Blue Ocean Strategy

A Blue Ocean Strategy is the name of the optimal Strategy to follow in New Markets.

• The concept was invented by W. Chan Kim and Renée Mauborgne in 2004.

 

The name Blue Ocean is a Metaphor for a sea where fishes don’t need to eat each other to survive.

• The color of the Ocean is blue, due to the pure color of its water.

 

Blue Ocean Markets are Characterized for:

• Little or no Competitors.
• New Products or Services not yet fully Defined.
• Uncertainty (often) about the Size that the Market can reach and its Future.

Therefore, a Company can grow without worrying too much about Competitors.

According to our Professional Experience, Blue Ocean Strategies should be based on:

 

Flexible Suppliers: Suppliers that can Adapt to Changes.

• Since the Market is New, you don’t know what to expect in the future.

 

Study the New Players: Be aware of their Products and Market Approaches.

• Learn from them: You never know if they will tackle the Market Better than you.

 

Focus on your Product: Substitute Products are not yet a Threat.

• Your Product is likely to have a long “life expectancy” ahead of it.

 

Comfortable Relationship with Clients: For you. Don’t push yourself too hard.

• The Market is young. You can establish the Benchmark you want.

 

Competition: Grow Faster than them to become the Market Leader.

• In the future, you will be the Big Fish and you will be able to buy your Competitors.

 

* We have followed Porter’s 5 Forces to design the Strategic Key Points..

• Visit our “Porter 5 Forces Page” to learn more about it.

Blue Ocean Strategy

 

Before we see some examples, we’ll analyze the difference between Blue Ocean and  Red Ocean Strategies:

 

As you can imagine, a Red Ocean is the Opposite of a Blue Ocean  Market.

 

Red Ocean Markets are Characterized for:

• Having Lots of Competitors or a Fierce Competition.
• Well established Products that Clients know.

 

A Red Ocean Strategy differs completely from that required for a Blue Ocean.

• Visit our “Red Ocean Strategy” Page if you are interested in these differences.

The best way to understand Blue Ocean Strategies and How to design them correctly is by sharing some examples with you:

We’ll now share 4 examples of famous Companies that were Successful in Blue Oceans.

• We’ll analyze what they did Right and what we can Learn from them.

 

Let’s begin:

 

When the first Computers appeared, they did not have Operating Systems (OS).

• Or at least, not as we know them today.

 

The interface that each Computer had was particular to its Brand.

• There was not a common Operating System.
  • Different Computer companies had different Systems.

 

Everybody was Focusing on developing the best Hardware…

…. And two young men Focused on developing a Common OS for all Computers.

 

Those guys were Bill Gates and Paul Allen. And their program, MS–DOS.

• The “father” of Windows.

 

What did Microsoft do?

• Microsoft created a New Market: the Operating System Market.

 

In fact, they Grew so Fast and so Strongly that they are still the King of Operating Systems.

• By far.

 

At first, they did not worry about other Companies or Products.

• They mainly Focused on Growing Fast: MS-DOS in every Computer.

 

Over the years, as Windows became the King of the Market, they could buy all the Competitors they wanted.

 

In 2003,  Martin Eberhard and Marc Tarpenning (Tesla founders) maybe thought:

“There is a good chance that in the future, cars become Electric…

… And nobody is manufacturing Electric Vehicles… What an Opportunity!“.

 

The rest is well known:

• Elon Musk became the CEO and the Company soared.

With lots of troubles, financial problems, etc.

 

What did Tesla do?

• They created the Market for Electric Vehicles.

Before them, no one thought that the technology was ready for it.

 

You can argue about:

• Tesla’s financial situation.
• Its Market Value.
• Sales Forecast.
• etc.

 

But, you can’t argue that thanks to Tesla, all Car Companies have started investing in the Electric Vehicle.

• Tesla has played a huge Role in the Electrification of our cars.

 

The problem for Tesla is the Future.

• Now, all car companies are investing heavily in Electric Vehicles.

The Blue Ocean is becoming Red.

 

Can Tesla grow so fast that not even Ford or Volkswagen can become a threat?

• Only time will tell.

 

In the age of High-Speed Internet, Netflix came up with a very good idea:

• A Platform where people could see whatever they wanted whenever they wanted.

 

We say high-speed internet because in the past, other companies tried to create something similar.

• The problem was that the average Internet connection was very slow.

If you are young, you cannot imagine what it is like to wait 2 hours for a single song to download.

 

Also, in the past, there were dozens of illegal platforms where people could easily download everything they wanted for free.

• And copyright laws hadn’t started to prosecute those platforms.
  • Kazaa.
  • Ares.
  • eMule.
  • etc.

 

Anyway.

What did Netflix do?

• They created the Market for Movie Streaming Platforms.

 

A Platform that was much better than illegal platforms with a very competitive price.

 

In the 50’s, if you wanted a Burger, you only had one option:

• Go to a Restaurant.
• Wait for the waitress.
• Make your order.
• wait.
• wait.
• Have your burger.
• Wait for the bill.
• Pay and leave.

It didn’t matter how much of a hurry you were.

 

You had no other option.

 

What did McDonalds do?

• McDonald’s created the Fast Food Restaurant Market.

 

Of course, Fast Food already existed before (every country has a type of “fast food”).

• But McDonalds found the way to design Restaurants based on Fast Food.

 

Before McDonalds, you could have a quick Sandwich on the way.

 

But you didn’t have a place, a Restaurant, where you could sit and have a Diverse Menu that was delivered quickly at very affordable prices.

 

McDonalds did with food what Ford did with cars.

 

And… last but not least: McDonald’s products taste very good.

A Blue Ocean Strategy is the name of the optimal Strategy to follow in New Markets, with low Competition.

 

Blue Ocean Markets are Characterized for:

• Little or no Competitors.
• New Products or Services not yet fully Defined.
• Uncertainty (often) about the Size that the Market can reach and its Future.

Therefore, a Company can grow without worrying too much about Competitors.

 

Blue Ocean Strategies should be based on:

• Flexible Suppliers: Suppliers that can Adapt to Changes.
• Study the New Players: Be aware of their Products and Approaches.
• Focus on your Product: Substitute Products are not yet a Threat.
• Comfortable Relationship with Clients: For you. Don’t push yourself too hard.
• Competition: Grow Faster than them to become the Market Leader.