Every now and then a company launches a product that fundamentally changes a category; sometimes creating a new category. iTunes transformation of the way we buy music, Nespresso turning homes into cafés, Wii making gaming physical, and R in creating a revolution in big data, and data visualisation are some recent examples.
But how do you replicate what these organisations did for your brand or business? While the book has been around for a number of years, Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne from INSEAD provides a useful framework for creating transformations. The underlying premise of the framework is that when creating strategies we choose either to compete in a Red Ocean or a Blue Ocean. Where a Red Ocean Strategy is competing with similar offers and at its pure form is competition between generics. While with a Blue Ocean strategy you create your own category by redefining what criteria are used to evaluate offers. For example, Nespresso included stylish coffee machines and dedicated retail outlets with an experiential service component in how we evaluate their offer.
But how to do it? Based on the authors approach the first step is to outline all the factors used to define offers in your market. Next, you create a strategy canvass that profiles where you and your competitors offer sits on each factor. Now you know where you are, you create multiple potential scenarios by answering the following four key questions:
- What factors do we eliminate?
- What factors do we reduce?
- What factors do we raise?
- What factors do we create?
Eliminating and reducing factors is critical in managing costs and to ensure you redefine your offer rather than trying to offer everything plus more at a competitive price. Shown below is a simplified example based on fictional weight loss offer. Initially, the business had a similar offer to its competitors with a similar price, communication that was emotive and self-esteem oriented, strongly cross-sold supplements, and communicated the product as offering hope to those who failed before. In their Blue Ocean strategy, they reduced the price and self-esteem focus in their creative, while eliminating supplements and maintaining the new hope message. In addition, strong service support was added and the self-esteem messaging was replaced with a more clinical message and persona.
That’s the recipe. Blue Ocean strategy framework provides a useful framework for the evaluation and design of your strategy around how to grow your business. The critical components are ensuring that you have the right factors, the changes you make are real and noticeable by the market, and the new factors you create are relevant. As with innovations, you need to dream like an optimist and evaluate like a pessimist during the process.
In future posts I’ll cover how to uncover new factors that are relevant to your market when creating your own Blue Ocean strategy. Happy sailing.
To find out more
- Chan Kim, W. Mauborgne (2005). “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant”. Harvard Business Review Press