Business strategy in existing markets usually focuses on the competition. This is because in existing markets, known as red oceans, business structures and processes are usually known and companies naturally try to outperform rivals to grab a share of the existing demand.
While understanding competition is relevant, markets and competition eventually expand, which implies that increased rivalry usually leads to fierce competition for a limited demand and limited profit.
The concept of Blue Ocean Strategy on the other hand suggests that companies are better off searching for ways to gain uncontested market space (known as blue oceans) than competing with similar companies.
Creating your own Blue Ocean
Blue Oceans in the business market universe are industries or segments where companies can create new demand or a new market space, and where fresh ideas are created which lead to doing things differently and giving customers more value in this attractive new market.
A good example of blue ocean strategy is Cirque du Soleil. Circuses in the 1980’s and 1990’s were dominated by a few players, who featured the same product – three-ring circuses, clowns, and animal acts, of which the target market were children and families.
However, as the marketing expanded, competition was stronger between the players. To counter each other, circuses competed to secure more famous entertainers and exotic animal acts, which raised costs without dramatically changing buyer value.
During this time, other forms of entertainment, such as TV and theatre were new and were appealing substitutes, but there was an increasing public outcry about the confinement and harsh treatment of animals.
Cirque du Soleil entered the circus industry. Instead of trying to compete with existing circuses in the red ocean for limited profit, they decided to remove the elements of the circus that people no longer cared about and to also introduce elements that people were being attracted to.
Essentially, they removed animal acts completely and introduced a single stage (instead of three ring circuses), hence reducing costs and reducing the number of performers. As other forms of entertainment such as TV and theatre was more appealing, they introduced a large theatrical element to the entire production combining the circus with theatre.
By combining the circus with the theatre, and introducing what people cared about and removing what people no longer wanted, Cirque du Soleil created a new form of entertainment (a blue ocean) that made the rest of the circus industry irrelevant, and Cirque du Soleil very profitable.
How do you opt out of competition?
You may be thinking – But as an entrepreneur in business, how do you opt out of the competition? Well, the hardest thing for any business is actually finding a reasonable strategy and executing it successfully.
The first tip would be to identify what your target market needs and doesn’t currently have and then look at what existing organisations do well (or not so well) to serve that market and determine how you can differentiate.
By defining and seeing examples of the Blue Ocean strategy (which can be readily found online), your organisation can learn how to execute on this strategic planning model and successfully reconstruct your market.
In short, attempt to provide the customer what you feel they would really values and eliminate what they really don’t care about so that you can create demand rather than fight for it, and so that you can value innovate without passing the price burden to the consumer.
In my personal example, when I founded OneCart, online grocery shopping from individual retail stores already existed by much bigger brands. However, what I found is that consumers don’t really shop from one store when they go to a mall. I knew this because I was dragged to the mall by my partner while living abroad and we on average went into 2 to 3 stores at a time, which was painful.
What I realised, while smiling through the pain, is that consumers tend to shop from multiple complimentary stores (e.g. a grocery store, pharmacy, liquor store etc.) and this process from start to finish usually takes a few hours. Hence the idea of OneCart, multiple stores you already love, delivered within 2 hours or when you want it.
By creating OneCart, I believed that I could offer the customer a new experience without competing with large retail, and eliminated the inconvenience of time consumption (going into a shopping center, finding parking, going to several stores for different products, loading the shopping into the car and heading into traffic) and replaced it with the convenience of doing everything for the customer, in OneCart.
Blue oceans will always be created in every industry. A century ago, these industries didn’t exist: automobiles, aviation, health care, music recording. 40 years ago, these industries didn’t exist: e-commerce, mobile phones, personal computers, biotechnology, coffee shops. It’s certain that 10-30 years from now, new unknown industries will be created. Go out there, find your blue ocean, and go where the competition isn’t.