What do companies like Cirque du Soleil, Northwest Airlines, Apple, IKEA and Swatch have in common? Well, at some point in their history, they played a part in redefining their industries, transforming the competitive playing field, and creating a new value chain that propelled them to become market leaders.
Whether you are a business owner or an employee looking to create new breakthroughs in your career, the concept of “Blue Ocean Strategy” is a powerful one to grasp. Based on a study of the strategic moves made by companies over more than 100 years and across 30 industries, the book Blue Ocean Strategy advocates that the only way to truly beat your competitors is not to fight them head-on, but to make them irrelevant.
How do you do that? By getting out of the “red ocean”, and developing/ executing a “blue ocean strategy”. This approach is all about identifying, creating and capturing new demand, hence creating uncontested market space for your business.
Understanding the Strategy Canvas
Let us zoom in on the one of the key tools and ideas in the book – the Strategy Canvas. To formulate your Blue Ocean Strategy, you need clarity on the current state of play in the marketplace. Armed with these insights, you can understand:
• Where the competition is currently investing
• How the industry currently competes (in products, service, delivery)
• What customers receive from existing competitors in the market
Let’s take the example of SouthWest Airlines, the pioneer of low-cost airlines and short-haul budget flights that have transformed the air travel industry that we know today. Back in 1967, when air travel was a luxurious, complex and expensive travel option, Air Southwest (which was later renamed Southwest Airlines) had the guts and vision to conceptualize a model where air travel could be affordable and no-frills, much like traveling via car.
By cutting back on “frills” like meals, lounges, seat allocation, and focusing on point-to-point travel (rather than complex “hub-and-spoke” operations), they were able to focus their resources on superior speed and friendly service at low prices. The result? A novel travel option that created a new market of travellers who could not previously afford air travel previously. Of course, over the decades, hundreds of new budget carriers have emerged to compete in this new space. However, Southwest Airlines had no doubt created a blue ocean for itself 40 years ago with its bold strategy.
The Strategy Canvas is indeed a powerful tool to help you understand the Blue Ocean Strategy, map out and visualize your competitive positioning vis-à-vis your competitors. A good BOS strategy curve should:
- Look significantly different from existing competitors’
- Involve cutting back and/ or eliminating competition factors that were taken for granted in your industry (thereby reducing cost)
- Involve raising and/or creating new competition factors that your industry doesn’t offer (thereby increasing differentiation).
Where does your company stand today? How can you create your own blue ocean that will make competitors irrelevant?
Obviously, drawing up this strategy canvas requires a lot of market research and deliberation. The book also outlines several tools (such as the Four Action Framework, the ERRC Grid, the PMS Map, the Buyer Utility Map etc.) to help us identify potential new customers and market opportunities, figure out how to reconstruct our market boundaries, and decide where to allocate our resources.
If you haven’t read the book yet, do consider buying the book online, or subscribe to download our summaries every month!
Click here to download Blue Ocean Strategy book summary and infographic