduced the Community Rehabilitation Program (CRP).
With this, the petty criminals were given rehabilitation centers at military bases' idle land instead of expensive prisons. They were also given training in agriculture and fishing to earn money which gave them a financial alternative to crime.
After the CRP program, there was a visible improvement as it reduced recidivism in the petty criminals, made their families happy, the society more secure and the government had a huge profit too. Thus, the execution of blue ocean strategy can bring about a well-desired change at a less price along with a benevolent outcome.
While the idea of competition gives little significance to value and prioritizes profit, blue ocean strategy emphasizes value for the organization as well as the customers.
Three key components of a successful blue ocean shift
1. Adopt Blue Ocean perspective- Adopting the blue ocean perspective is not as easy as it seems. You will have to study the existing market and its trends thoroughly. Then, you should make a flawless strategy to address the issues which the old system failed to address. It is all about thinking of the new possibilities and finding the one which is more efficient and cost-effective.
2. Have practical tools- Some tools and proper guidance is required to apply the blue ocean perspective effectively in real-life situations. Market-creating tools and guidance help people to ask the right questions at the right point of time. The employees should make a visual presentation of their plan to make sure that everyone in the team is working in the same way and follows the same rules.
3. The concept of humanness- Build people’s confidence to work together for actualizing the new idea. The main mistake that the organizations commit is that they consider the building of strategy and execution as two different processes. They will give the first step to a team and execution to another. For the successful implementation of the new idea, they have to blend designing and execution to make people accept the change.
The second mistake is that they usually rely on mechanical levels like providing incentives and setting up key performance indicators to make people work for the change. Instead of doing this, they should inspire the employees and make them feel that the change is inevitable.
Humanness is the term that refers to the process of adapting change while addressing all the fears and questions of employees. The organizations can thus make the employees psychologically ready for the change.
Why blue ocean shift is necessary
Most of the new industries need a shift. As the market keeps on changing and new companies sprout up, you should create your own space to thrive. It is required to flourish in a market where everyone competes with each other. A new strategy can help if your organization faces a decline in the sale.
Sometimes, you may be inside an organization where the development is stunted due to the people’s conventional way of thinking. There are government departments or ministries that try hard to satisfy the customers while trying to keep the cost low. In all these cases, adopting a blue ocean strategy is a great idea for you.