The central theme of Blue Ocean strategy is to look outside the conventional wisdom of how competitors define market boundaries to find and create new market spaces with new “rules-of-the-game” a company defines to make competition irrelevant. The question is of course: HOW?
Blue Ocean Strategy provides a tool called the Six Paths Framework. It’s a methodology to look across conventional market boundaries to gain insights on how to apply the “four actions”: what product factors should a company 1) eliminate, 2) reduce, 3) raise or 4) create in their offering to reconstruct market boundaries to unlock a blue ocean of a new market space.
According to the authors of Blue Ocean Strategy, Kim and Mauborgne, there are six identifiable patterns or assumptions that companies’ tend to build their strategies on. “Hypnotically” applying these assumptions to the competitive landscape results in being trapped in red oceans. Companies tend to do the following:
1) Define their industries similar and focus on being the best within. What if instead we look across alternative industries to redefine the competitive boundaries? Consider Southwest Airlines. Instead of seeing other airline carries as their competition, they defined the market as being “short haul” travel. Cars, trains and buses were alternatives for short haul travel. As a result, SWA created a low cost, no frills airline with regular departures that created an alternative to cars, trains and buses – not just other airlines.
2) Look at their industries through the lens of generally accepted strategic groups (such as luxury, economy and family cars), and strive to stand out in the strategic group they play in. What if instead we look across these strategic groups and not confine ourselves to competing exclusively in these groups? Ask ourselves why do customers trade up for the higher group, and why do they trade down for the lower one? Then create a new category defining a blue ocean.
For example, Sony created the personal portable-stereo market in the late 70’s by looking across the high fidelity of boom boxes with the low price and mobility of transistor radios.
3) Focus on the same buyer group, be it the purchaser (b2b industries), the user (clothing industry) or the influencer (pharma industry). What if we looked across the chain of buyers to unlock new product definitions?
Consider Google Analytics. Instead of targeting the IT department, which traditionally buys knowledge based software solutions, Google targeted the marketing departments by simplifying and minimizing the complexity while removing the adoption barriers by providing the base tool free.
4) Define the scope of the products and services offered by their industry similarly. What if we looked across complementary products and services to open new market opportunities?
Consider NABI, a Hungarian bus company and the transit bus industry. Under the accepted rules of competition in the industry, companies competed on offering the lowest purchase price. As a consequence the bus designs were outdated, poor quality and expensive to maintain. NABI recognized that the highest cost for municipalities was not the purchase price but rather all the complementary activities associated with operating muni-buses including maintenance and millage (total cost of ownership).By addressing all the activities in operating muni buses, NABI was able to carve out their blue ocean.
5) Accept their industry’s functional or emotional orientation. What insight can we discover by looking across functional or emotional appeal to buyers instead of accepting an industry’s functional or emotional orientation?
Apple is a master at this. The iPhone was created not only to be a wonderful product in terms of its functionality and utility, but also as a statement for buyers. iPhones appeal to the emotional desire to make a statement on how hip the buyer is by using really “cool” products.
6) Focus on the same point in time – and often on current competitive threats in formulating its strategy. What if we expand the time horizon and anticipate where the market will be and create our innovation strategy around this?
Once again, Apple has done a magnificent job in anticipating where the market is heading based on technology and infrastructure advancement and likely consumer attitudes in response to the evolving trends. And timing is everything! Apple wasn’t the first to imagine a smart phone and/or the power and utility of pervasive computing (access to the internet from anywhere). But they understood how to put the pieces together to create a great user experience and chasm crossing blue ocean strategy.
There are more tools and concepts Kim and Mauborgne layout in their book Blue Ocean Strategy worth checking out. I’ll include some of these in future articles as well as more innovation tools and frameworks to help you innovate by identifying problems worth solving and creating solutions customers will love and embrace.
To innovate, we need to see things differently – so here’s to opening our eyes, ears and minds to new possibilities!
Kevin