All businesses operate on the principle of risk and return.
That said, one can maximize opportunity and minimize risk by adopting what W. Chan Kim and Renee Mauborgne described in 2005 as Blue Ocean Strategy - the creation of demand in a market space uncontested by one’s rivals, using the ‘Four Actions Framework’ (eliminating points of competition, reducing that excess design which does nothing to improve value, raising factors of product differentiation that are value-adding, and creating/addressing a consumer need that has never existed/been addressed before).
This strategy’s products leapfrog the price factor (e.g. – [yellowtail] wines are priced more than budget wines, yet are gaining popularity as ‘friendly’ and enjoyable in a market clouded with terminology and complex wines for the sophisticated palate, intimidating to the lay person). Typically, this strategy steers the early years of a product’s market performance, using ‘value innovation’ as the guiding principle.
A Blue Ocean may be sustained more easily in some industries due to the innate pressing need of that industry to innovate for survival/growth/high payback (e.g. – technology industry as against consumer goods such as jams/jellies).
A Red Ocean strategy, in contrast, signifies the contest for a limited and set market share as per accepted best-practice rules. Companies using this strategy aim to increase their ‘slice of the pie’ in a saturated market by compromising on profit. As products lose their differential value and are reduced to being commodities, the price-driven cut-throat competition turns the ocean blood red (e.g. – performances by acrobatic/circus companies as against the premium Cirque du Soleil that combines showmanship, theatre, music, and acrobatics).
While the strategic and market profiles of Red Ocean products follow the same value curve in terms of price, quality, and product features, a Blue Ocean product’s value curve will differ on every point of the competition and thus neutralize the force of competitors (e.g. – the ipod, when introduced, differed from CDmans/walkmans in terms of user-friendliness, attractive designs/colors, higher price, cutting-edge components and revolutionary means of storing/organizing/playing music, energy efficiency).
However, when a product patent expires, new competing products will fight for market space and there is every possibility that Blue Oceans will turn bloody (the ipod now has its fair share of rivals such as Sandisk’s Sansa, and other MP3 players by Creative Technologies, Samsung, iRiver, Toshiba, Sony, that serve the Asian market at competitive prices. The ipod currently owns 49% Asian market share, while Sansa owns 29%).
With the rise of globalization and inter-connectedness (loss of untouched markets), businesses must insure against the disappearance of their niche markets or Blue Oceans via ‘reconstructionism’ – viz., the seasonal re-alignment of a firm’s utility, price, and cost activities with the conscious stimulation of demand (through constant innovation), and thus rewriting ‘game’ rules (e.g. – tech companies are constantly launching new versions of their products to capture a market that demands cutting-edge quality to feed technological and emotional needs) .
Kim and Mauborgne’s theory itself has innovative value as it could help businesses evolve and keep growing. Although the cases the theorists chose conveniently illustrated only the successful application of this strategy, it is noteworthy that their work is self-illuminating.
Firstly, it answers a need in the continually evolving academic canon for a Blue Ocean of new theories/redefinitions/solutions, with its own game rules. It is thought-provoking and stimulates creativity both in academia and in real life with the use of a powerful image – the blue/red ocean. It is life-affirming and recognizes the role human passion plays in any enterprise – be it business or social.
Secondly, this strategy is a viable tool in a globalized world, precluding the movement of the world market towards hyper-competition in different industries and locations, within economic cycles, and macro-/micro- economic forces. It is interesting that the root of this business theory lies in art and psychology (human nature – after all, strategic survival has existed even before man’s evolution). Fittingly, Blue Ocean strategies are strongest in the entertainment industry and art world, where value is driven by difference and originality.
Oprah Winfrey exemplifies this strategy. She attained popularity in the early 90’s despite the existence of other talk shows (Donahue/Jerry Springer/Ricki Lake/Suzanne Somers) by answering the need for women to have someone identifiable, who shared similar problems with weight/marriage/relationships, and who took the therapeutic power of ‘heart-to-heart girlfriend talk’ to a new level. The biggest differentiator for Oprah was her compassion and her generosity where charities and causes were concerned, on a scale that has not been matched in the industry.
Although the Blue Ocean strategy had not been theorized in the early 90’s, Oprah instinctively differentiated herself with her company Harpo and its divergent interests in publications (Oprah magazine/Oprah’s Book Club), charities (Oprah’s Angel Network), production (films/TV shows), radio, and a blog. Oprah’s creativity has led to the existence of a platform to foster other artists/professionals from other industries to prove themselves (Dr. Oz/Dr. McGraw/Rachel Ray).
The Blue Ocean in Oprah’s case, has moved beyond sustainability to itself becoming a controlled and protected world (minimally, as ultimate acceptance of Oprah’s stars lies with the global audience), where growth is bolstered by mere association with the parent Oprah brand.
© The Sacred Dome (Jan 2013 – current).
© The Sacred Dome (Jan 2013 – current).
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