Designed by W. Chan Kim and Renée Mauborgne, in their book Blue Ocean Strategy, this method makes it possible, as part of the strategic review of the business, to address an existing market by using a different approach and to create uncontested market space by redefining market boundaries.
The market universe is described by the metaphor of red and blue oceans.
Red oceans represent all the existing industries – the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the ocean bloody; hence, the term “red oceans”
Blue oceans in contrast, denote all the industries that doesn’t not exist today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.
Kim and Mauborgne argue that while traditional competition-based strategies (red ocean strategies) are necessary, they are not enough to sustain high performance. Companies need to go beyond competing.
This method addresses how an organization can create “blue oceans” by looking across the six conventional boundaries of competition.
Method:
Start by drawing the strategic axes of the company then decline each of the paths by listing all the ideas and opportunities that may result.
Key questions:
- What are the differentiators of the alternatives solutions on the market?
- What are the differentiators in other industries with similar missions?
- What happens before, during and after the use of our products / services? What customers’ dissatisfactions could be addressed at each stage?
- Who are the “non-buyers “? How could they become customers?
- How can we change the focus from price and functional appeal to emotional content?
- What are the major external trends that will influence the future market?
The 6 Path Framework
Example: a restaurant
Question #1:
Inspiration: “frozen ready-made meals” that can be eaten at home at any time.
Idea: a restaurant that offers at launch a prepared dish for the evening too
Question #2:
Inspiration: A similar mission to other industries could be to allow people to stay in shape
Idea: programs, meals, “coaches”… similar to the ones of fitness centers
Question #3:
E.g. Booking means finding the phone number, going at the restaurant implies taking a vehicle, etc.
Idea: a food restaurant that made it possible to book and order online
Question #4:
e.g. Babysitters who keep the children at lunch time
Idea: a restaurant that provides children activity areas and meals for children
Question #5:
Idea: a restaurant where not only you can eat well but where the main dishes do not exceed a certain amount of calories
Question #6
e.g. Organic produce, vegetarian dishes
Idea: a restaurant that improves customers’ health
Examples documented in the book
Cirque du Soleil: Blending of opera and ballet with circus format while eliminating star performer and animals.
Southwest Airlines: offering flexibility of bus travel at the speed of air travel using secondary airports.
Curves: redefining market boundaries between health clubs and home exercise programs for women
Home Depot: offering the prices and range of lumberyard, while offering consumers classes to help them with DIY projects.
Bibliography
Chan Kim, Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.
La boite à outils de l’innovation, G. Benoit-Cervantes
Wikipedia: https://en.wikipedia.org/wiki/Blue_Ocean_Strategy
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