The Blue Ocean Strategy concept was introduced by Chan Kim. It suggests that an organization should create new demand in an uncontested market space, or a “Blue Ocean”, rather than “Red Ocean” competition head-to-head with other suppliers without differentiation.
One of the tools proposed to help discover this uncontested space is the blue ocean matrix.
It starts with an existing product or service and asks 4 questions:
- What features can you eliminate?
- What new features can you create?
- What performance can you reduce?
- What performance can you raise?
When is it useful?
Use it in new product or new business model development. When you want to brainstorm creative new value propositions to bring to customers, breaking established value trade-offs to offer them something different to the rest of the industry.
The concept has to go beyond product development to be sustainable. Any competitor can copy a product innovation. However, if you design your entire organisation around delivering this Blue Ocean model without trade-offs, it will be impossible for any competitor to copy.
RIM Blackberry Example
Before Blackberry, there were few options for the mobile businessmen wanting to manage their e-mail while they were out of the office. A laptop with dial-up modem was the main choice. This was not a very satisfactory solution, because the laptop was designed to do many other jobs for the customer too. Blackberry applied Blue Ocean strategy tpo create a new value proposition to deliver a better solution for this job:
- They Eliminated access to MS Office applications (reducing cost)
- They Reduced screen size and keyboard size
- They Raised portability and ease-of-use
- They Added everywhere always-on capability, Security, Business support, and Prestige branding
It has taken competitors (Nokia; Apple) over 8 years to catch up with the Blue Ocean value proposition they created, in which time they have established themselves as synonymous with mobile e-mail in the customer’s mind.
And there is the next problem…..with the Blackberry brand strongly linked to mobile e-mail in customer’s minds, it has been hard for them to create a new identity now that their mobile e-mail feature is matched by competitors.
How do you do the analysis?
Before you launch on this brainstorming exercise, you need to decide your target. This should be a specific customer job that you want to nail for a specific customer segment, without trade-offs.
Understand this job in detail, going beyond traditional market research, taking an anthropological approach to understand customer behaviour.
Once you have a complete understanding of the customer job, arrange a brainstorm session when you bring in diverse participants. Ask each of these questions in turn:
- What can we eliminate from this offer?
- What customer benefits can we reduce?
- What customer benefits can we raise?
- What customer benefits can we add, that have never been offered before?
In this way a new value proposition is created. Cost can be eliminated from features that over-served customers and this cost re-invested in added features and raising customer benefits in other areas. By focusing on specific customer segments, the new value proposition can offer greater value to these customers at the same time as lowering cost.
Once a promising Blue Ocean value proposition has been identified with this framework, the real work starts. How do you shape this value proposition into a compelling customer offer, at scale, at a cost that will make money? The limitation of this framework is that it is just a starting point.
I want to know more
The Blue Ocean Strategy book by Chan Kim and Renee Maubiourge
Wikipedia entry for Blue Ocean strategy