History and Development of Blue Ocean Strategy

The term “Blue Ocean Strategy” was first introduced in 2005 in a book by W. Chan Kim and Renée Mauborgne. The authors, both professors at INSEAD, drew upon a decade-long study of 150 strategic moves spanning over 30 industries. They proposed that companies can achieve high growth and profits by creating new demand in an uncontested market space, or a “Blue Ocean,” rather than competing head-to-head with other suppliers in an existing industry.

Understanding the Blue Ocean Strategy

The premise of the Blue Ocean Strategy is to ‘create uncontested market space and make the competition irrelevant’. It suggests that businesses should shift their focus from existing markets (Red Oceans) filled with cutthroat competition, to creating new markets (Blue Oceans) where they have the freedom and flexibility to set the rules. This involves innovation and value creation, as companies need to identify and fulfill unmet customer needs.

Current Applications and Case Examples

One of the most cited examples of a Blue Ocean Strategy is Cirque du Soleil, the Canadian entertainment company. Traditional circuses focused on animal performances, but Cirque du Soleil eliminated this feature, focusing instead on rich storytelling and unique performers, creating a new market space and setting a new standard for circuses.

Another example is the Nintendo Wii. Instead of competing with Sony and Microsoft in the high-tech gaming market, Nintendo created a new market segment aimed at casual gamers, emphasizing fun and interaction over complex graphics.

Impact, Benefits and Challenges

Companies that successfully implement a Blue Ocean Strategy can enjoy several benefits, including less competition, higher profit margins, and a boost in brand recognition. However, it also poses several challenges such as the risk of market uncertainty, the need for significant resources for market creation, and the possibility of imitation by competitors.

Practical Implications of Blue Ocean Strategy

• Companies should actively seek to identify and create new market spaces instead of merely competing in existing ones.
• Innovation and value creation are crucial components of a Blue Ocean Strategy. Companies should strive to identify unmet customer needs and find unique ways to fulfill them.
• Implementing a Blue Ocean Strategy requires a shift in mindset from competition to creation. This might involve significant organizational culture change.

Closing Thoughts

The Blue Ocean Strategy offers an innovative approach to business strategy, focusing on creating new market spaces rather than competing in existing ones. While it poses several challenges, businesses that successfully implement this strategy can enjoy significant benefits. As the business landscape continues to evolve, strategies like these will be crucial for companies seeking to stay ahead.