Strategic Thinking with the Blue Ocean Strategy: A Leader’s Guide

Understand the Blue Ocean Strategy and how it can help you create uncontested market space and make the competition irrelevant. Engage in a Blue Ocean exercise to identify new opportunities for innovation and growth.

In a business landscape marked by fierce competition and crowded markets, the quest for a clear competitive edge is relentless. The Blue Ocean Strategy offers a compelling approach to strategic thinking that goes beyond battling competitors and focuses on creating new market spaces, termed "blue oceans," that are ripe for innovation. This strategy is about making the competition irrelevant by carving out a unique niche in the marketplace. In this blog post, we will explore the essence of the Blue Ocean Strategy and provide a practical exercise to help leaders identify new opportunities for innovation and growth.

Understanding the Blue Ocean Strategy The Blue Ocean Strategy, conceptualized by W. Chan Kim and Renée Mauborgne, challenges everything you thought you knew about the requirements for strategic success. It argues that cutthroat competition results in nothing but a bloody "red ocean" of rivals fighting over a shrinking profit pool. The Blue Ocean Strategy, instead, suggests that lasting success comes not from battling competitors but from creating “blue oceans” of untapped new markets ready for growth.

Key Principles of the Blue Ocean Strategy

1. Value Innovation: At the heart of the Blue Ocean Strategy is value innovation. This is the simultaneous pursuit of differentiation and low cost, creating a leap in value for both the company and its customers.

2. Eliminate-Reduce-Raise-Create (ERRC) Grid: This tool helps companies to develop blue oceans of uncontested market space by reconstructing market elements across conventional boundaries.

3. Reach Beyond Existing Demand: Instead of focusing on existing customers, the Blue Ocean Strategy encourages exploring ways to reach non-customers.

4. Get the Strategic Sequence Right: The strategy emphasizes the importance of following the proper sequence to ensure that your blue ocean initiative is commercially viable.

The Four Actions Framework (ERRC Grid) The ERRC Grid is a powerful tool within the Blue Ocean Strategy that pushes companies to act on four key factors:

1. Eliminate: Which factors that the industry takes for granted should be eliminated?

2. Reduce: Which factors should be reduced well below the industry's standard?

3. Raise: Which factors should be raised well above the industry's standard?

4. Create: Which factors should be created that the industry has never offered?

By applying these four actions, companies can systematically create a new value curve and unlock new demand.

Blue Ocean Exercise: Crafting Your Strategy Canvas To put the Blue Ocean Strategy into practice, let’s engage in an exercise to create your Strategy Canvas, which is the central diagnostic tool and action framework of the Blue Ocean Strategy.

Step 1: Draw the Current State

• Identify the major factors that your industry competes on and invests in.

• Plot these factors on the horizontal axis of a graph to create what is known as the 'as-is strategy canvas'.

• Assess the offering level that your industry provides to customers for each factor and plot them on the vertical axis.

Step 2: Visualize the Strategy Canvas

• Look at the shape of your value curve on the strategy canvas.

• Ask yourself what the curve reveals about your strategy. Is it offering what everyone else is?

Step 3: Apply the ERRC Grid

• Use the ERRC Grid to question the status quo of your industry.

• Think about how you can eliminate and reduce factors. What can you do differently?

• Consider what you can raise and create. How can you stand out?

Step 4: Draw the 'To-Be' Strategy Canvas

• Based on your ERRC Grid analysis, sketch out a new value curve on your strategy canvas. This is your 'to-be strategy canvas'.

• Your new value curve should diverge from the industry’s current state and open up new value for customers.

Reflection Questions for the Exercise:

• How does your 'to-be' strategy canvas unlock new value for customers?

• Does it open up new and uncontested market space?

• Is your blue ocean idea easy to understand and communicate?

Conclusion The Blue Ocean Strategy is not just about market competition; it's about making the competition irrelevant. It's a mindset and a strategic framework that encourages leaders to step out of the red oceans of bloody competition and into the blue oceans of untapped market space.

As you reflect on your 'to-be' strategy canvas, consider the broader implications of your blue ocean strategy. How will it affect your organizational structure, your go-to-market strategy, and your long-term vision? Remember, the Blue Ocean Strategy is more than a one-time event; it's a continuous journey of exploration and innovation.

In today's rapidly evolving business environment, the Blue Ocean Strategy remains a relevant and vital approach to strategic thinking. By focusing on creating new markets, you not only unlock new opportunities for growth but also set your organization on a path of innovation and change.

As a leader, your role is to guide your team through these uncharted waters with a clear vision and a strong strategy. Use the insights from the Blue Ocean Strategy to challenge the conventional wisdom of your industry, inspire your team, and navigate towards a future of growth and opportunity. The vast, blue ocean of possibilities awaits.