Blue Ocean Strategy

by Cecilia Magnergård on February 21, 2014

clip_image002Different from most traditional consultancy organisations we in Bearing deliver our services as individually developed solutions addressing a specific market segment, problem, or a strategic or operational area. Each business solution is developed from the basis of combined expertise, experience and knowledge represented by the group of consultants forming the core of each business vertical.

For us at Bearing, when initiating consultancy services, it is important to include the practical experience we have gained from years of working as management consultants, but it is equally important to emphasise our analytical understanding of the challenges within each project that we work with.

Throughout the spring I will on this blog, in brief, go through some of the most fundamental models we use in our work. Every project we work with is specific, and we apply the theoretical knowledge specifically designed for the client we are currently working with. I will, nevertheless, divide these central articles into diverse parts and outline, exemplify and come back to the most significant elements of them. The first I will write about is Blue Ocean Strategy, authored by W. Chan Kim and Renee Mauborgne. It is an ingenious article in Harvard Business Review in 2004 and later on book that we base some of our analytical models on.

clip_image004The authors of the Blue Ocean Strategy accentuate that the only way to beat competitors is to stop trying to beat them.

Today’s business arena consists of two distinct kinds of space that can be thought of as red and blue oceans. In red oceans, with this they mean existing markets, the industry boundaries are already defined and accepted, and the competitive rules of the game are already known. The red oceans represent the known market space including all the markets in existence today. As the space in the red oceans gets increasingly more crowded, the possibility for growth and profits are reduced.

On the other hand, we have the blue oceans; representing the unknown market space incorporating the markets not yet in existence today. Within the blue oceans competition is irrelevant as the rules of the games are waiting to be set, meaning that demand is created rather than fought over. In short, the blue ocean strategy is about the importance of playing a different game on the same field as the competition as well as the prominence to watch the competitors but never attempt to follow them, no matter how successful their current strategies are. Below follows one example.

Cirque de Soleil

clip_image006Cirque de Soleil broke through the boundary traditionally defining their industry and made a new profitable blue ocean from within the red ocean of the circus industry.

Cirque de Soleil’s rapid growth occurred in an unlikely setting where the circus business was under long-term decline – the rules, criteria and limitations for the industry were already taken for granted. For decades they included famous performers, animal shows and multiple shows pushing concession sales.

Instead of following their competitors and keeping a high emphasis on all the existing rules and components of circus, Cirque de Soleil profoundly reduced or eliminated many of the existing rules and created new ones themselves. By doing this, Cirque de Soleil increased the value of their target market while they at the same time lowered their own costs.

When establishing Cirque de Soleil the key inventors looked across market boundaries for alternatives to the circus resulting in part theatre and part circus. Cirque de Soleil did not make its money by attracting customers from incumbent circuses or competing within the restrictions of the existing industry, they rather created uncontested market space that made the competition solely irrelevant. They included only performers in their shows, no animals, and they performed in one location at a time, without moving around to the audience. They let the audience come to them at established venue in Las Vegas, Berlin, Toronto and other mayor cities.

clip_image008Many desirable goals and outcomes cannot be delivered through normal market mechanisms, and the normal rules of demand and supply do not always apply in a public sector context.

Nevertheless, rather than stripping away services as a way to reduce costs and compete with price, blue ocean thinking can help prioritise and strategize innovation and income generation from new previously unthinkable customer segments, resulting in new ways of undertaking challenges.

Blue ocean strategy can help boost creativity in public as well as private sector organisations. At Bearing, we use a well-tested further developed methodology based on the blue ocean thinking that we combine with our practical know-how in order to help our clients to see beyond their comfort-zone and thereby increase profitability and growth. The combination tends to maximise possibilities leading to innovative solutions.

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