Explore alternative industries, strategic groups, buyer groups, complementary products, functional-emotional orientation, and time to discover innovative opportunities. If a company’s current portfolio and planned offerings consist mainly of settlers, the company has a low growth trajectory, is largely confined to red oceans. If it consists of a lot of migrators, reasonable growth can be expected. In an age where streaming movies was unheard of, Netflix entered a blue ocean by offering just that. It was able to create a new market space for itself by going beyond the conventional DVD rental market (red ocean). Business leaders with innovative products and services who can identify blue ocean markets have endless opportunities.

The traditional strategy of most wineries has always been to compete on the prestige and the quality of wine at a particular price point. Prestige and quality are judged by things like the personality and characteristics of a wine, reflected in the uniqueness of the soil, the winemaker’s skills, the aging process, and so on. By 2018, it had become the fastest-selling home video game system of all time in the U.S. and outsold every other console over Christmas that year. Nintendo had reconstructed market boundaries with the Switch capturing the best of high-powered game consoles and smartphone games. Perhaps the most famous example of the blue ocean model is Cirque du Soleil. This renowned circus had to get creative during a period of crisis in the fiercely competitive circus industry.

1. Compared to red ocean, blue ocean strategy represents a significant departure from the status quo.
2. The Avengers, Age of Ultron, Infinity War, Endgame, and Black Panther are the five highest-grossing superhero films of all time, accounting for half of the lifetime top-ten grossing films of any genre.
3. With a collection of over two hundred thousand songs, consumers could download an individual song for as low as 99 cents or an entire album for $9.99.
4. While billions of music files were being downloaded each month illegally, Apple created the first legal format for downloading music in 2003.
5. Companies must first distance themselves from conventional methods to enter the Blue Ocean Market.
6. It’s where strategy, teams, and data come together to drive effective decision-making, streamline execution, and maximize performance.

Blue Ocean vs. Red Ocean Strategies

In a saturated market, young companies frequently face daunting challenges. Understanding the blue ocean strategy definition – creating uncontested market space by ignoring the competition – offers a way out of this predicament. When markets are saturated and competition is dense, discovering new growth opportunities can seem impossible. Blue Ocean Strategy provides a dynamic framework for businesses to carve out new market spaces, encourage innovation, and achieve sustainable growth by making the competition irrelevant. These businesses extend the industry’s curve by giving customers more for less, but they don’t alter its basic shape. These are businesses whose strategies fall on the margin between red oceans and blue oceans.

1. Use the Six Paths Framework to identify unmet customer needs and create new market space.
2. However, by the early 2000s, Nintendo was struggling as industry giants Sony and Microsoft dominated the market.
3. Stitch Fix is a personal styling company that mails its customers boxes of stylish, carefully selected clothing.
4. The appeal of fresh food served in under 90 seconds and at a reasonable price captured the restaurant-goers’ attention who otherwise did not consider fast food.

How Marvel broke the value-cost trade-off

After this, Netflix explores new market spaces using the Six Paths Framework, examining industries like video gaming and social media to see how they engage users and create interactive experiences. Hence renewal is key to ensure that the creation of blue oceans is not a one-off occurrence but is institutionalized as a repeatable process in an organization. Sending a team into the field puts managers face-to-face with what they must make sense of and helps realize how customers use or don’t use their products or services.

Step 4: Visual Communication

The natural course of action would be to start from Tier 1 to Tier 3, which allows you to start with the customers who are most likely to convert to your product if their unmet needs are addressed. Tetris went way beyond that by creating a game that was simple and yet highly addictive to play. It was played not just by kids and gamers but also by their siblings, parents, grandparents, bosses, teachers, and everyone else. As we discussed in the previous point, customer demand needs to be evaluated. Potentially even more damaging than employee disaffection is the resistance of partners who fear that their revenue streams or market positions are threatened by a new business idea.

To validate your thinking up to now, you need to build a hypothesis and validate it using actual people from your customer segment. Also, identify which non-customers are good candidates to target with your product. The “Three tiers of non-customers” tool categorizes non-customers into different categories to provide insights into how to convert them to customers. Finally, the severity and urgency of the customer problem might be significantly different from what is observed in established markets. Even though the problem might exist for many customers, its importance might be low enough that it doesn’t justify the switching cost.

From strategic pricing to target costing

“Blue Ocean Strategy” is a business theory that suggests companies are better off searching for ways to gain “uncontested market space” rather than competing with similar companies. The term is derived from the book “Blue Ocean Strategy,” written by W. In an established industry, companies compete with each other for every piece of available market share. The competition is often so intense that some firms cannot sustain themselves.

Blue ocean strategists recognize that market boundaries exist only in managers’ minds, and they do not let existing market structures limit their thinking. This, in turn, requires a shift of attention from supply to demand, from a focus on competing to a focus on creating innovative value to unlock new demand. This is achieved via the simultaneous pursuit of differentiation and low cost. To sustain themselves in the marketplace, red ocean strategists focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Here, grabbing a bigger share of a finite market is seen as a zero-sum game in which one company’s gain is achieved at another company’s loss. They focus on dividing up the red ocean, where growth is increasingly limited.

The Strategy Canvas

Cirque du Soleil developed a new concept that eliminated animals from the show and focused on high-quality dance and live performances. This allowed them to expand their audience and increase ticket prices. Once all portions are addressed, a value curve can blue ocean strategy meaning help measure business success by planning individual product features according to their intensity. This curve enables direct competitor comparison, giving you an edge in predicting success. How do companies create a brand-new product that withstands competition? Companies must first distance themselves from conventional methods to enter the Blue Ocean Market.

Before Slack, chats were sporadically used in companies for work-related communication, and email was the primary communication channel. However, email is often inefficient and creates unneeded noise and communication overhead. Quantive empowers modern organizations to turn their ambitions into reality through strategic agility. It’s where strategy, teams, and data come together to drive effective decision-making, streamline execution, and maximize performance. Opposition to a new business idea can also spread to the public, especially if the idea threatens established social or political norms.