The only way to beat the competition is to stop trying to win
The comparison of military confrontation and market competition is firmly rooted in the mass consciousness and seems quite logical. Competing companies are enemies who fight each other on the battlefield. They are trying to regain their part of the territory as market shares, producing look-alike products or offering similar services with minor modifications or at a lower price. The market which is crowded with competitors, tearing each other apart, looks like a scarlet ocean drenched in blood.
The “Blue Ocean Strategy” book offers a different approach. It shows how to go beyond well-known parts of the market and the paradigm of tough competition of the red ocean and concentrate on untouched areas. They are called blue oceans, where there are no competitors, but there is a huge potential for the development of the company.
In blue oceans, competition does not threaten anyone, since the rules of the game have yet to be established.
How to create a blue ocean
To create a blue ocean there is no need to invent a new industry, as most companies create blue oceans within the red ones. They push the existing industry boundaries in the way Cirque du Soleil or The Body Shop had done it by finding their unique niche.
The blue ocean strategy is based on the value innovation. It is not a competitive advantage, but what makes competition simply unnecessary due to the fact that the company enters a fundamentally new level.
In contrast to the classical competitive approach, when using value innovation strategy it is not necessary to choose between low cost and high value. This strategy allows you to simultaneously create high value at a low cost.
The main tool for building an innovation strategy of value is the strategy canvas. The strategy canvas is a simplified model of the industry, clearly represented in the form of a graph. It allows you to assess the similarities and differences of your strategy with the strategies of your competitors.
The construction of a strategy canvas is as follows:
First, you should highlight the key industry factors that are common to the product or service you offer and to the offer of competitors (and place them on a graph along the horizontal axis). For example, for food products, it may be the cost, taste, assortment, packaging, the prestige of a company, etc.
Secondly, it is necessary to estimate the costs or the volume of the offer for each characteristic selected in the first paragraph. For example, a wide range or narrow, high price or low. The vertical axis will show the assessment of these factors.
For example, the higher the price of a product is the higher the location of this factor relative to the vertical axis will be.
Thirdly, you need to connect the resulting points on the chart for each company. The resulting curves are called the value curves. They are a visual representation of the strategies of an organization or group of companies.
Images of value curves for competing companies from the red ocean will have a similar shape (and may even overlap each other), unlike the value curves of those companies that have made value innovations.
Thus, a strategy canvas is not only a reflection of the current state of affairs in a particular industry, giving a visual representation of the actions of competitors. It is also a convenient tool for developing a new alternative strategy for the company.
If you are aiming at creating a blue ocean, then your strategic outline should not be similar to the strategic outline of competitors.
How to do it?
Neither price cuts nor customer surveys will be the way out. Studies have shown that consumers usually want to get more of what they already have.
To create a blue ocean, deeper changes are required. A change of orientation from competition to the search for alternatives and a change of orientation from attempts to satisfy typical industry customers to making new clients.
A case in point is the Australian company Casella Wines that decided to enter the American wine market. Having studied the industry factors, they made sure they did not repeat the model of the strategic canvas of competitors by selling expensive and seasoned wine for connoisseurs. They significantly changed the position of the factors of the strategic canvas, created a new industry. Wine for people who do not understand it. The company began to produce wine for everyone, the wine that is convenient to drink at parties along with beer and cocktails.
As a result, in two years, wine for parties has become the fastest growing brand in the history of the Australian and American wine industry, as well as the main, imported wine in the US, overtaking French and Italian wines.
Blue ocean life cycle
Of course, competitors and imitators are not asleep, and you need to be ready for them to appear at any time. The blue ocean will sooner or later become a red one.
In order not to lose sight of this process you will need to regularly monitor the value curves. If your curve begins to merge with the curves of competitors, then this is a sign that your efficiency is declining. It is time to look for ways to create new market spaces.
You should always remember that the search for a blue ocean is not a one-time process, but a dynamic one.
It seems like the rules of all industries have been established a long time ago. It might be hard for new companies to enter the market when every place seems to be taken. But there really is an alternative to what seems to a well-established path of copy-pasting the idea with minor changes.
There really is a chance to find the territory that is not occupied by anyone. It can be done by systematically following the rules of the Blue Ocean strategy.