The world of marketing consists of two oceans: red and blue. Red oceans represent all the industries that already exist today. Blue oceans refer ...

How to create a blue ocean strategy and make the competition irrelevant

The world of marketing consists of two oceans: red and blue. Red oceans represent all the industries that already exist today. Blue oceans refer to all the industries that do not yet exist. It’s the unknown market space. How can you enter a blue ocean?

Most successful companies have created a blue ocean. Apple did it with their iPhone. Cirque de Soleil pulled it off in the entertainment industry. And [yellow tail] did it in the wine industry. They defeated ”best industry practice” and made the competition irrelevant.

What these companies have in common is that they’ve managed to create a unique offer for their customers. They’ve found an innovative way to reach both customers and non-customers.

In their book Blue Ocean Strategy, authors W. Chan Kim and Renée Mauborgne show how companies can create a blue ocean strategy that leads to new markets.

The four actions framework

To set sail towards a blue ocean and create a new value curve for your company, you must answer four key questions. Authors W. Chan Kim and Renée Mauborgne call this the four actions framework:

• Eliminate: Which factors that the industry has long competed on should be eliminated?
• Reduce: Which factors should be reduced well below the industry standard?
• Raise: Which factors should be raised well above the industry’s standard?
• Create: Which factors should be created that the industry has never offered?

The first two questions focus on elimination and reduction, with a particular focus on systems and processes. The third question is about raising the standards on those aspects that the customers appreciate. The fourth question encourages you to explore new sources of value for customers.

So, how does this framework play out in real life? Let’s look at two examples: Circue du Soleil and the wine [yellow tail]. Both of these companies have created a blue ocean strategy that give them a unique position in the marketplace.

The four actions framework: Cirque du Soleil

Cirque du Soleil is a Canadian entertainment company, founded in the 1980s. The company has gone on to entertain some 155 million people in over 300 cities. How did they manage that? By finding smart ways to act out the four actions framework.

Eliminate Star numbers, animal numbers, rental of sales in corridors, several arenas.
Reduce Pranks and fun, excitement and danger.
Raise Special venue, the price.
Create Themes, refined environment, multiple productions, artistic music and dance.

Source: Blue Ocean Strategy (2004), W. Chan Kim and Renée Mauborgne.   

Cirque de Soleil provides a unique experience by removing the expensive aspects of the circus (e.g. animal numbers) and borrowing the best factors from the theatre (e.g. themes, refined environment, artistic music and dance). By combining these factors in a new way, they manage to attract an audience that’s willing to pay for the experience.

The four actions framework: [yellow tail]

The Australian wine producer Casella Wines came across an important insight. Many consumers, particularly in the United States, didn’t drink wine because they found it too difficult, snobby and complex. The general wine industry didn’t cater for this.

Casella Wines launched [yellow tail] to change that. Here’s an overlook of the four actions framework for [yellow tail]:

Eliminate Difficult wine terminology, storing properties, classical marketing.
Reduce The complexity of wine, the wine range, the vineyard’s snob value.
Raise Price visavi low price wines, engagement with retailers.
Create  Easy to drink, easy to pick, fun and exciting

Source: Blue Ocean Strategy (2004), W. Chan Kim and Renée Mauborgne.   

[yellow tail] managed to eliminate and reduce the complexity of the wine and thus made people feel more comfortable when they chose their wine. When I lived in Australia, [yellow tail] became the first choice for many students – an audience that usually drank beer, not wine. Many consumers told their friends about the wine. A similar trend happened in the United States and the rest of the world.

Will your company set sail towards a blue ocean?

The purpose with a blue ocean strategy is to create focus, divergence, and an attractive price tag that’s difficult for competitors to mimic.

Research shows how important it is to work with the four actions framework. By eliminating and reducing certain factors, you create the right opportunities to come up with a groundbreaking offer. How does the value chain look like in your industry? What can you remove, reduce, raise, and create to set sail towards a blue ocean?

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