Business StrategyBlue Ocean Strategy
Introduction
Anna Rivera’s 2021 book “Blue Ocean Value Innovation: Unleashing Market Potential” delves into the comprehensive strategy known as the Blue Ocean Strategy, which advocates for creating new market spaces or “blue oceans” rather than competing in saturated markets, termed “red oceans.” Rivera’s book builds on concepts initially introduced by W. Chan Kim and Renée Mauborgne, expanding into practical applications and providing a variety of real-world examples. The book is a manual on how businesses can systematically innovate to unlock untapped market potential.
Key Concepts and Frameworks
The Four Actions Framework
Rivera introduces the Four Actions Framework as central to the Blue Ocean Strategy, which includes the following steps:
1. Eliminate factors that the industry takes for granted but no longer adds value.
2. Reduce factors well below industry standards.
3. Raise factors well above industry standards.
4. Create factors that the industry has never offered.
Example: Cirque du Soleil
- Eliminate: Animals and star performers were eliminated from the acts.
- Reduce: Traditional circus costs like multiple show rings and expensive circus acts were reduced.
- Raise: The quality of productions, costumes, and venue quality.
- Create: A unique circus experience integrating theater, dance, and music, which attracted both circus-goers and the more affluent theater-going audience.
Action Step: A business can conduct a thorough analysis of its industry standards and customer pain points. Identify which elements can be eliminated or reduced and what new value elements can be created or raised to redefine market boundaries.
Value Innovation as the Cornerstone
Rivera emphasizes that Value Innovation, the simultaneous pursuit of differentiation and low cost, is the cornerstone of creating blue oceans. The goal is to break the value-cost trade-off.
Example: Yellow Tail Wine
- Value Innovation: Yellow Tail simplified its product line, making wine approachable for non-wine drinkers by eliminating the complexity of wine selection while reducing the cost of production. They raised the aesthetic packaging and created an easy-to-understand label to appeal to a broader audience.
Action Step: Evaluate your unique value proposition. Simplify offerings to enhance customer experience and simultaneously cut unnecessary costs. Develop branding that demystifies your product or service for a wider audience.
Tools for Formulating Blue Ocean Strategy
Strategy Canvas
The Strategy Canvas is a diagnostic and action framework that captures the current state of play in the known market space and helps to visualize how a company can break out of the red ocean.
Example: Southwest Airlines
- Strategy Canvas: Southwest Airlines used this to map out the factors of competition within the airline industry, such as price, meal service, and hub connectivity. They then innovated by eliminating meals and hubs, lowering costs, but increasing the frequency of point-to-point flights and friendly service.
Action Step: Create a Strategy Canvas for your industry. Identify the key factors of competition and then decide which ones to alter by eliminating, reducing, raising, or creating new factors.
The Six Paths Framework
Rivera introduces the Six Paths Framework as a method for reconstructing market boundaries. The framework suggests looking across alternative industries, strategic groups, buyer groups, complementary product and service offerings, the functional-emotional orientation of an industry, and across time.
Example: IKEA
- Six Paths Framework: IKEA looked across traditional furniture retailers and decision pathways, changing the functional emotional appeal by providing affordable furniture that customers assemble themselves.
Action Step: Conduct a deep dive using the Six Paths Framework. Explore beyond conventional boundaries in your industry and identify opportunities to create new value curves that set your business apart.
Execution Principles
Rivera outlines that after defining the strategy, effectively executing it is crucial.
Overcoming Key Organizational Hurdles
These include cognitive, motivational, resource, and political challenges. Rivera adds practical advice on overcoming these hurdles through fair process, transparent communication, and establishing trust and commitment.
Example: Nespresso
- Execution Hurdles: Nespresso faced resistance internally and externally. They addressed cognitive hurdles with pilot tests showing success, motivational hurdles by presenting opportunities for personal stake in the new venture, and resource hurdles by reallocating funds from less successful projects.
Action Step: Create a fair process for change management. Ensure that all employees are aware of why changes are necessary, how they will happen, and their role in these changes, fostering an inclusive and motivated environment.
Tipping Point Leadership
This concept encourages concentrating resources on the factors that exercise the greatest influence on performance—akin to finding and leveraging tipping points for the desired change.
Example: NYPD under Commissioner Bratton
- Tipping Point Leadership: By focusing on strategic places (like the subway system and squeegee men) that had the highest visibility and impact on the public’s perception of safety, significant and rapid change was achieved.
Action Step: Identify the few key areas with a disproportionate impact on your organization’s performance. Allocate resources and effort to these areas to trigger widespread organizational change.
Case Studies and Success Stories
Throughout the book, Rivera presents a multitude of case studies from various industries such as technology, entertainment, healthcare, and retail, showing the breadth and applicability of the Blue Ocean Strategy.
Example: Apple iTunes
- Case Study: Apple’s iTunes transformed the music industry by eliminating the need for physical CDs and reducing production costs. It raised convenience and accessibility and created a new digital music format that appealed to consumers and music producers.
Action Step: Look at existing pain points or inefficiencies in your industry. Innovate by integrating technology or new methodologies that streamline and elevate the user experience.
Conclusion
“Blue Ocean Value Innovation: Unleashing Market Potential” by Anna Rivera is more than a theoretical exploration; it is an actionable guide for transforming businesses. By applying the Four Actions Framework, Strategy Canvas, Six Paths Framework, and principles of effective execution, organizations can navigate beyond competitive markets into blue oceans of uncontested market space. Businesses and entrepreneurs are encouraged to scrutinize their value propositions, break free from industry norms, and innovate fearlessly to achieve sustainable growth and market leadership.
Final Action Step: Cultivate an innovative mindset among employees. Encourage continuous experimentation and learning from both successes and failures to sustain blue ocean thinking within the organization.