cover-strategy-of-the-blue-oceanu-64b737ffc6c1e164208731-min-64e32595ee3fc315418089.jpg
Mikulski
Emilia Mikulska,
journalist Laba
In 2004, Harvard Business Review published an article by W. Chan Kim and Renée Mauborgne of the French business school INSEAD, in which they coined the terms “red ocean” and “blue ocean” in an innovative way to describe the market world. In 2023, the journal honored four leading scientists whose publications had the greatest impact on the development of business, and Kim and Mauborgne were among those honored. Almost 20 years after the article was published, their theory is still triumphant. What is the blue ocean strategy and how to implement it in your business?
Red and blue oceans
One of Canada’s most famous exports is Cirque du Soleil list of georgia cell phone numbers a circus troupe whose traveling acrobatic shows attract millions of viewers worldwide. In its first 20 years, Cirque du Soleil generated revenues that took other major circuses more than 100 years to earn. How did a group of Canadian performers create a hugely profitable show at a time when talk of the death of circus was growing?
The Cirque du Soleil phenomenon is an example from which the authors of Blue Ocean Strategy begin their argument. The theory, developed by W. Chan Kim and Renée Mauborgne, is based on ten years of research, in which they analyzed strategic business moves over the last 100 years. In research covering 108 companies from over 30 industries, the authors distinguished two models of business strategy on which all companies are built. The first, called the "red ocean" , is based on fierce competition and constant process improvement in order to stay one step ahead of the competition. According to the researchers, 86% of corporations operated in accordance with the first model, and their total profit was 39% . The second model, called the "blue ocean", was implemented by only 14% of the companies studied, which achieved a total of 61% of profits .
Red oceans are all existing industries – a known market space where the boundaries are precisely defined, demand is constant and the rules of the game are clear. The red ocean is also called a “bloody ocean” because there is a constant battle for customers. The market space is crowded, and players are forced to compete with each other for an ever-shrinking pool of profits. Mauborgne and Kim’s research has shown that cut-throat market competition is not an effective strategy for achieving lasting business success. What is the alternative? What is the blue ocean strategy?
Make your place on the market
According to the red ocean strategy, the company's goal is to be one step ahead of the competition. However, one step is not much. Such an advantage can be easily caught by the rival and the brutal fight for the podium begins again. The blue ocean strategy is based on the belief that real advantage is gained by leaving the competition behind by... withdrawing from the race.
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Instead of competing with their competitors, companies using the blue ocean strategy sail off into uncharted waters and develop in a completely new and unexplored direction . This is what the founders of Cirque du Soleil did. Observing the crisis in the circus industry, the Canadians decided to withdraw from the competition for a shrinking pool of customers. Instead, they created a more sophisticated show combining circus elements with theater and opened up to a completely new audience. Cirque du Soleil targets its offer to adults and corporate clients, thus creating a completely new market niche for itself.
This is what blue oceans are – new industries waiting to be discovered . The blue ocean strategy is about creating value innovation, i.e. discovering new, untapped market space untainted by competition. One of the greatest advantages of creating market niches is the lack of competition. In blue oceans, demand is not fought for, but created. Competition remains in the old industry, so it ceases to be important.
How to find your blue ocean?
Building and developing a business begins with creating a strategy. Traditionally, one of the first steps in this process is identifying and analyzing the competition. We examine the offers and methods used by other players in the industry in search of those elements that we can introduce in our company, and in particular those that we are able to implement better. We can offer a lower price, a better standard of workmanship or a longer warranty, however, we still build our strategy based on the offer of the competition.
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Blue ocean strategy moves away from this model. To find their blue ocean, companies must go beyond the traditionally understood framework of competition. The goal is no longer to outdo the competition, but to make the competition irrelevant by expanding the market space. Blue ocean strategy is based on the belief that the boundaries of the market and the structure of the industry are not fixed and can be reconstructed by the actions of individual players. Creating products and services that the competition has not yet discovered, or acting in new and innovative ways, causes the boundaries of the industry to shift and creates new space and new demand.
