How to make the moves towards a Blue Ocean?
Red Ocean vs. Blue Ocean
Navigating the business world is tricky and dangerous and can pose threats to your business varying in levels of riskiness, however, understanding the nature of the Market in which you choose to operate and build your business, determines the approaches you’d adopt to keep your business in the thriving shore rather than a tumbling one.
The traditional market is saturated, mature, and characterized by fierce competition, hostile takeovers, and a race-to-the-bottom price war, so tapping into this territory requires careful planning and a full understanding of the market in that specific sector, this is called Red Ocean, and an example of this is the Automobile market, it is very difficult to build an auto manufacturer because the market is saturated, no auto manufacturer was able to penetrate the market in the last few decades with the exception of Tesla, but, there is a good reason why Tesla was able to do it, obviously because of the innovation they developed and made electric vehicles a practical reality.
On the contrary, Blue Ocean is the untapped market, free from competition, the space is not crowded with competition trying to put you out of business, this is where technological advances and bright ideas present an opportunity to create a new customer base, generate astronomical revenues, drive cost down, and create new value.
By tapping into Blue Ocean, you’ll be able to increase your business’s revenue potential and maximize your business’s profit impact.
Strategic Moves
Ok but how to tap into that beautiful Blue Ocean?
There are several steps you can take to move your business in the direction of a Blue Ocean.
The first thing we need to consider when creating a Blue Ocean is moving beyond competition-based strategy and this is because of two reasons:
1. Technological advances in manufacturing and distribution mean more products are readily available than ever, which means competition is global, niches are disappearing, and monopolies are threatened.
2. Globalization has caused international trade barriers to fall and made global price information instantly available.
Having these two factors in mind, our market analysis and the search for a bright idea or technological breakthrough should focus on finding solutions to these two issues when creating a Blue Ocean.
Blue Oceans emerge when the balanced combination of value innovation happens, you must create a product that provides value and at the same time drives cost down because if we only focus on value without innovation, this approach will anchor the company in the Red Ocean and if we focused on innovation without value, the product will be impractical.
Red Ocean companies operate on the model of high-value, high-cost products or modest-value, and affordable-cost products, while Blue Ocean companies should focus on value innovation while lowering costs, that balance is very important.
Strategy Assessment
This can be achieved using a few tools like the strategy canvas that includes factors of competition and value curve, Another tool that will help us with the value curve is the four-action framework, this tool optimizes the strategy,
A successful Blue Ocean strategy has three signatures:
1. Focus: An emphasis on only key factors of competition.
2. Divergence: A break from an industry’s prevailing strategies.
3. Compelling tagline: e.g. Southwest’s, “The speed of a plane at the price of a car—whenever you need it.”
Strategic Sequence
Strategic sequence: A four-step process for formulating and evaluating blue ocean ideas.
1) Buyer utility: What value does the buyer get from a product?
2) Optimal pricing: The price point that will attract the biggest number of buyers.
3) Optimal costing: Using insights gained from determining optimal price points to set your target cost of production.
4) Adoption: Ensure smooth adoption by engaging and educating the three primary stakeholders: employees, business partners, and the public.
