Thinking of ways to improve your small business? Or planning to develop your own small business? The article below will discuss what the blue ocean strategy is and how it can help small businesses.
What is Blue Ocean Strategy?
In simple terms, the blue ocean strategy is about creating a new market space and create new demand, capturing untapped market space. Hence, there is no or less competition to this business form. It is based on the belief that boundaries in the market can be constructed by the actions and beliefs of industry players.For example, Cirque du Soleil blended opera and ballet with the circus format without star performers and animals. It creates new demand and a new market in the entertainment industry.https://www.youtube.com/watch?v=x-1-gLv3aWsThe book, Blue Ocean Strategy, is divided into three parts: Framework, Principles, and Implementation.
1. Framework
Blue ocean strategy uses a strategy canvas and four action framework as the key analytical tools. The four action frameworks are used to the trade-off between differentiation and low cost within a company. The four actions framework are:
- Raise: This talks about which factors must be raised within an industry in terms of product, pricing or service standards.
- Eliminate: This talks about which areas of a company or industry could be completely eliminated to reduce costs and to create an entirely new market.
- Reduce: This talks about which areas of a company’s product or service are not entirely necessary but play a significant role in your industry. For instance, the cost of manufacturing a certain material for a product could be reduced. Therefore, it can be reduced without completely eliminating it.
- Create: This prompts companies to be innovative with their products. By creating an entirely new product or service, a company can create its own market through differentiation from the competition.
2. Principles
The second part describes the four principles of blue ocean strategy formulation.
- How to create new market space by reconstructing market boundaries.
- Focus on the bigger picture.
- Reach beyond existing demand and supply in new market.
- Get the strategic sequence right.
These 4 formulation principles address how an organization can create "blue oceans" by looking across the Six Paths Framework.
source: Kim and Mauborgne
3. Implementation
The third and final part describes the two key implementation principles of blue ocean strategy: tipping point leadership and fair process.These implementation principles are essential for leaders to overcome the four key organizational hurdles (cognitive, resource, motivational and political) that can prevent even the best strategies from being executed.
Summary
It is argued that blue ocean strategy is more than just a theory. It is a successful attempt for existing brands with highly "sticky" ideas. If you are still thinking of which business you should do, here are some article you may be interested in:
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Frequently Asked Questions
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