What Is Blue Ocean Strategy? Examples & Application

While both Blue Ocean Strategy and disruptive innovation involve creating new market spaces, they differ in their approach. Disruptive innovation often starts with a low-end offering that gradually improves and disrupts the existing market. Blue Ocean Strategy, on the other hand, aims to create a completely new market space by offering a fundamentally different value proposition from the outset. It seeks to create uncontested market spaces, rather than directly disrupting established players. Traditional competitive strategies, like Porter’s Five Forces, focus on competing within existing industries to capture market share.

Every car manufacturer focuses on creating expensive, fashionable car models. However, it did not cater to the middle-class groups that did not want such vehicles. Prime examples of companies that have identified and capitalized on blue oceans are Apple, Netflix, and Ford. Conversely, red oceans are markets that are crowded with competitors, each vying for a competitive advantage and seeking to increase their market share. Blue oceans are generally riskier than red oceans because they are unexplored.

Although blue ocean businesses take time to be reached or surpassed by imitators, competition remains a reality. Over time, imitation can turn a once-unique market into a red ocean, reducing the impact of the original idea. To stay ahead, businesses must continuously innovate and refine their offerings. In contrast, blue ocean companies seek to go beyond market boundaries and extend further than the existing market space. They achieve profitability by offering unique value to customers while keeping costs low. For example, consider Napster and Apple’s iTunes in the digital music industry.

Blue Ocean Strategy vs. Red Ocean Strategy

A hundred years ago, some of the most basic industries of today didn’t exist. Many of these started as blue ocean strategic move at some point before the boundaries disappeared and competition took over. 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).

Step 4: Create

Tesla, for example, is creating market space by combining sustainability and innovation, while Airbnb and Spotify have opened up new markets by making smart use of platform technology and community thinking. The 4 Actions Framework / BOS Framework from the Blue blue ocean strategy meaning Ocean Strategy is particularly valuable when an entrepreneur is trying to achieve value innovation and break up the cost trade-off between value and cost. The developers of this method use terms of red and blue oceans to describe the global market. The rules of the game have yet to be drawn up, there are no large market share holders, and there is sufficient potential. A blue ocean is an analogy, to describe the deeper potential that can be found in environments where no company has ever been present.

• While blue oceans represent untapped market spaces with potential for growth, their scope may be limited compared to established red oceans.
• The key insight of the Blue Ocean Strategy is that market boundaries exist only in our minds – they can be reconstructed by looking across traditional limitations.
• Implementing a Blue Ocean Strategy involves identifying and seizing new opportunities without competition.
• Robinhood’s commission-free trading and ability to purchase fractional shares were completely unheard of when it launched in 2013.
• There are very few (if any) people actively looking for your product, so you need to give them reasons to be interested in the first place.
• Conduct market research, focus groups, and pilot programs to validate the demand for your innovative offerings and gather insights for refinement.

The Four Actions Framework

Companies like Nintendo used this approach when they created the Wii—stopping the technology arms race with Sony and Microsoft to instead focus on casual gamers overlooked by the industry. Blue ocean strategy is a business theory that aims to create new and uncontested market spaces where competition is irrelevant. The main purpose of this strategy is to provide value innovation by identifying new customer needs and preferences and offering unique products or services to meet those needs.

Path 1: Look at alternative industries:

Can this initiative be reduced to something simpler with lower costs, but still remain competitive, interesting and relevant to users? Venture strategies are specifically about the technological innovation of companies towards a dynamic market. Blue Ocean Strategy is about value innovation in general, in which no emphasis is put on reducing the speed to market. W. Chan Kim and Renée Mauborgne contend that future leading companies are likely to succeed by targeting uncontested markets that are ready for growth and development. Shifts in work-life balance, demand for ethical sourcing, and the push for financial inclusivity create new opportunities. By focusing on fresh ideas rather than competing on the same old terms, businesses can thrive in a fast-changing economy.

Step 4: Develop a value curve

This article unpacks this idea so that you can focus on entering a brand-new business landscape where the competition remains far behind you. Chan Kim and Renée Mauborgne in the book Blue Ocean Strategy, the answer is no. What was lacking in Napster was its failure to align external people – its partners to support the compelling value it unlocked. When the record labels approached Napster to work out a revenue-sharing model, Napster balked while Apple partnered with major music companies.

The Ansoff Matrix: A Strategic Framework for Business Growth

In some cases, you may be an existing business seeking to tap into a blue market. In other cases, you may be an early stage startup that’s ready to launch an offering on the market. Either way, testing and executing and then refining your strategy will be key parts of the process. With the blue oceans strategy, differentiation and affordability in prices go hand in hand.

• The strategy emphasises value innovation, aiming to simultaneously pursue differentiation and low cost to open up new market space and create new demand.
• It strategically reshapes industry dynamics, challenging the conventional belief that market boundaries are fixed.
• 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.
• When companies challenge this functional-emotional orientation of their industry, they often find blue oceans.

Therefore, the first mover can set prices to ensure each conversion (i.e. sale) is profitable — albeit the value received by the customer must warrant the pricing (or else market demand will drop). Creating a new market category often requires upfront investment in marketing, product development, or infrastructure that can be higher than expected. A blue ocean is free of direct rivals, but that doesn’t mean it’s risk-free.

Companies try to outperform rivals to grab a greater share of existing demand. In a blue ocean, you create something different that brings in new customers. Blue Ocean Strategy is a business approach that focuses on creating new, untapped market spaces rather than competing in existing ones. It’s about making your competitors irrelevant by offering something so different that you essentially create your own playing field.

This means getting a clear understanding of how you can create value for your customers and differentiate yourself from existing solutions. Before you move forward with a blue ocean strategy, you need to figure out if your product is actually feasible. The Blue Ocean Idea Index helps you understand whether your business idea meets the criteria for a blue ocean strategy.