Most companies compete in red oceans where competitors swirl like hungry sharks biting at the same shredded piece of meat. Red oceans are miserable. Differentiation is low with competitors saying and doing the same things. Profits become scarce. Nobody makes any money and nobody is happy.
Kim and Mauborgne propose a better way in Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. They present a methodology for companies to create blue oceans where they sell in a space that is uncontested.
The ideas in this book are timely. Most companies are reluctant to change when things are working. However, with the pandemic driving sea-level shifts in the economy, markets, and customer demand companies feel the pressure to find new strategic paths forward. Blue Ocean Strategy provides a framework to create a profitable strategy. Here are some of my key takeaways.
Don’t Focus On YourCompetition, Focus On Your Customers
What separates winners from losers is how they create a strategy. Red ocean companies focus on their competition. Blue ocean companies focus on their customers. “The creators of blue oceans surprisingly didn’t use the competition as their benchmark.” Instead, they focused energy on creating value innovation, “a leap in value for buyers.”
Value innovation puts equal weight on innovation and market value. “Value innovation occurs only when companies align innovation with utility, price, and cost positions.” In other words, breakthrough ideas and technology are only a part of the game. Blue oceans are found when companies also look at the way these products are brought to market, positioned, priced, and packaged. Many companies have access to innovative technology. By looking at the value proposition, they can discover blue oceans.
Create a Strategy Canvas
The concept of a “strategy canvas” is brilliant. In Revenue Growth Engine, I say, “Buyers don’t buy products and services, they buy the outcomes the products and services deliver.” The authors of Blue Ocean Strategy present a model to map the outcomes you offer to your clients versus other competitive offerings. Blue oceans happen when you can create a differentiated value curve. In this, you focus on delivering a set of outcomes that your ideal clients and prospects want while defocusing on outcomes that are not as important. They argue that companies need to look at the outcomes they deliver and decide which outcomes should be increased or created. Simultaneously, they should decide which should be reduced or eliminated. The end result is a different value model that should resonate with your ideal clients.
Where To Find New Customers
In Revenue Growth Engine I present the two ways to grow revenue: get net-new clients or cross-sell more to your existing clients. Net-new business in a red ocean is a challenge with the same old competitors thrashing around to steal each other’s customers.
Mauborgne and Kim recommend that companies look at three tiers of noncustomers to find new sources of revenue:
- Soon-to-be noncustomers who are on the edge of your market.
- Noncustomers who actively refuse to buy the offerings of your market.
- Unexplored noncustomers who are in markets distant from yours.
They challenge us to think about why seemingly good prospects are leaving our market or not buying from us at all. What can we do to adjust our value proposition to get their attention?
Map Value at Each State of Your Client Experience
As the authors of The Experience Economy assert, customer experience is the new frontier of value creation. In Revenue Growth Engine, I recommend companies map out their Ideal Client Experience. Mauborgne and Kim propose looking at customer experience in terms of the utility (value) that is added at each level of the experience. “Where are the greatest blocks to utility across the buyer experience cycle for your customers and noncustomers.” If you can find and eliminate frustrations and friction, you can create new value and develop a blue ocean strategy.
Renew Your Blue Oceans
Strategy is not a one-time event, it is a habit. The market is always changing. Companies need to develop a strategic cadence to continually create blue oceans. In this final chapter, the authors use my favorite company, Apple, as a case study. They show how Apple continues to create blue oceans by combining technology innovation with value. As products move through the lifecycle, they not only introduce new products, they also refresh the value of existing products. While most companies are static, the only thing standing still at Apple is the commitment to innovate to add value to its customers.
This book is deep, full of powerful ideas to help any business grow. I highly recommend you grab a copy of Blue Ocean Strategy and a box of highlighters. You’re going to get a ton of ideas to help you find blue oceans.