Business StrategyBlue Ocean Strategy
Title: Blue Horizon: Expanding Market Frontiers with Blue Ocean Strategy
Author: Olivia Parker
Publication Year: 2019
Category: Blue Ocean Strategy
Summary:
I. Introduction to Blue Ocean Strategy
Olivia Parker’s “Blue Horizon: Expanding Market Frontiers with Blue Ocean Strategy” is a comprehensive guide aimed at helping businesses find uncontested market spaces, which she refers to as “blue oceans.” In contrast to “red oceans” where competition is fierce, blue oceans represent unexplored, untapped market workspaces where competition is irrelevant. Parker draws on the foundational principles of Blue Ocean Strategy to provide actionable insights for creating these new markets.
Actionable Tip: The first step a business leader can take is to break away from traditional competitive strategies and start focusing on innovation. Encourage your team to brainstorm areas in the industry that are underserved or overlooked.
Case Example: Parker discusses Cirque du Soleil, which redefined the circus industry by combining elements of theater and circus, targeting a more adult, sophisticated audience, thus creating a new market and avoiding direct competition with traditional circuses.
II. The Four Actions Framework
To create blue oceans, Parker emphasizes the importance of the Four Actions Framework, developed by Chan Kim and Renée Mauborgne. The framework consists of eliminating, reducing, raising, and creating elements regarding product or service offerings.
- Eliminate: Identify which factors that the industry has long competed on should be eliminated.
- Reduce: Determine which factors should be reduced well below the industry standard.
- Raise: Ascertain which factors should be raised well above the industry’s standard.
- Create: Discover which factors should be created that the industry has never offered.
Actionable Tip: Regularly conduct strategy meetings to list out and evaluate the factors related to the Four Actions Framework. This structured approach ensures you stay focused on both eliminating unnecessary competition and creating new value.
Case Example: Parker illustrates this with the example of Southwest Airlines, which eliminated costly services such as seating class and meals, reduced travel prices, raised the frequency of flights, and created a fun and friendly flying experience, redefining air travel.
III. Value Innovation
A core concept Parker discusses is “value innovation,” which is creating new and superior value for customers while simultaneously reducing costs. Value innovation is seen as the cornerstone of Blue Ocean Strategy because it allows businesses to offer something radically different that disrupts the market.
Actionable Tip: Focus on innovation workshops within your organization. Engage employees from various departments—R&D, marketing, and customer service—to contribute ideas that blend high technology with low-cost production.
Case Example: The book highlights the Nintendo Wii, which diverged from competitors like Sony’s PlayStation and Microsoft’s Xbox by focusing on motion-sensing gameplay rather than high-end graphics, making it accessible to a broader audience and reducing production costs.
IV. Reconstructing Market Boundaries
Parker argues that to create blue oceans, businesses must reconstruct market boundaries. This involves looking across alternative industries, strategic groups, buyer groups, complementary offerings, functional or emotional appeal, and time.
- Alternative Industries: Is there value in combining or blurring boundaries between industries?
- Strategic Groups: Identify commonalities and differences within your industry.
- Buyer Groups: Explore non-customers and different segments.
- Complementary Offerings: Consider products or services that complement your core offerings.
- Functional vs. Emotional Appeal: Shift the focus from functional attributes to emotional appeal, or vice versa.
- Time: Think about trends over time and how you can capitalize on future opportunities.
Actionable Tip: Use market research to gather insights on non-customers and cross-industry trends. Deploy these findings to rethink and restructure your business offerings.
Case Example: Parker recounts how Apple’s launch of the iPod and iTunes reconstructed market boundaries by combining hardware (iPod), software (iTunes), and content distribution (iTunes Store), blending aspects of the consumer electronics and music distribution industries.
V. Tipping Point Leadership and Fair Process
Parker delves into leadership aspects crucial for driving Blue Ocean Strategy. She mentions “Tipping Point Leadership,” which focuses on overcoming organizational hurdles using minimal resources to achieve maximum impact. Additionally, “Fair Process” underlines the importance of transparency, engagement, and clear communication within an organization.
Actionable Tip: Implement regular check-ins and transparent communication channels to ensure your team fully understands and buys into the strategic direction. Involve key team members in the decision-making process to enhance commitment.
Case Example: The book discusses the turnaround story of New York City’s police department under Commissioner Bill Bratton, who applied tipping point leadership techniques to achieve dramatic drops in crime rates with limited resources.
VI. The Strategy Canvas
A critical tool Parker discusses is the Strategy Canvas, which provides a visual representation of a company’s strategic profile against competitors. It helps highlight where the company is investing and allows comparison of critical factors.
Actionable Tip: Create a Strategy Canvas for your business and your key competitors. Use it to identify areas where you can shift focus and differentiate significantly.
Case Example: Parker presents the case of Yellow Tail, an Australian wine company that used the Strategy Canvas to simplify their wine offering, appeal to a broader audience, and deviate from traditional wine complexities, capturing significant market share quickly.
VII. Moving Beyond Existing Demand
Expanding on traditional blue ocean strategies, Parker suggests businesses should also aim to capture demand beyond existing customer bases by focusing on non-customers. There are three tiers of non-customers:
- Soon-to-be non-customers: People on the verge of entering your market.
- Refusing non-customers: Those who consciously choose against your market.
- Unexplored non-customers: Those who haven’t been targeted due to lack of awareness.
Actionable Tip: Conduct surveys and focus groups with non-customers to understand their needs and pain points. Use these insights to tailor offerings that meet these underserved segments.
Case Example: Parker examines Uber’s rise, highlighting how they attracted non-customers who were disenchanted with traditional taxi services and didn’t originally consider ride-sharing as an option.
VIII. Three Characteristics of a Good Strategy
Lastly, Parker emphasizes that a good Blue Ocean Strategy is characterized by being Focused, Divergent, and having a Compelling Tagline.
- Focused: Efforts and investments should hone in on key areas without getting distracted by industry norms.
- Divergent: Your strategy should set your business apart from others in a meaningful way.
- Compelling Tagline: Craft a succinct, memorable tagline that communicates your unique value proposition.
Actionable Tip: Continually assess and refine your company’s value proposition to ensure it remains focused and differentiated. Use customer feedback to keep your tagline relevant and captivating.
Case Example: Parker cites Tesla’s tagline “Accelerate the world’s transition to sustainable energy,” which succinctly and compellingly communicates its mission, helping it stand out in the automotive industry.
Conclusion
“Blue Horizon: Expanding Market Frontiers with Blue Ocean Strategy” by Olivia Parker is a significant resource for businesses looking to escape the intensely competitive “red oceans” and discover their own “blue ocean” opportunities. By employing the frameworks, examples, and actionable tips Parker provides, companies can innovate and lead in unexplored market spaces, ensuring sustainable growth and reduced competition.
Actionable Review: Regularly revisit the principles and frameworks discussed and assess how your business can continuously adapt and innovate to maintain its “blue ocean” standing.