Make Competition Irrelevant

Blue Ocean Strategy: Learning to Win Without a Fight

In a post-recession economy, when major companies are looking to reinvent the industry and create a whole “new market space” to conquer competition and push profit margins, they are increasingly adopting the “Blue Ocean” mantra advocated by Harvard professors W.Chan Kim and Renee Mauborgne.

First published in 2005 the Blue Ocean Strategy handbook outlines that the best way to compete is to stop trying to beat the competition. Professionals should learn to create new demand in an uncontested market space, or a “Blue Ocean”, rather than compete with each other in an existing industry.

Markets are typically classified into red oceans (known or existing markets) and blue oceans (non-existent, unknown or untapped markets).

Blue Ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored. In sharp contrast, in the Red Ocean industry boundaries are defined. 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 cut-throat competition turns the ocean red.

The most dazzling example of the Blue Ocean strategy is the performance of the Cirque du Soleil. Created in 1984 by a group of street performers, Cirque productions have been seen by almost 40 million people in 90 cities around the world. What makes this rapid growth all the more remarkable is that it was not achieved in an attractive industry, but rather, in an industry with declining revenue for potential growth.

Cirque du Soleil’s success was not attained by taking customers from the already shrinking circus industry (which had historically catered to children) but instead, they were successful because they created a new marketplace in which to compete. Their offering appealed to a whole new group of customers: adults and corporate clients who were prepared to pay a price several times as great for a show that spelled excellence.

Some of the other shining examples include lightweight footwear company Crocs (fashionable and low-priced), Air Asia (easy booking system), ING Direct banking (superior interest rates on savings with no fees) and Ninetendo electronic games (less complexity, more fun).

Tips

• Create new market space by challenging traditional assumptions.
• Innovative and reinvent, adding value for customers.
• Cut costs, not corners.
• Set your own rules, make competition irrelevant.

Mr. Sathya Menon is Executive Director, Blue Ocean Academy, Dubai.