understand what it is and how to apply it to your business – WAU
The business world is full of metaphors to explain new management methods and sales approaches that are developed on a regular basis. The Blue Ocean strategy uses one more of them. A popular saying goes that calm seas never made a good sailor, but when we talk about saturated markets and harmful competition for the finances of the […]
The business world is full of metaphors to explain new management methods and sales approaches that are developed on a regular basis. The Blue Ocean strategy uses one more of them.
A popular saying goes that calm seas never made a good sailor, but when we talk about saturated markets and harmful competition for business finances, seeking smooth navigation is the best path to success.
This is the promise of the Oceano Azul strategy: guiding managers to find new markets, free from direct competitors, and knowing how to exploit them with high performance.
We dedicate this post to deepen the strategy, show how its fundamentals can be applied in the business and, thus, achieve the best results, managing risks and minimizing costs.
Follow the reading and navigate with us in this blue ocean of information!
What is the origin of the Blue Ocean strategy?
Developed by researchers W. Chan Kim and Renée Mauborgne, the strategy was published in 2005 under the eponymous title, “The Blue Ocean Strategy” and later translated into 43 languages because of its incredible success.
Using as a base 8 fundamental points and the suggestion of some management tools, his main idea for the business is to get out of the red sea, bloody and unruly by the competition, to find calm navigation conditions, even in markets that are little or not explored, the so-called blue ocean.
The 8 fundamentals of the Blue Ocean strategy
But are there really untapped markets? And, for that, would it be necessary to create a new disruptive and competitive product or service?
Not necessarily! Know that the simple brand positioning, new differentials and demand for segments and audiences that were not yet addressed by the business can offer great opportunities for success.
So, shall we better understand the fundamentals of the strategy? Check it out below!
1. Use of data to support the strategy
The first point that supports the strategy and can be replicated for the business is the use of data and research that support an idea.
In the case of the book, the research process involved analyzing the trajectory of several companies and their 150 movements made in search of better results. More than 30 industries and segments were used as references over more than 100 years (1880 to 2000).
To identify untapped markets and opportunities, research and the use of reliable data are also essential measures.
In recent years, for example, several companies have chosen to take their sales to the virtual world. This movement has increasingly raised the sector’s competition, but surveys such as E-commerce Trends 2018 can help managers differentiate their services.
In it, 70.9% of consumers reported that one of their main reasons for buying on this channel is their cheaper prices.
This can indicate a challenge and also an opportunity for companies that can direct their sales to niches with less financial sensitivity in purchasing decisions, for example.
2. Union of differentiation and low cost strategies
The Blue Ocean strategy also seeks to demystify the idea that a company that is positioned to offer low-cost products cannot include differentiation to attract more sales.
For this, it reduces energy and investment in competition with characteristics that other companies offer in a similar way, and creates new differentials for your product or service, so-called innovative values.
Innovative values are identified based on the buyers’ decision-making process and what are their criteria for acquisition.
Thus, considering changes that would please the public, its creation process is optimized so that costs remain low.
3. Expanding market boundaries
Another strength of the strategy is the identification of other markets to be explored, expanding borders and target segments, or changing the level of services by offering innovative values.
When Apple launched iTunes, it created a new segment and market in which its competitors were not.
The first pizzeria in a city to offer a delivery service created an innovative value that other establishments would not offer, that is, it managed to explore a new market, just as Steve Jobs did.
4. Use of tools to identify opportunities
Research in various industries over the years has allowed researchers to find patterns in the actions that have brought innovation to companies, or have not provided the expected results.
Based on these standards and analyzes, the blue ocean strategy has compiled management models, graphics and guidelines to link the discovery of innovative values with the expansion and discovery of new markets.
In addition, a didactic structure was built in 4 phases, as well as 6 possible paths for its realization that will be presented below.
5. Fidelity to the strategy development stages
These steps allow companies of different niches and structures to develop the method to identify which blue ocean to explore.
It also ensures that managers and their teams create concrete and efficient strategies, being faithful to step by step, thus enhancing the chances of producing innovative value with each attempt.
6. Maximizing opportunities and minimizing risks
Strategies naturally involve risks, but with the Blue Ocean Idea Index (or Blue Ocean Idea Index), it is possible mitigate risks and increase opportunities to test the viability of ideas.
With this analysis, it is possible to answer 4 questions:
- Is there an indisputable reason why buyers want your product?
- Is your pricing appropriate for the audience you want to reach?
- Is it possible to produce the product with its new innovative value, offer the stipulated price and still have a good profit margin?
- What are the obstacles to making the project feasible, and what does it take to face them?
7. Simultaneous transformation of execution and strategy
The series of action models and their logic are easily transformed into execution and interaction between the different areas and teams of the business, in addition to favoring the exchange of knowledge and strengthening the team around the established objectives.
That is, strategy and execution are carried out almost simultaneously and based on the so-called “Fair Process ”, which is based on team engagement, detailed explanation of the strategy and well-defined expectations.
This allows decision making and isolated actions to have the same foundation and, therefore, contribute equally to the success of the strategy.
8. Achievement of win-win results
Building strategies with this philosophy allows the company align 3 key points: innovative values, profit and people.
In other words, it creates innovative values that are relevant to its customers, profits that allow its structure and investors to be remunerated satisfactorily, and that its employees work motivated and with a purpose in which they believe.
Why use it in your business?
These 8 fundamentals and the holistic approach – which ensures that the company, customers and employees have a perception of gain – bring a series of benefits to the business.
In highlight, it is possible to point out the following.
Competitive markets involve high expectations and little budget for hiring services or purchasing products.
In other words, companies that want to provide or provide services to these segments need to work with small margins and standardized quality.
Using the Blue Ocean strategy, the company is able to move away from this competition and find other markets that can generate better results.
Using data and carefully studying the opportunities with the ideas index, the company can improve its innovations until they reach the desired point.
And, for innovation, it is necessary to understand how new values for the solutions they offer, audiences that were not their focus, channels that expand their sales, or means of dissemination that have not yet been explored.
Innovating and locating new markets allows the company to strengthen its brand and be seen as innovative.
In its traditional and recently discovered market, a stronger connection with its consumers is created, as it manages to offer low cost and differentiated solutions at the same time.
The level of satisfaction and loyalty is considerably high with its success.
What are the 6 possible ways to identify innovative value?
Based on the analyzes carried out by the book’s researchers, 6 paths were pointed out to create innovative values and identify new markets. Are they:
- analyze groups of companies that operate in the same niche, are relevant and have similar strategies, such as drugstore or gym chains, which can help build a value outside that standard;
- analyze companies that offer alternative products, with different shapes and functions, that end up serving the original audience. This allows rethink values that direct competitors do not offer;
- research the buyer chain, which is particularly interesting when there are sales intermediaries. Instead of focusing on just one audience, you can discover new opportunities and stakeholders;
- make an analysis of complementary services, such as pizza delivery or change the design of a product with values that a certain public believes, such as sustainability;
- analyze the temporal context and anticipate the needs of buyers, as was the case with Apple in the case of iTunes, since the growth of illegal music downloads was growing;
- consider the functional and emotional stimuli that the service or product provides and reinvent them according to what is relevant to the public. A coffee shop in a residential neighborhood is an invitation to a slow and affectionate meal, but this model would not work in a shopping center that is fast-paced and requires, above all, agility.
How are the steps for its implementation?
It is possible to use one or all of the paths, to carry out this process several times until the innovative value developed is satisfactory for the moment.
From there, the following 4 steps will lead to the implementation of the Blue Ocean strategy.
1. Visual awareness
In this step, the business or strategy is compared to the other direct competitors and the points of improvement and differentials to be tackled are highlighted.
2. Visual exploration
With the information from the previous step and the possible paths for the development of an innovative value, visual exploration aims to create the element that will be explored as a differential.
3. Presentation of the visual strategy
In this phase of the process, the value that will be explored is presented to clients, non-clients and clients of the competition, in order to evaluate their considerations and improve the idea.
4. Visual communication
All information and improvements developed in the process are condensed and the questions from the Blue Ocean Idea Index are applied to find the model with the highest probability of profits and the lowest risk for the business.
The Blue Ocean strategy seeks to direct the business towards markets that offer more efficient results, that is, they offer less competition and expenses to stand out from other companies.
In addition, it directs companies to perform well in the current reality of the business world, in which you must always innovate.
The Blue Ocean strategy can also be applied to specific sectors and projects, such as the creation of marketing campaigns, and complemented with other dynamics, such as the Net Network, developed by Steve Johnson to create an environment conducive to innovation.
Want to know how it works too? The TED Talks lecture, which addresses your insights, is part of a selection with those we consider most relevant for professionals and those interested in digital marketing.
Check out the 25 best lectures here and find out what the experts in this field think!