5.3 Blue Ocean Strategy and value innovation

Blue Ocean Strategy challenges traditional competitive thinking by creating uncontested market space. It focuses on making competition irrelevant through value innovation, simultaneously pursuing differentiation and low cost. This approach aims to create and capture new demand rather than fighting over existing customers.

Value innovation is the cornerstone of Blue Ocean Strategy, aligning innovation with utility, price, and cost. It involves challenging industry assumptions and looking beyond existing boundaries to create superior value for customers while reducing less valued features. This approach leads to the creation of new market space.

Blue Ocean Strategy

Key Principles

Top images from around the web for Key Principles

• 

  Cool stuff you can use.: All You Wanted to Know About Blue Ocean Strategy Simplified View original

  Is this image relevant?

• 

  Free Blue Ocean Strategy PowerPoint Template - Free PowerPoint Templates - SlideHunter.com View original

  Is this image relevant?

• 

  Exploring Uncontested Markets With Blue Ocean Strategy in Convenience Food Business-a Case of ID ... View original

  Is this image relevant?

• 

  Cool stuff you can use.: All You Wanted to Know About Blue Ocean Strategy Simplified View original

  Is this image relevant?

• 

  Free Blue Ocean Strategy PowerPoint Template - Free PowerPoint Templates - SlideHunter.com View original

  Is this image relevant?

1 of 3

Top images from around the web for Key Principles

• 

  Cool stuff you can use.: All You Wanted to Know About Blue Ocean Strategy Simplified View original

  Is this image relevant?

• 

  Free Blue Ocean Strategy PowerPoint Template - Free PowerPoint Templates - SlideHunter.com View original

  Is this image relevant?

• 

  Exploring Uncontested Markets With Blue Ocean Strategy in Convenience Food Business-a Case of ID ... View original

  Is this image relevant?

• 

  Cool stuff you can use.: All You Wanted to Know About Blue Ocean Strategy Simplified View original

  Is this image relevant?

• 

  Free Blue Ocean Strategy PowerPoint Template - Free PowerPoint Templates - SlideHunter.com View original

  Is this image relevant?

1 of 3

• Blue Ocean Strategy focuses on creating new market space and making the competition irrelevant by offering innovative products or services
• Creates uncontested market space by simultaneously pursuing differentiation and low cost, rather than competing in existing markets
• Emphasizes the importance of creating and capturing new demand, rather than fighting over existing customers in crowded markets
• Involves a systematic approach to identifying untapped market opportunities and creating new value for customers through innovation
• Requires a shift in strategic focus from competitors to alternatives and from customers to noncustomers of the industry

Comparison to Traditional Strategies

• Traditional competitive strategies (Porter's generic strategies) focus on competing within existing market boundaries and beating the competition through differentiation or cost leadership
• Blue Ocean Strategy seeks to create new market space and make the competition irrelevant by offering innovative products or services that create new value for customers
• Traditional strategies often involve a trade-off between value and cost, while Blue Ocean Strategy aims to simultaneously pursue differentiation and low cost through value innovation
• Traditional strategies tend to focus on existing customers and market segments, whereas Blue Ocean Strategy emphasizes the importance of targeting noncustomers and creating new demand
• Requires a fundamental shift in strategic thinking, from a focus on competing within existing market boundaries to creating new market space through innovation

Value Innovation

Creating Uncontested Market Space

• Value innovation is the cornerstone of Blue Ocean Strategy and involves creating a leap in value for both the company and its customers
• Occurs when a company aligns innovation with utility, price, and cost positions to create a new value curve that differs from the industry's existing value curve
• Aims to create superior value for customers while simultaneously reducing or eliminating features or services that are less valued by the market
• Requires a company to challenge the conventional logic and assumptions of its industry and to look beyond existing boundaries to create new market space
• Successful value innovation leads to the creation of uncontested market space, where competition becomes irrelevant because the rules of the game are waiting to be set

Challenging Industry Assumptions

• Value innovation requires companies to question and challenge the conventional wisdom and assumptions that shape their industry
• Companies must look beyond existing market boundaries and consider the broader context in which their products or services are used
• This involves exploring the pain points and unmet needs of customers, as well as the factors that influence their decision-making process
• By challenging industry assumptions and looking at things from a fresh perspective, companies can identify new opportunities for value creation and differentiation
• This process often involves breaking free from the constraints of existing business models and exploring new ways of delivering value to customers

Blue Ocean vs Traditional Strategies

Differences in Focus and Approach

• Traditional strategies focus on competing within existing market boundaries, while Blue Ocean Strategy seeks to create new market space
• Traditional strategies often involve a trade-off between value and cost, while Blue Ocean Strategy aims to simultaneously pursue differentiation and low cost
• Traditional strategies tend to focus on existing customers and market segments, whereas Blue Ocean Strategy emphasizes the importance of targeting noncustomers and creating new demand
• Traditional strategies often involve incremental improvements to existing products or services, while Blue Ocean Strategy requires a more radical approach to innovation and value creation
• Traditional strategies are often reactive and driven by competitive benchmarking, while Blue Ocean Strategy is proactive and driven by a desire to create new value for customers

Implications for Strategy Formulation

• Blue Ocean Strategy requires a fundamental shift in strategic thinking, from a focus on competing within existing market boundaries to creating new market space through innovation
• Companies must be willing to challenge the status quo and explore new possibilities for value creation, even if it means cannibalizing their existing products or services
• Blue Ocean Strategy involves a systematic approach to identifying and pursuing untapped market opportunities, which requires a deep understanding of customer needs and preferences
• Companies must be willing to invest in research and development, as well as in building new capabilities and partnerships, in order to successfully execute a Blue Ocean Strategy
• Successful implementation of Blue Ocean Strategy requires strong leadership and a culture of innovation and experimentation within the organization

Blue Ocean Strategy Case Studies

Cirque du Soleil

• Cirque du Soleil successfully implemented Blue Ocean Strategy by reinventing the circus industry and creating a new market space that combined elements of theater, dance, and acrobatics
• The company eliminated traditional circus elements (animals, star performers) and focused on creating a unique, high-quality entertainment experience
• Cirque du Soleil targeted a new customer segment (adults) and offered a premium experience at a higher price point than traditional circuses
• The company's innovative approach and focus on artistic excellence helped it to create a loyal customer base and establish a strong brand identity in the entertainment industry

Nintendo Wii

• Nintendo's Wii console is another example of successful Blue Ocean Strategy, as it created a new market for video games by targeting noncustomers and offering a unique gaming experience based on motion control technology
• The Wii appealed to a broader audience (families, casual gamers) than traditional gaming consoles, which primarily targeted hardcore gamers
• Nintendo's innovative motion control technology and focus on social gaming experiences helped to differentiate the Wii from competitors and create a new value curve in the industry
• The Wii's success helped to revitalize Nintendo's business and established the company as a leader in the video game industry

Other Examples

• Yellow Tail, an Australian wine brand, created a Blue Ocean in the US wine market by simplifying the wine selection process and offering a fun, easy-to-drink wine at an affordable price point
• Salesforce.com revolutionized the CRM software industry by introducing a cloud-based, subscription-based model that made CRM accessible and affordable for businesses of all sizes
• Nespresso, a division of Nestlé, created a new market for premium home coffee consumption by offering high-quality coffee capsules and machines that delivered a cafe-like experience at home