Blue Ocean – more success with the right strategy

As an en­tre­pre­neur, it is very important for you to make your company more prof­itable in the long term. To achieve this, you sometimes have to go into unknown waters - the so-called blue oceans. Instead of getting entangled in an eternal com­pet­i­tive struggle in which each market par­tic­i­pant can only achieve small successes, larger profits could be waiting for you in a com­plete­ly new market. With the Blue Ocean Strategy and in­no­v­a­tive, new products, you will make higher profits - if you correctly attack the market.

The term Blue Ocean Strategy was coined in 2005 by the two econ­o­mists W. Chan Kim and Renée Mauborgne. In their book "Blue Ocean Strategy: How to Create Un­con­test­ed Market Space and Make the Com­pe­ti­tion Ir­rel­e­vant" they dis­tin­guish "blue oceans" from "red oceans". The latter refer to highly com­pet­i­tive markets that are - fig­u­ra­tive­ly speaking - blood-red in color due to predators attacking. The blue oceans, on the other hand, are untouched and com­plete­ly free of com­peti­tors.

In order to open up a market that no one else is working on, you have to create a com­plete­ly new one. For this you need one thing above all else: in­no­va­tions. A new market can only be created with com­plete­ly new products that consumers do not yet know. Anyone who takes this step can achieve undreamt-of benefits:

• no com­pe­ti­tion
• new target group
• new demand
• no price war
• new cost struc­tures

In a red ocean, you define yourself primarily through the price and can therefore gain market share from other par­tic­i­pants, but this pressure does not exist in a blue ocean. If a company manages to develop a blue ocean, it can com­plete­ly escape from the com­pe­ti­tion and make the highest profits.

Of course, you won't be alone in the market forever. Imitators find each other rel­a­tive­ly quickly and attack the new market. The com­pe­ti­tion will try to take your shares. In a study conducted by Mauborgne and Kim in the run-up to their book, however, they found that companies with a Blue Ocean Strategy were able to maintain their dominance in the new market for an average of 10 to 15 years.

Now you have created a new product for a com­plete­ly new market (a blue ocean). You don’t have to worry about com­pe­ti­tion at least at the beginning, and since you invented the market, you will also dominate it in the coming years.

The tra­di­tion­al way to be suc­cess­ful as a company is to enter an existing market. There, companies fight for a more or less limited circle of consumers through cost and price reduction as well as marketing efforts. In doing so, you always take a look at the com­pe­ti­tion: at what price are the other market par­tic­i­pants offering their products? What dif­fer­en­ti­at­ing features can be iden­ti­fied?

Countless companies have created in­no­va­tions and therefore a new market in the past. Es­pe­cial­ly in the first years after in­dus­tri­al­iza­tion, this had to do with the fact that ground-breaking in­ven­tions created com­plete­ly new in­dus­tries - such as the au­to­mo­tive industry. In recent decades, however, many in­dus­tries have become stuck in red oceans. Par­tic­u­lar­ly in­ter­est­ing are therefore the cases in which a blue ocean could be claimed within their branch of industry.

A red ocean has sta­bi­lized in the wine producer sector: Beginners therefore find it difficult to claim sig­nif­i­cant shares. That's why Aus­tralian producer Casella Wines has changed course with its Yellow Tail product. Instead of entering into a pro­tract­ed battle with the es­tab­lished com­pe­ti­tion, a target group was developed con­sist­ing of people that hadn’t pre­vi­ous­ly been wine drinkers. Beer and cocktail drinkers were asked what they didn't like about the existing wine range. The bitter or sweet taste, the unclear and too complex range as well as the snobbish image attached to the wine were crit­i­cized.

Equipped with this knowledge, the wine producer used the four actions framework. The com­pli­cat­ed wine ter­mi­nol­o­gy was removed from the bottle and the vintage wine was even ignored. Also the maturing process and storing it in barrels for a long time, was elim­i­nat­ed. The simple and modern design of the label made it possible to reduce many factors that the target group found annoying, such as the snobbish image. In addition, the range was reduced to two wines: one red and one white.

Instead, Casella Wines increased the sim­plic­i­ty of taste. Neither too sweet nor too heavy, the Yellow Tail wine appeals to people who don't actually like the taste of wine. After all, the company has created a wine that is perceived as simple and playful. Through these ad­just­ments, Yellow Tail was able to create a blue ocean: former non-consumers all over the world have bought the product.

At the beginning of the 2000s, the very lucrative market for game consoles was divided mainly between the two providers: Sony (with Playsta­tion) and Microsoft (with Xbox). The man­u­fac­tur­er Sega, which was still suc­cess­ful in the 1990s, had meanwhile withdrawn from the business, and Nintendo, once the most popular supplier of game systems with Gameboy and (Super) Nintendo En­ter­tain­ment System, was losing more and more market shares. The two major suppliers defined them­selves primarily through the per­for­mance of their consoles and were involved in a red ocean battle for the best graphics and computing per­for­mance. Nintendo decided to try something new with the Wii and appeal to consumers who were not really into video games.

The de­vel­op­ment of motion sensors enabled Nintendo to establish an in­no­v­a­tive control concept. Instead of in­ter­act­ing with the usual con­trollers con­sist­ing of buttons, pads and joysticks, players hold a control device in their hands that resembles a remote control. By simply moving the con­troller, you can move the figures on the screen: the entry level is therefore very low for people who have not pre­vi­ous­ly used game consoles. In addition, the Wii forgoes many of the features that define the com­pe­ti­tion, so the cost of the device has been kept low.

This Nintendo game should also appeal to players who only want to use the tech­no­log­i­cal toy oc­ca­sion­al­ly and prefer­ably together with friends or family. Learning curves are flat, the look playful and no lengthy gaming sessions are necessary: Party games attract both younger and older people to the game console, meaning that the Wii has created a blue ocean.

The Canadian en­ter­tain­ment company Cirque du Soleil was founded back in the 1980s, and found a way out of the sinking red ocean of the circus industry. The numerous market par­tic­i­pants fought for an ever-smaller customer group. Certain features, which had been the hallmarks of a suc­cess­ful circus decades earlier, were no longer up to date, and more and more spec­ta­tors were stopping visiting the classic circus tents. Above all, animal cruelty deterred visitors. Cirque du Soleil therefore removed animal at­trac­tions from its portfolio. Instead, the range was extended to include high­lights from other en­ter­tain­ment areas - above all dance and live music.

At the same time, a concept that was par­tic­u­lar­ly appealing to families was abandoned and admission prices increased. In addition, the programme is changed regularly to encourage people to repeat their visit. Since Cirque du Soleil does not only perform in one place at a time, but also has several events worldwide with mirrored pro­grammes, costs can be reduced and prof­itabil­i­ty increased. Cirque du Soleil used the Blue Ocean Strategy - before it was even es­tab­lished - to develop a concept that avoided the doomed battle in a red ocean and achieved huge success in a blue ocean.

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