Blue ocean strategy is one of the most powerful innovation processes, aiming at creating profitable high-growth for companies. The objective is to create and capture new demand by focusing on unaddressed groups of customers (non-customers), with a strategic offering that creates a leap in value for both the buyers and the company.
Authored by INSEAD professors W. Chan Kim and Renée Mauborgne (ranked no. 4 global strategic thinkers), the Blue Ocean Strategy book is translated in 43 languages and sold in over 3.5 million copies, being embraced by CEOs, mayors, presidents and prime ministers across the world. According to the authors studies of over 150 companies, blue ocean strategic moves account for 14% of business launches but generate 38% of revenues and 61% of profits. This is possible thanks to the value innovation concept, which breaks the traditional trade-off between differentiation and low-cost, making it possible to achieve both at the same time.
While the theory was built on analyzing existing strategic moves (the descriptive method) to find a pattern for success, the great value of Blue Ocean Strategy lies in its powerful innovation process and tools, so it is more about the how than the what.
There is a large number of companies that successfully applied the blue ocean strategy principles, innovation process and tools. For examples, Toyota Motor Corp. moved from being a process innovator to becoming a product innovator thanks to its Value Innovation Strategy (2005). Nintendo Wii challenged the traditional assumptions of the game consoles industry and captured new groups of unaddressed customers: older people, very young people, women. Other notable examples include Samsung, LG, Agricultural Bank of China, Kimberly Clark etc., on one hand, and public sector organizations such as governments or local authorities, on the other hand.
The theory is backed by a powerful innovation framework and tools (Blue Ocean Strategy formulation) which makes possible the creation of such breakthrough strategic moves in virtually any company in any industry.
Our consultants are qualified blue ocean strategy practitioners and have deep experience with applying the concept for a number of companies in several industries, as well as in the public sector.
Here are some of our observations of applying blue ocean strategy in practice.
While many companies seem to be excited about the concept, when it comes to creating a very different strategic offering from what these companies do “normally”, they tend to step back: “this is not what our business does”. Success only occurs in those cases where these initiatives have the full support of top leadership. In addition to this support, companies must employ creative human resources strategies to engage the managers and move the company forward, an example being Blue Ocean Leadership, one of our areas of expertize.
When it comes to creating a breakthrough move, the risk of failing is higher, be it risk related to business model, scaling, organizational or management. However, our approach takes these risks into consideration and minimizes them, by integrating the principles of blue ocean strategy into the process.
Another insight is that it is best to start small and focused (so called atomization), to lower the perceived risk and to allow the managers experience the power of the tools.
Finally, while the methodology is applicable to every sector and industry, we our experience shows that blue ocean strategy is applied most successfully in mature markets facing slower growth, where competitors have similar strategic offerings.
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For more information about the Blue Ocean Strategy concepts, principles and tools you could refer to the following materials:
- What is Blue Ocean Strategy? (article)
- Blue Ocean Strategy versus competitive-based strategy (article)
- Red One: a blue ocean in the cinematographic cameras industry (article)
- Our services: Blue Ocean Strategy Workshop