Blue Ocean Strategy is a potent method for questioning value propositions and business models, and exploring new customer segments.
The aim of Blue Ocean Strategy is not to out-perform the competition in the existing industry, but to create completely new industries through fundamental differentiation, thereby making the competition irrelevant.
Authors W. Chan Kim and Renée Mauborgne argue that tomorrow’s leading companies will succeed not by battling competitors, but by creating “blue oceans” of uncontested market space ripe for growth. Such strategic moves – termed “value innovation” – create powerful leaps in value for both the firm and its buyers, rendering rivals obsolete and unleashing new demand.
To achieve value innovation, they proposed a four action framework. These four questions challenge an industry’s strategic logic and established business model. When these questions are applied to the Business Model Canvas the right-hand side represent value creation and the left-hand side represent costs.
Companies have long engaged in head-to-head competition in search of sustained, profitable growth. They have fought for competitive advantage, battled over market share, and struggled for differentiation.
Yet in today’s overcrowded industries, competing head-on results in nothing but a bloody “red ocean” of rivals fighting over a shrinking profit pool. While most companies compete within such red oceans, this strategy is increasingly unlikely to create profitable growth in the future.
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