Blue Ocean Strategy: How to Avoid Competition

Xavier January 21, 2024 Article Comments Off on Blue Ocean Strategy: How to Avoid Competition 1 Views

Let’s say you have the ambition to start and manage your own e-commerce business. However, launching your e-commerce site in a town filled with big players can be intimidating as millions of dollars are poured into running these businesses. So, how can you find your unique spot in the market where you can survive the battlefield? Okay, the strategy that can help you to survive is the blue ocean strategy.

Table of Contents

Understanding the Blue Ocean Strategy

Renowned business theorists W. Chan Kim and Renée Mauborgne came up with the term Blue Ocean Strategy in 2004 in their book of the same name.

In the initial part of the book, they discussed two types of strategies. The first one is the traditional approach, where typical companies in the industry compete aggressively for the same market share. They call it the Red Ocean Strategy. It is kind of like a sea full of sharks where all are fighting for the same food. So, you can imagine, it turns the ocean a bit bloody.

The red ocean is a metaphor often used to show how competitive and tough traditional markets can be. It’s like companies in a fierce battle, trying to outdo each other, and it creates an intense and cutthroat atmosphere.

Now, there’s another part of the ocean. It’s not like the red one where everyone’s fighting. Enter the blue ocean. Here, you don’t have to battle your competitors aggressively. Instead, the idea is to find a new market space by doing things differently, avoiding the usual methods.

It changes how things are done and creates new limits. This, in turn, brings in a fresh demand in the market. It’s like a more innovative way to navigate the business seas.

Blue Ocean Strategy: Blue Ocean Vs Red Ocean

Yes, you need to enter the blue ocean. Navigate the new business territories. But how do you do it? In this philosophy, the authors point out some specific tools to help you navigate your business to the blue ocean. We will talk about the tools dedicated to the blue ocean strategy along with some of the tools that can be complementary to the strategy.

How to enter the Blue Ocean

When you’re starting something new in business, know your surroundings, see how things might change, understand what you’re good at, consider how your customers react to changes, think about how long you can keep going, and find ways to come up with new ideas. You’ve got to figure it all out. So, when you’re heading into unexplored territory, just ask yourself these important questions. They’re like your guide to success! So, let’s dive into the details.

Understand the External Environment

Before diving into the territory of the blue ocean, take a closer look at why your current business environment is so unpredictable and competitive, resembling a red ocean.

The competitiveness, unpredictability, and volatility of the market can be influenced by external factors such as the inflation rate, political stability, taxation policy, laws and regulations, technological advancement, social mobility, etc.

To delve further into understanding these factors, you can gather insights from various complementary frameworks, such as conducting a PESTEL analysis and a SWOT analysis.

PESTEL analysis helps in comprehending and evaluating external aspects such as the economy, society, politics, technology, law, and ecology. And, the SWOT analysis offers valuable insights into external factors by assessing both the opportunities and threats present in the business environment.

Building Your Core Competencies through Value Innovation

When discussing the blue ocean, the idea of creating a unique market space comes first. Establishing this unique space requires innovation, and building your core capabilities is crucial for fostering innovation.

Yet, when pursuing innovation, we sometimes overlook price considerations. There’s a misconception that innovation must be expensive, which can get in the way of reaching the blue ocean. In their Blue Ocean Strategy book, W. Chan Kim and Renée Mauborgne highlighted the term Value Innovation, emphasizing the need to balance innovation and costs.

“Value innovation is the cornerstone of blue ocean strategy”
― W. Chan Kim, Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant

When your products or services are both innovative and cost-effective, the two finest combinations set your business apart, making you invincible to bloody competition.

Four Actions Framework

In the Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne discussed different tools and frameworks, and one of the interesting ones is the Four Actions Framework. In this framework, you will ask yourself four important questions that may lead you to take four significant actions which are Eliminate, Reduce, Raise, and Create. Let’s dive into detail:

Four Action Framework, Blue Ocean Strategy

Eliminate

Have you ever considered whether the industry in which you operate has outdated processes, obsolete technologies, or perhaps complementary services that seem redundant? The supply chain utilized by industry players may contain unnecessary or complex steps.

We are accustomed to it as it is taken for granted as an industry custom since we never question ourselves!

The framework encourages you to ask yourself the question, “Which factors that the industry takes for granted should be eliminated”

When you analyze the question, you may find that some factors need to be eliminated. As we have discussed factors such as outdated processes, obsolete technologies, redundant services, and complex or unnecessary supply chains, eliminating these factors can result in efficient and effective output.

For instance, there is criticism circulating regarding the poor working conditions, environmental hazards, and overproduction within the fast-fashion industry. It can be a great opportunity for a manufacturer to separate itself from the market by eliminating these problems.

Reduce

The second step is to ask yourself, “Which factors should be reduced well below the industry’s standard?”

At times, there is no need to eliminate the factor entirely. It may just require small adjustments or optimizations while keeping the process intact.

Sometimes, the HR department in your software firm frequently organizes lengthy and comprehensive corporate training programs on corporate compliance.

While these training programs are essential and core to development, the extensive ones may impact productivity as they consume a significant amount of time. Therefore, making the training program more concise and appropriate to a certain level would be effective.

Raise

Here comes the inception of the positivity of the four frameworks. We have discussed how to eliminate and reduce. Now it is time to talk about how to enhance the current process, product, or any particular process.

There is always a place for improvement. So, ask yourself if there is any opportunity to improve the current process, product, or any other factors.

The long-lasting battery health in the smartphone industry serves as a clear example of the ‘Raise’ action within the Four Action Framework.

Create

The final part of the Four Action Framework is ‘Create,’ which involves pure innovation. It’s about discovering entirely new elements for the business that industry counterparts have never offered before, thus creating a unique value proposition.

Do you recall the launch of the iPhone by Apple Inc.? It completely revolutionized the mobile phone industry, and arguably, the networking landscape as a whole. In the past, people used button phones. Then, Steve Jobs introduced the idea of a phone that could be operated by touch.

Strategy Canvas

The name itself suggests that Strategy Canvas is a graphic representation that lets you compare your strategies with your competitors in creating value for customers. It shows where you stand in the market, indicating if you’re in a tough ‘red ocean.’ It’s a quick way to find out how much you intersect with industry players in creating value.

It is an incredible tool that provides a snapshot of how you and your competitors perform in certain key factors within the industry.

You have already guessed what is required to create a strategy canvas. Let’s dive into the details:

Since the canvas involves your position in the market, find out who your key competitors are.
Point out your industry’s influencing key factors such as product/service Features, price, customer service, distribution channels, brand image, reputation, etc.
As you have already identified the key factors, assess the performance of both you and your industry players.
Draw a horizontal axis at the bottom of the chart. It will represent the key factors. Then, you need to draw a left vertical axis that represents the performance.
Now it’s time to plot the current performance of your business and your competitors on the chart.
Connect the dot to find out your position!
Take a good look at the graph to see where you outperform or where you find a space from your competitors.

This exercise template Drawing-Your-As-Is-Strategy-Canvas_1506935160.pdf (blueoceanstrategy.com) can be effective to learn more about creating the strategy canvas.

Even though it seems hard to escape from the competition, an in-depth analysis of the industry market, competitors, and the urge to be innovative can help you become invincible to the competition. Netflix, Uber, Airbnb, and many other growing inventors have been proving it otherwise.

Footnotes:

Loves to write

Xavier

Bicchuron Bicchuron Blog