What are some examples of successful blue ocean strategies in different sectors and markets?

1 The logic of blue ocean strategy

The term blue ocean strategy was coined by W. Chan Kim and Renee Mauborgne, two professors at INSEAD, a leading business school. They contrasted blue oceans with red oceans, where companies fight for a share of a saturated and shrinking market, resulting in lower profits and higher costs. Blue oceans, on the other hand, are markets that are not yet exploited or even created, where demand is high and competition is low or nonexistent. By pursuing blue ocean strategy, companies can achieve growth, innovation, and differentiation, while avoiding the pitfalls of red ocean strategy.

2 The four actions framework

To create a blue ocean strategy, Kim and Mauborgne suggest using the four actions framework, which consists of four questions that help identify and eliminate the trade-offs between value and cost. These questions are: what factors can be eliminated that the industry has long taken for granted? What factors can be reduced well below the industry standard? What factors can be raised well above the industry standard? And what factors can be created that the industry has never offered? By answering these questions, companies can create a value curve, which is a visual representation of how they differentiate themselves from the competition on various attributes. This value curve should have a unique shape that reflects the company's strategic profile and value proposition.

3 The six paths framework

Kim and Mauborgne propose the six paths framework as a tool for finding blue oceans. This framework consists of six ways of looking beyond the existing boundaries of the industry and exploring new opportunities. Companies can look across alternative industries that offer similar benefits or solve similar problems for customers, strategic groups within the industry, the chain of buyers that influence the purchasing decision, complementary products and services, functional or emotional appeal to customers, and time and trends that shape the industry and customer preferences. By applying these six paths, companies can discover new ways of creating value for customers and opening up new market spaces.

4 Some examples of blue ocean strategy

Many companies have successfully implemented blue ocean strategy in different sectors and markets, creating new demand and leaving the competition behind. For example, Cirque du Soleil reinvented the circus industry by eliminating animals, stars, and multiple rings, and creating a unique blend of art, music, and acrobatics that appealed to a wider and more affluent audience. Netflix disrupted the video rental industry by offering unlimited online access to a large library of movies and shows, eliminating the need for physical stores, late fees, and limited selection. Starbucks transformed the coffee industry by offering a premium and personalized experience, with high-quality beans, customized drinks, and cozy ambience, creating a loyal and profitable customer base. IKEA revolutionized the furniture industry by offering low-cost, stylish, and functional products that customers could assemble themselves, reducing the costs of production, transportation, and storage, and creating a distinctive brand identity. Southwest Airlines created a new segment of low-cost, short-haul, point-to-point flights, by eliminating reserved seats, meals, and baggage fees, and focusing on efficiency, convenience, and customer service.