Ever wondered how Cirque du Soleil's CEO, Guy Laliberté, revolutionized the entertainment industry without competing directly with traditional circuses? Curious about how the Blue Ocean Strategy can help create new, uncontested market spaces? Intrigued by the idea of aligning innovation with utility and cost-effectiveness to achieve remarkable growth? This is your chance to delve into the world of strategic planning and innovation, unlocking the secrets of successful business strategies!

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

Once a fire-eater and stilt-walker, Guy Laliberté is now the CEO of Cirque du Soleil, an entertainment company that has seen incredible global success, surpassing even the once-great Ringling Bros. and Barnum & Bailey circus. 

The key to Cirque du Soleil's success is that it didn't compete directly with traditional circuses. Instead, it created a new market space, appealing to adults and corporate clients who were willing to pay a higher price for a unique entertainment experience. This approach is known as Blue Ocean Strategy.

Unlike Red Ocean Strategy which focuses on competing in existing market space, Blue Ocean Strategy emphasizes the creation of new, uncontested market space. Companies using this strategy don't focus on outperforming competitors, but make competition irrelevant by providing a leap in value for customers. This is achieved by aligning innovation with utility, price, and cost positions. 

A prime example of Blue Ocean Strategy is Cirque du Soleil, who we discussed earlier. By eliminating elements of a traditional circus such as animal shows and aisle concession sales, and incorporating elements of theatre like a story line and artistic music, Cirque du Soleil created a unique entertainment experience that dramatically reduced its cost structure while simultaneously raising its value proposition.

This book provides a blueprint for creating and implementing a successful Blue Ocean Strategy. It reveals how companies can systematically create uncontested market space, design a strategic planning process that goes beyond incremental improvements, aggregate demand to maximize the size of their market and formulate a strategy that allows for both differentiation and low cost. 

Additionally, it outlines principles for effective execution of Blue Ocean Strategy, such as Tipping Point Leadership which helps managers overcome organizational hurdles, and Fair Process which integrates execution into strategy making, encouraging voluntary cooperation from everyone in the organization. 

Later, we address the dynamic aspects of Blue Ocean Strategy at both the business and corporate level for multi-business firms, and how to avoid the common traps that keep organizations anchored in the Red Ocean (saturated markets). 

Is Blue Ocean Strategy the Secret Behind Cirque du Soleil's Global Success?

After a decade of development, the authors have created a set of analytical tools and frameworks to systematically formulate and execute a blue ocean strategy - a business approach that aims to create new, uncontested market spaces. 

While red oceans are all the industries in existence today with known market space and rules, blue oceans denote all the industries not in existence today, representing untapped market space, demand creation, and the opportunity for highly profitable growth. The authors studied companies around the world, developed methodologies, and tested these tools by working with companies in their quest for blue oceans.

An example of these tools in action is the US wine industry. Despite being the third-largest consumer of wine worldwide in 2000, its consumer base was stagnant due to intense competition. To break out of this red ocean, they used the strategy canvas, a diagnostic tool for building a compelling blue ocean strategy. It captures the current state of play in the known market space, allowing us to understand where the competition is investing and what customers receive from existing offerings.

In the case of the US wine industry, despite more than 1,600 wineries in the industry, there was convergence in their value curves - from the market point of view, they all had the same strategic profile. To create a blue ocean, the authors shifted their focus from competitors to alternatives and non-customers, and redefined the problem the industry focused on, resulting in the creation of new uncontested market space.

They also used the four actions framework, which helps break the trade-off between differentiation and low cost by asking: 
• Which of the factors that the industry takes for granted should be eliminated? 
• Which should be reduced? 
• Which should be raised? 
• And which should be created? 

This framework helped Australian winery, Casella Wines, to create a new company "yellow tail" in the US, a fun and simple wine that could be enjoyed by everyone, not just wine connoisseurs.

Three key characteristics of a good strategy are focus, divergence, and a compelling tagline. For instance, yellow tail's strategy focused on creating a social drink accessible to everyone; diverged by eliminating or reducing everything else in the traditional wine industry; and had a compelling tagline - a fun and simple wine to be enjoyed every day.

In essence, these tools - the strategy canvas, the four actions framework, and the eliminate-reduce-raise-create grid - are essential for navigating the blue ocean strategy. They allow companies to break from the competition, unlock untapped market space and create highly profitable growth.

Charting the Blue Ocean: Innovative Strategies for Uncharted Market Growth

Blue Ocean Strategy enlightens businesses on how to break away from the competition by reconstructing market boundaries to create a "blue ocean" of new opportunities. This principle helps businesses overcome the risk of identifying commercially appealing opportunities among a myriad of possibilities. The authors have found six fundamental ways to remake market boundaries, referred to as the six paths framework. 

These paths include looking across 
• alternative industries, 
• strategic groups, 
• buyer groups, 
• complementary product and service offerings, 
• the functional-emotional orientation of an industry, and 
• even across time. 

For instance, the company NetJets created a new market by offering the convenience and speed of a private jet at the price of first-class air travel. The company reconstructed market boundaries by exploring alternatives to traditional aviation. 

Similarly, companies like Curves, a women's fitness company, and NTT DoCoMo, a Japanese telecommunications company, achieved success by looking across strategic groups within industries and identifying key factors that lead customers to trade up or down from one group to another. 

Looking across the chain of buyer groups, from the value a market delivers today to what it might deliver tomorrow, can also unlock new market spaces. An example of this is the shift in the Asian barbershop industry from an emotional to a highly functional one by QB House. 

Looking across complementary products and services can also reveal latent value. For instance, NABI, a Hungarian bus company, created a new market by prioritizing the customer's overall experience rather than just focusing on the product. 

Companies can also shift their focus from functional to emotional appeal or vice versa to create new market spaces. For example, QB House transformed the emotionally driven barber industry into a highly functional one, thus creating a new blue ocean. 

Finally, businesses can look across time to predict how trends will change value to customers and impact the company's business model. This approach can lead to the discovery of new blue ocean opportunities. For example, Apple capitalized on the trend of music file sharing by launching the iTunes online music store, thus creating a blue ocean in digital music. 

In essence, by thinking across these six paths, businesses can reframe their strategy and create a blue ocean of new market opportunities.

Can the Blue Ocean Strategy Unlock New Market Opportunities for Your Business?

Imagine your company is stuck in the rut of endless spreadsheets, graphs, and a strategic plan so convoluted that even your employees can’t articulate it. This is the red ocean, where the competition is fierce and innovation is scarce. The solution? Focus on the big picture and create a blue ocean strategy that makes the competition irrelevant.

A perfect example comes from European Financial Services (EFS), a company once plagued by a muddled strategy and internal conflicts. By visualizing their strategy through a value curve, EFS identified glaring issues and opportunities. They discovered that their online and offline services were too similar, lacked focus, and ignored crucial customer needs. This realization came to life when comparing their strategy to Clearskies, a competitor with a clear, compelling approach.

EFS’s journey didn’t stop at visualizing their current strategy. They sent managers into the field to directly observe customer and noncustomer behaviors, uncovering that their prized relationship managers were actually seen as a hindrance. Customers valued speed and accuracy over personal interaction. Inspired by this fieldwork, EFS revamped their strategy, emphasizing ease of use, security, and speed, while reducing unnecessary services. This led to a 30% revenue boost in the first year alone.

To ensure everyone was on board, EFS held a visual strategy fair where teams presented their new strategic approaches. Judges, including customers and noncustomers, provided immediate feedback, helping refine the strategies further. This transparent process not only eliminated internal politics but also highlighted that many previously assumed key factors were, in fact, irrelevant to customer satisfaction.

Samsung Electronics also embraced this visual strategy approach through its Value Innovation Program (VIP) Center. By consistently challenging industry norms and fostering cross-functional collaboration, Samsung transitioned from a struggling company in 1998 to a global leader in consumer electronics, with sales soaring from $16.6 billion to $216.7 billion by 2013.

In essence, focusing on the big picture and employing visual strategies can transform muddled, number-centric plans into clear, actionable blue ocean strategies. This shift not only fosters innovation but also aligns the entire organization towards a unified, compelling direction.

Creating Blue Oceans: Transforming Strategy from Numbers to Visuals for Unprecedented Growth

Blue Ocean Strategy encourages businesses to explore potential blue oceans by looking across different paths and constructing a strategy canvas that outlines their future direction. The next challenge is to develop a robust business model that ensures profitability. This revolves around four key principles: utility, price, cost, and adoption. 

The first principle, utility, requires businesses to create offerings that unlock exceptional utility for the buyer. The offering should provide a compelling reason for a large number of people to buy it. If it doesn't, businesses need to reconsider the idea until it provides exceptional utility.

The second principle, price, involves setting the right strategic price. Businesses should not rely only on price to create demand but should ensure their offerings are priced to attract the mass of target buyers. 

The third principle, cost, focuses on production. Businesses should aim to produce their offerings at a target cost that still allows for a healthy profit margin. Cost should not dictate pricing, nor should high costs reduce utility. 

The last principle, adoption, emphasizes the importance of addressing potential barriers to the implementation of the new idea. Businesses need to consider potential resistance from retailers or partners and find ways to overcome these hurdles.

Then, there's the Blue Ocean Idea Index, a tool that tests an idea against the four principles of the Blue Ocean Strategy. The index helps businesses determine whether their idea is likely to be successful in opening up a blue ocean. This index has been used in many real-world business situations. Examples include Philips’ CD-i, Motorola’s Iridium, Ford’s Model T, and NTT DoCoMo’s i-mode.

Can the Blue Ocean Strategy Propel Your Business to Unprecedented Success?

Executing a blue ocean strategy, or a significant departure from the status quo, can be a monumental task for any organization. Many hurdles can stand in the way, with the most common ones being cognitive, resource-based, motivational, and political.

One cognitive hurdle is getting employees to understand the need for a strategic shift. This can be overcome by making them experience the harsh realities first hand. For instance, when Bill Bratton was appointed as the police commissioner of New York City, he made his top and middle brass ride the crime-ridden subways day and night to understand the severity of the situation.

Next, the challenge of limited resources can be tackled using "tipping point leadership". Instead of seeking more resources, this approach focuses on multiplying the value of existing resources. This can be done by redistributing resources to "hot spots" - activities that have low resource input but high potential performance gains. Then redirect resources away from "cold spots" - activities that have high resource input but low performance impact. Another approach is resource-swapping or "horse trading".

Similarly, motivating key players to carry out a break from the status quo is another hurdle. This can be addressed by focusing efforts on key influencers or "kingpins", managing them in a transparent and fair manner, and breaking down the strategic challenge into manageable, bite-sized "atoms".

Finally, overcoming political hurdles is crucial. This involves securing a "consigliere" or a politically adept insider in the top management team, leveraging "angels" or those who stand to gain from the strategic shift, and silencing "devils", or those who stand to lose from it.

By leveraging tipping point leadership and focusing on acts of disproportionate influence, organizations can overcome these hurdles to execute a strategic shift and make a blue ocean strategy a reality.

Overcoming Hurdles in Strategic Shifts with Tipping Point Leadership

Blue ocean strategy requires that the whole company, from top to bottom, is motivated to support the strategy. This strategy is more potent when all members of an organization are driven to execute it, not just by obligation, but voluntarily. This principle minimizes the risk of distrust, noncooperation, and even sabotage, which are relevant to strategy execution in both red and blue oceans.

The organization must execute fair process in the making and executing of strategy. Research shows that fair process is a key variable that distinguishes successful blue ocean strategic moves from those that failed. Poor Process can ruin strategy execution. 

For instance, Lubber, the global leader in supplying water-based liquid coolants for metalworking industries, devised a strategy to eliminate the complexity and costs of the trial phase. However, the strategy was doomed because the sales force fought it. They felt threatened by the new system and often expressed doubts about its effectiveness to customers, causing sales to drop. 

Fair process builds execution into strategy by creating people’s buy-in upfront. When fair process is practiced in the strategy-making process, people trust that a level playing field exists. This inspires them to cooperate voluntarily in executing the resulting strategic decisions. 

Three principles of fair process are engagement, explanation, and clarity of expectation. Engagement involves individuals in strategic decisions that affect them. Explanation means everyone involved should understand why final strategic decisions are made as they are. Expectation clarity means managers clearly state the new rules of the game. When these principles are not followed, it can lead to disorder and rebellion within the organization. 

For example, the company Elco wanted to shift to a new manufacturing process. However, the introduction of the new manufacturing process at one of the plants led to disorder and rebellion. This was because Elco managers violated the principles of fair process. They failed to engage employees in the strategic decisions, they didn't explain why strategic decisions were being made, and they neglected to make clear what would be expected of employees under the new manufacturing process. 

On the other hand, another plant of the same company, despite its reputation for resistance, had accepted the strategic shift in the manufacturing process. This was because management at the plant abided by all three principles of fair process when introducing the strategic shift. 

In essence, for any strategy to be successful and sustainable, an organization must develop an offering that attracts buyers; it must create a business model that enables the company to make money out of its offering; and it must motivate the people working for or with the company to execute the strategy. When these three propositions are aligned, a high-performing and sustainable strategy is achieved.

Can the Blue Ocean Strategy Fail Without Practicing Fair Process?

Creating a Blue Ocean strategy is not a one-time achievement, but a dynamic process. As companies create these highly successful strategies, imitators inevitably appear, turning the ocean red with competition. The key is to understand when and how to renew and reinvent this strategy, making it a repeatable process within the organization. 

Examples abound: Cirque du Soleil’s Blue Ocean strategy lasted over 20 years, Comic Relief’s nearly 30 years, and Apple’s iTunes over a decade. This longevity is due in part to barriers such as brand image conflict, cognitive and organizational barriers, economic and legal barriers, and the alignment of value, profit, and people propositions. 

However, with time, Blue Oceans will be imitated and companies must be ready to innovate again. Tracking value curves helps signal when to innovate and when to optimize existing offerings. Companies like Salesforce.com have successfully renewed their Blue Ocean strategies multiple times, staying ahead of the competition. 

Companies like Apple have successfully balanced pioneers, migrators, and settlers in their business portfolio over time, continuously creating new Blue Oceans as previous ones became crowded. However, balancing both Blue and Red Ocean strategies is essential for long-term success. 

Avoiding Red Ocean traps is also crucial. Misconceptions such as equating Blue Ocean strategy with being first to market, seeing it as a low-cost or differentiation strategy, or viewing it as synonymous with innovation can prevent the creation of Blue Oceans. Understanding these pitfalls can help companies to balance their strategies and continue to create new Blue Oceans. 

In essence, Blue Ocean strategy is about making competition irrelevant through value innovation. While competition will always exist, companies need to learn how to redefine industry boundaries and create new market spaces to achieve sustainable success.

Sailing the Blue Ocean: The Art of Continual Strategy Innovation in Business

Guy Laliberté, CEO of Cirque du Soleil, found incredible success by creating a new market space through a unique entertainment experience, rather than competing directly with traditional circuses. This approach, known as the Blue Ocean Strategy, emphasizes the creation of new, uncontested market space, rather than outperforming competitors. This strategy is executed by aligning innovation with utility, price and cost positions. 

To implement a successful Blue Ocean Strategy, companies must systematically create uncontested market space, design a strategic planning process that goes beyond incremental improvements, aggregate demand to maximize the size of their market and formulate a strategy that allows for both differentiation and low cost. 

Principles for effective execution of this strategy include Tipping Point Leadership and Fair Process, which integrate execution into strategy making, encouraging voluntary cooperation within the organization. 

Tools crucial for navigating the Blue Ocean Strategy include the strategy canvas, the four actions framework, and the eliminate-reduce-raise-create grid. These allow companies to break from the competition, unlock untapped market space and create highly profitable growth. 

The Blue Ocean Strategy also involves six paths for remaking market boundaries, which include looking across alternative industries, strategic groups, buyer groups, complementary product and service offerings, the functional-emotional orientation of an industry, and even across time. 

Focusing on the big picture rather than just the numbers is key to creating a Blue Ocean Strategy. This approach allows businesses to unlock new opportunities and create effective strategies for growth. 

The next principle of the Blue Ocean Strategy is getting the strategic sequence right, which involves buyer utility, price, cost, and adoption. This sequence must pass through each of these four steps to be successful. 

Executing a Blue Ocean Strategy can be challenging due to cognitive, resource-based, motivational, and political hurdles. These can be overcome by making employees understand the need for a strategic shift, multiplying the value of existing resources, motivating key influencers and overcoming political hurdles. 

Finally, the Blue Ocean Strategy is not a static achievement, but a dynamic process. Over time, the blue ocean turns red due to imitators, hence the need for renewal of the strategy. It involves understanding the barriers to imitation and planning for renewal to stay ahead of competition.

Home

Trending Books

News & Mags

Relax

Curated

Collections

Key Ideas & Notes

Insights

Highlights & Bookmarks

Listening History

Key Ideas

#1