In a world where companies are fighting for a share of a finite market, it’s no wonder that many are looking for new ways to grow. One such way is known as blue ocean strategy.
What is Blue Ocean Strategy? Blue Ocean Strategy is a business strategy developed to create new market space (a blue ocean) and make the competition irrelevant. The theory is that businesses typically compete within existing market space (a red ocean), where industry conditions are bloody. The goal of blue ocean strategy is to create uncontested market space and make the competition irrelevant.
Blue ocean strategy is all about creating new markets that are uncontested by your competitors. This is done by offering something new or different that your target market finds appealing. In other words, you’re creating your own market rather than competing in an existing one.
To do this, the company must create and deliver new value that creates a new market. This is done by looking at the company’s strategic canvas, which has four main elements:
1. Key Activities
2. Value Proposition
3. Customer Relationship
The essential tool of blue ocean strategy is the “Eliminate-Reduce-Raise-Create” (ERRC) framework, which is used to challenge the assumptions that a company has about its industry.
The ERRC framework is used to identify new market space by looking at what a company can eliminate, reduce, raise, and create.
Eliminate: What can we stop doing?
Reduce: What can we do less of?
Raise: What can we do more of?
Create: What can we start doing that we’ve never done before?
By looking at these four areas, companies can identify new areas for growth and market expansion.
For example, a company might eliminate the need for a sales force by selling directly to customers online. Or, a company might reduce the number of SKUs it offers in order to simplify its product line.
The goal is to find new areas for growth that are uncontested by the competition.
The Blue Ocean Strategy has been used by companies like Cirque du Soleil, Southwest Airlines, and Lego to find new market space and achieve incredible growth.