The key to the blue ocean theory is that the best way to beat the competition is precisely to stop fighting with them. Find out how.
Sailing in a red ocean or a blue ocean. This is the question that most entrepreneurs are forced to ask themselves when they consider building their own company. Or, in other words, enter a saturated but safe market; or embark on an adventure and create a new market from scratch.
The present bifurcation is the one that gives way to the Blue Ocean strategy, developed by professors W. Chan Kim and Renée Mauborgne. It is a new form of strategic thinking that is based on analysis and that encourages entrepreneurs to create new markets instead of competing in existing ones.
The key to the following strategic theory is that the best way to beat the competition is precisely to stop fighting with them. How? Capturing new demand. The result? Relegating competitors to irrelevance. The application of the blue ocean theory is applicable to any sector and any type of company – if we take into account that all industries were born from scratch, the opportunity is there.
Cirque du Soleil, Nintendo Ralph Lauren, Swatch or Novo Nordisk are some of the entities or corporations that have made their way into a new market, capturing a new demand that did not exist until then. But what are we talking about when we talk about blue and red ocean?
Following Chan and Mauborgne’s theory, the red oceans are the ones in which most companies sail (in fact, red oceans will always be part of the reality of the business world). They are characterized by having very defined limits and by having the same rules under which all competitors operate. Companies compete with each other for the largest slice of the pie , and when competition intensifies, opportunities for growth are limited.
In blue oceans, on the other hand, companies do not compete for existing demand; they create it anew. Those few companies that sail in a blue ocean are faced with a great opportunity for growth. In this context, competition is irrelevant, because the rules of the game are still to be defined.
What are the guidelines for diving into a blue ocean?
- Create new spaces for consumption. You can do this by exploring alternative sectors, looking at the different strategies of each sector or observing the chain of buyers, among others.
- Focus on the big picture, not the numbers. The key is to understand the global dynamics of the industry and go beyond your company’s strategic planning based on how your main competitors operate.
- Go beyond existing demand. Instead of focusing on customers, look at the common elements they value and also at non-customers. The opportunities in this field are immense, but companies tend to focus their efforts on their customer segment, especially when competition is tight.
- It ensures the commercial viability of the blue ocean. If you’re going into a blue ocean, first make sure you’re able to answer yes to these questions: Will customers get exceptional utility from the new business idea? Is the price within the reach of the great mass of potential customers? Is the cost structure viable? Remember, innovate yes, but reducing the risk as much as possible.
Do you want to learn more about methodologies applicable to your company? Don’t miss this article on the benefits of agile and design thinking methodologies, or find out what Google’s method is to solve critical problems in just five days.
