Understanding the basics of Blue Ocean Strategy via brands like IKEA and Marvel

Blue Ocean Strategy is a strategic framework developed by W. Chan Kim and Renée Mauborgne that encourages businesses to create new market spaces, called "blue oceans," where competition is irrelevant or non-existent. It offers a systematic approach to help businesses break away from the intense competition of existing markets and find new opportunities for growth and profitability.

The underlying premise of Blue Ocean Strategy is that companies can achieve sustainable success by simultaneously pursuing differentiation and low cost. This approach, known as value innovation, involves creating a leap in value for customers while reducing costs.

The strategy focuses on two key concepts:

Value Innovation: Rather than competing within existing industry boundaries, businesses aim to create new value for customers by offering unique and differentiated products or services. Value innovation occurs when companies are able to provide superior value to customers while also reducing costs. By doing so, they can break away from the competition and create a blue ocean market space. Because value to buyers comes from the offering’s utility minus its price, and because value to the company is generated from the offering’s price minus its cost, value innovation is achieved only when the whole system of utility, price, and cost is aligned. [1]?

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Redefining Market Boundaries: Blue Ocean Strategy challenges the idea that industries have fixed boundaries. It encourages businesses to redefine the industry they operate in by expanding the boundaries or creating entirely new industries altogether. This entails exploring opportunities beyond the traditional customer segments and adopting a broader view of potential customers.

To implement Blue Ocean Strategy, businesses can utilize the "Four Actions Framework" and the "Six Paths Framework":

Four Actions Framework: This framework prompts companies to challenge industry norms and identify opportunities for value innovation by answering four key questions:

a. Which factors that the industry takes for granted should be eliminated?

b. Which factors should be reduced well below industry standards?

c. Which factors should be raised well above industry standards?

d. Which factors should be created that the industry has never offered?

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Six Paths Framework: This framework provides a systematic approach to identifying new market opportunities by considering six different perspectives:

a. Look Across Industries: Analyze alternative industries that may offer valuable insights and inspiration for creating new market spaces.

b. Look Across Strategic Groups: Identify strategic groups within the industry and seek opportunities to differentiate and redefine industry boundaries.

c. Look Across Buyer Groups: Explore underserved or non-customers with different needs and develop offerings to attract them.

d. Look Across Complementary Products and Services: Identify complementary products or services that can enhance the value of the core offering.

e. Look Across Functional or Emotional Appeal: Discover new ways to deliver functional or emotional benefits to customers.

f. Look Across Time: Consider trends and future developments to anticipate and capitalize on emerging market needs and opportunities.

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By applying these frameworks and concepts, businesses can discover untapped market spaces, create unique value propositions, and effectively differentiate themselves from the competition. This allows them to attract new customers, increase customer loyalty, and achieve sustainable growth and profitability.

Successful examples of companies that have implemented Blue Ocean Strategy include Cirque du Soleil, which transformed the circus industry by combining elements of theater and music to create a new entertainment experience, and Southwest Airlines, which differentiated itself by offering low-cost flights with a focus on customer service and convenience.

Overall, Blue Ocean Strategy provides a structured and systematic approach for businesses to break free from the limitations of existing markets and carve out their own uncontested market spaces, where they can create unique value and thrive.

Example 1: Now, let us try to understand the Blue Ocean Strategy in the context of brands that we see around us. One of them is the furniture brand IKEA.

In the context of the furniture brand IKEA, Blue Ocean Strategy can be observed in several aspects of its business model and strategies. IKEA has successfully created its own blue ocean by redefining the furniture industry and offering unique value propositions to customers. Here's how IKEA embodies the principles of Blue Ocean Strategy:

Value Innovation: IKEA has excelled in value innovation by offering well-designed, functional furniture at affordable prices. By combining stylish design with cost-effective manufacturing and self-assembly, IKEA delivers value to customers who seek quality furniture at lower prices. This approach has allowed IKEA to differentiate itself from traditional furniture retailers and appeal to a broader customer base. [5]

Redefining Market Boundaries: IKEA has redefined the furniture industry by adopting a comprehensive approach to home furnishings. Instead of solely focusing on selling furniture, IKEA offers a complete home furnishing experience by providing a wide range of products, including home accessories, textiles, kitchenware, and more. This expansion of the industry boundaries enables IKEA to cater to customers' holistic needs and become a one-stop destination for home furnishing solutions.

Four Actions Framework: IKEA has implemented the Four Actions Framework by making strategic choices that differentiate it from competitors:

a. Eliminating: IKEA eliminates unnecessary costs associated with traditional furniture retailers by adopting a self-service approach, flat packaging, and minimal in-store assistance.

b. Reducing: IKEA reduces prices by optimizing its supply chain, sourcing affordable materials, and employing cost-effective production techniques.

c. Raising: IKEA raises the level of customer involvement and engagement by offering a unique shopping experience through its showroom layouts, in-store displays, and interactive product demonstrations.

d. Creating: IKEA creates value by providing aesthetically pleasing, functional, and well-designed furniture that meets customers' needs for affordability, practicality, and modern aesthetics.

Customer-Centric Approach: IKEA's customer-centric approach aligns with Blue Ocean Strategy. It focuses on understanding customers' needs and preferences, offering innovative solutions, and creating a seamless shopping experience. This customer-centric approach is evident in IKEA's store layouts, which are designed to guide customers through inspirational room displays, providing ideas and solutions for their specific living spaces.

Six Paths Framework: IKEA utilizes the Six Paths Framework to identify new market opportunities and reach untapped customer segments:

a. Looking Across Industries: IKEA draws inspiration from various industries like fashion and technology to incorporate trends and innovative design elements into its furniture offerings.

b. Looking Across Strategic Groups: IKEA targets customers who seek affordable and stylish furniture, differentiating itself from higher-end and luxury furniture brands.

c. Looking Across Buyer Groups: IKEA appeals to value-conscious customers who prefer affordable, ready-to-assemble furniture without compromising on style and quality.

d. Looking Across Complementary Products and Services: IKEA offers a wide range of complementary products such as home accessories, lighting, and kitchenware, creating a comprehensive and cohesive home furnishing solution.

e. Looking Across Functional or Emotional Appeal: IKEA focuses on delivering functional and aesthetically pleasing furniture that enhances customers' living spaces while also addressing their emotional desires for a well-designed home.

f. Looking Across Time: IKEA continually tracks emerging trends, societal shifts, and customer preferences to anticipate and introduce innovative products and designs that cater to changing consumer needs.

By embodying these principles, IKEA has successfully created a blue ocean market space within the furniture industry, attracting a large customer base globally. Its value-driven approach, focus on affordability, comprehensive product offerings, and customer-centric strategies have positioned IKEA as a leading furniture brand and exemplify the application of Blue Ocean Strategy.

Example 2: Understanding the basics of Blue Ocean Strategy via Marvel Comics.

Marvel's journey with the Blue Ocean Strategy has been an intriguing one, experiencing shifts between red and blue oceans over the years. As per the principles proposed by Chan Kim and Renée Mauborgne, red oceans are characterized by cutthroat competition within well-defined industry boundaries, whereas blue oceans represent uncontested market spaces where demand is created rather than fought over.

In its early days, Marvel Comics operated in a blue ocean, producing comic books starring superheroes. Its target audience was primarily children who enjoyed comics with limited original content. However, the landscape changed when the Comics Code Authority was established in the 1950s, leading to a downturn in the comic book industry. Only two publishers, Marvel and DC Comics, dominated the market, resulting in intense red ocean competition.

DC Comics gained an upper hand by acquiring Marvel's distribution unit, leaving Marvel with limited distribution and struggling to compete for retail shelf space. This situation prompted Marvel to adopt a new strategy. To enter a blue ocean, Marvel shifted its focus from children to college students and began introducing characters that were humans first and superheroes second. This strategic move allowed Marvel to capture an uncontested marketplace, appealing to a more mature and intelligent demographic.

Marvel's first blue ocean success came with the launch of characters like the Hulk, Thor, Ant-Man, Spider-Man, and Iron Man, which resonated with its new audience. By prioritizing creative innovation over shelf space competition, Marvel created a new value proposition for itself.

However, poor management decisions in the late 1980s, including a bubble strategy and emphasis on higher prices and limited distribution, led to Marvel's decline and eventual bankruptcy in 1996. The company found itself surrounded by a red ocean, in desperate need of stronger leadership.

Isaac Perlmutter's acquisition of Marvel through ToyBiz in 1998 brought a new direction. Perlmutter hired a turnaround specialist, Peter Cuneo, who implemented reforms using the Leadership Grid analytical tool. Cost-cutting measures, eliminating big offices, and promoting a creative culture within the organization were among the steps taken to move towards a blue ocean.

The release of successful movies like Blade, X-Men, and Tobey Maguire's Spider-Man rejuvenated Marvel's prospects. These movies, produced by other companies licensing Marvel's characters, brought the brand closer to its current status. The success of these films encouraged Marvel to invest more in producing original content and in-house movies.

The turning point for Marvel was the release of Iron Man, which marked the beginning of the Marvel Cinematic Universe (MCU). Emphasizing its original vision, Marvel introduced characters that were human first and superhero second. The interconnected world of characters, spanning various films, created a complex universe that captivated audiences.

Marvel's focus on its characters and storytelling, rather than relying solely on Hollywood stars, set the stage for the MCU's success. The first Iron Man film was a massive hit, grossing approximately $585 million and laying the foundation for future Marvel movies.

Disney's acquisition of Marvel in 2009 further fueled its growth. Marvel's transformation into a multi-billion-dollar business, operating in its own market, solidified its position as a blue ocean player. The company no longer competes in traditional red oceans but enjoys uncontested market space, catering to a global audience of fans.

Marvel's journey demonstrates key lessons for organizations aiming to operate in a blue ocean:

1.?????Simultaneous Pursuit of Differentiation and Low Cost: Marvel's success was driven by its ability to offer a unique product while keeping costs under control.

2.?????Intensive Blue Ocean Market Research: Marvel found a new market among non-customers and tailored its content to create sustained demand.

3.?????Cultivating a Creative Culture: A creative environment within the company played a pivotal role in Marvel's transformation.

4.?????Having Faith in the Company: Marvel's journey exemplifies the importance of staying committed to delivering value and exploring new markets, even in the face of challenges.

From bankruptcy to a pioneering force in the entertainment industry, Marvel's strategic decisions and commitment to its creative vision have made it a blueprint for other organizations seeking success in a blue ocean. [8] [9]

Value Innovation:

Marvel's journey showcases value innovation in multiple ways:

a) Shifting Target Audience: Marvel's shift from targeting children to college students was a value innovation move. By focusing on a more mature and intelligent demographic, Marvel captured an untapped market, creating a new value proposition for its audience.

b) Human-First, Superhero-Second Characters: Introducing characters that were portrayed as humans first and superheroes second was a value innovation strategy. This approach added depth and relatability to the characters, making them more appealing to the audience.

c) Emphasis on Storytelling: Marvel's focus on storytelling, rather than relying solely on Hollywood stars, was a value innovation move. By prioritizing compelling narratives and character development, Marvel differentiated itself from traditional blockbuster movies.

Redefining Market Boundaries: Initially targeting children, Marvel shifted its focus to college students, creating a new value proposition and tapping into an untapped market. By expanding into movies, emphasizing storytelling, and building an interconnected cinematic universe, Marvel attracted a diverse audience base beyond traditional comic book fans. This strategic shift from a red ocean of competition to a blue ocean of uncontested demand enabled Marvel to become a dominant force in the entertainment industry, demonstrating the effectiveness of redefining market boundaries in achieving sustained success.

Four Actions Framework: Marvel has implemented the Four Actions Framework by making strategic choices that differentiate it from competitors:

a. Eliminating: Marvel has eliminated the notion that comic books are exclusively for a niche audience by creating stories and characters that appeal to a broader demographic.

b. Reducing: Marvel has reduced barriers to entry by introducing accessible entry points for newcomers, such as introductory story arcs, reboots, and digital subscriptions. This approach makes it easier for new readers to engage with the Marvel universe. To cut costs and optimize resources, Marvel eliminated big offices, reduced high salaries, and streamlined middle management. This enabled them to focus more on creative content and storytelling.

c. Raising: Marvel placed storytelling and character development at the forefront. This raised the emotional connection with the audience and differentiated the MCU from typical superhero movies. It also raised the level of fan engagement through interactive platforms, fan events, and digital communities. By embracing fan feedback and incorporating fan theories, Marvel actively involves its audience in the storytelling process.

d. Creating: Marvel continuously creates captivating characters, compelling narratives, and interconnected storylines that captivate readers and viewers alike. The creation of an expansive Marvel Cinematic Universe (MCU) has been a testament to Marvel's creative prowess and ability to extend its universe across different media. [6]

Customer-Centric Approach: Marvel's customer-centric approach focuses on understanding its fans and delivering content that resonates with them. Marvel actively listens to its audience, responds to their preferences, and introduces diverse characters and storylines that reflect societal changes and foster inclusivity.

Six Paths Framework: Marvel utilizes the Six Paths Framework to identify new market opportunities and reach untapped audiences:

a) Look Across Alternative Industries: Marvel's shift from targeting children to college students involved looking at an alternative audience and catering to their preferences.

b) Look Across Strategic Groups: By moving away from Hollywood stars and casting lesser-known but talented actors, Marvel tapped into a different strategic group, aligning with a low-cost strategy.

c) Look Across Buyer Groups: Marvel expanded its audience beyond traditional comic book fans to non-customers, such as moviegoers and fans of action-adventure films.

d) Look Across Complementary Products and Services: Marvel's expansion into films and merchandise complemented its comic book offerings, creating a comprehensive Marvel Cinematic Universe.

e) Look Across Functional-Emotional Orientation: Shifting from a child-focused functional orientation to a more emotional and relatable human-first approach redefined Marvel's value proposition.

f) Look Across Time: Marvel's investment in original content and the creation of a universe with interconnected stories set the stage for long-term value creation.

Marvel's journey from a blue ocean to a red ocean and back to a blue ocean again exemplifies the transformative power of the Blue Ocean Strategy. Initially thriving with innovative characters and captivating stories, Marvel adopted red ocean strategies and faced financial distress. [7] However, through strategic leadership and redefining market boundaries, Marvel returned to a blue ocean by targeting college students and creating an interconnected cinematic universe. Emphasizing creativity, low cost, and original content, Marvel restored its brand and became a multi-billion-dollar powerhouse.

References:

[1] https://www.blueoceanstrategy.com/tools/value-innovation/

[2] https://www.blueoceanstrategy.com/tools/value-innovation/

[3] https://www.blueoceanstrategy.com/tools/four-actions-framework/

[4] https://www.blueoceanstrategy.com/tools/six-paths-framework/

[5] Strategic Management 3rd Edition, Frank T. Rothaermel

[6] https://uweconsoc.com/from-red-to-blue-marvels-guide-to-reinstate-a-blue-ocean/

[7]https://mba.haas.berkeley.edu/hubfs/FT%202021%20DAH%202/FT%202021%20DAH%202%20Mock%20Class%20Marvel%20Case.pdf

[8] https://www.blueoceanstrategy.com/teaching-materials/marvel/

[9] https://www.youtube.com/watch?v=-dvVUN2tyug

[10] https://www.turningpointboston.com/your-job-search-needs-a-blue-ocean-strategy/