How to Apply Blue Ocean Strategy

Designorate Team 08/16/202104/03/2023Blue Ocean Strategy 8 min read

One of the biggest challenges that face today’s companies is market competency. The challenge factor is magnified for new companies as they try to find a value proposition that allows them to have a place in the market. As such companies have limited financial and human resources, these conditions leave them a limited window to penetrate the market. Various studies and practical case studies show that the only innovation is the solution for this complicated equation. Here, the Blue Ocean Strategy stands out as a strategy to achieve innovation.

In the previous article, Types of Innovation and How to Utilize Them, we explored the different types of innovation from size aspect (incremental, disruptive and breakthrough), place in the organization (10 Dublin Types of Innovation) and nature (Open innovation and close innovation). These types can help companies to penetrate the market. However, this requires a broader strategy, such as the Blue Ocean Strategy.

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Contents

What is the Blue Ocean Strategy?

The blue ocean strategy was developed by Professor Kim and Renee Mauborgne of INSEAD Business School. They believed that creating a new market which is the blue ocean is more beneficial than competing in an existing market. The blue ocean strategy was developed and implemented using various frameworks to look beyond the competition and reduce risks and hurdles in the newly created market.

Blue Ocean Strategy example — The smart household vacuum is a good example of applying Blue Ocean Strategy.

Most companies today have been using the blue ocean strategy even though the strategy is complicated. But all companies that succeed in the market create a product or a service that communicates the brand value, which would get a better reach for the brand in the market. Companies need to create an innovative product or service for an already existing industry that creates a new demand among customers and target audience to stand ahead of the competition.

Why is the Blue Ocean Strategy Important?

Adopting the blue ocean strategy could be the perfect choice for all companies in a brand-new market. But it comes with multiple challenges and risks. Coming up with a new idea in a new market to achieve a profitable company can be tricky as there is no proven formula or strategy for it to work. Entering the market too early, bringing a different product, having the right strategy and moving in the right direction can be risky. The number of organizations that failed using the blue ocean strategy is larger than the ones that succeeded.

Innovation can create value and significant benefits by making a product or service perform better and convenient for the customer. For example, Apple focuses on innovation efforts that make it easier for customers by providing a seamless experience across all its products and services. With the right innovation and strategy, it gets easier to make the product perform better, reliable and convenient for the customer to use.

The Blue Ocean strategy allows companies to open up a new marketplace and create new demand. There is a huge demand and an excellent opportunity for growth in the blue ocean, making the business profitable.

Companies must adopt the blue ocean strategy that has no competitors in a new market which improves growth. Adopting the blue ocean strategy creates a huge demand that evolves extensive growth with little to no competition in the market. The blue ocean strategy is vast and powerful tool for profitable growth in a business.

Blue Ocean Strategy and Innovation

Innovation is the factor of learning, market and entrepreneurial orientation. Companies can create better products or services to enhance their performance, revenue, profit, and market share than those with lesser practices or innovative methods.

Most red ocean organisations fight for survival as bigger organisations consume the smaller ones, which eventually innovates and creates value for both customers and the company to grow and survive in the market.

How to Apply the Blue Ocean Strategy?

The blue ocean strategy requires the business owner to focus on the idea and perform a blue ocean strategy research to find something innovative and different that communicates the product or service’s value.

Most start-up founders come up with innovative ideas but struggle to find a way to implement the ideas into a product and make it look valuable for customers to purchase. The blue ocean strategy helps business founders build and turn their ideas into innovative and profitable companies (also check 5 Steps to Turn Your Creativity into a Successful Design Business).

It is crucial for business owners to analyze various industries and sectors to identify trends and product demands. Analyzing these industries lets them find out if customers or users are satisfied with already existing services.

Suppose there is a demand or requirement in the industry or market. In that case, it is essential to understand and put forward solutions for customers and figure out a way to make it easier for the target audience.

In addition to the above video, we can follow the blue ocean strategy four action framework by Professor Kim and Renee Mauborgne to get a clear understanding of how to apply the strategy,

Raise: What are the significant factors that need to be improved within the market or industry?
Reduce: What were the results of competing with other companies and what can be reduced?
Eliminate: What must be eliminated by the existing industry which can also make customer’s lives easier?
Create: What must be created or added that the existing companies in the market have never offered?

The four-action blue ocean framework allows entrepreneurs or business owners to implement their strategy and make the shift to make it better for customers and help them improve their revenue.

Blue Ocean Strategy Examples

Several companies have adopted the Blue Ocean Strategy. This application’s evidence appears in the companies’ offering, structure and business model. Below are two examples of these companies, Netflix, iTunes and Airbnb:

Netflix

Netflix is a popular subscription-based streaming service provider and started competing in the DVDs rental and sales industry. With the blue ocean strategy, Netflix wanted to satisfy customers’ needs and began by making movies or films online and completely excluding sales at physical stores.

Netflix made it comfortable for customers and also provided a fantastic list of movies available online. They also created subscription-based monthly plans and created an algorithm that would understand users preferred movies and shows. Its main goal was to make movies available online, so users do not have to leave their homes to buy or rent a DVD.

iTunes

Apple brought in a new market space for the music industry as it found millions of users using illegal music file sharing across the web during the late 1990s. It only got harder for the music industry to stop illegal digital music downloads.

With the fastest growing demand for MP3 players, Apple offered iTunes that triggered customers to buy individual songs at a reasonable price. Apple offered various other benefits, like copyright protection to music companies, free downloading services, amazing search and browsing functions. Today, iTunes has dominated the global digital music download market for over a decade, although there have been multiple competitors. Check (How Does Apple’s Design Process Work?).

iTunes as Blue Ocean Strategy example — iTunes app and market place are good examples of the Blue Ocean Strategy.

Airbnb

Airbnb connects travellers and renters around the world with both affordability and value. Airbnb’s blue ocean strategy includes process innovation where they don’t own any properties but provide customers and sellers with a platform through which they can serve both parties.

Airbnb’s only goal was to create amazing accommodations for their customers at the best possible price. With the blue ocean strategy, they created a new marketplace where they eliminate the hassle of booking hotel rooms, quality of service, locations, inconvenience to find the best suitable place and multiple other issues that customers faced. Airbnb created innovation in the hospitality and the hotel industry, which never existed prior, which became successful and advantageous to hosts and travellers.

In addition to the examples above, the below two case studies highlights innovation in business:

Airbnb as Blue Ocean Strategy example — Airbnb is another example of the application of Blue Ocean Strategy.

Conclusion

Based on the blue oceans strategy research, it is said that the blue ocean strategy is needed when supply exceeds demand in the industry or market. The strategy is complicated and doesn’t require companies to create new products but provide a more reasonable and valuable service or product to the consumers that will, in turn, become a profitable business.

The blue ocean strategy follows an approach to develop sustainable and profitable frameworks and create an innovative market with brand new customers. The strategy has a significant impact to make a business successful, profitable and unique within the industry.