One of my favorite business books is called Blue Ocean Strategy, written by W. Chan Kim and Renee Mauborgne, professors at INSEAD, back in 2004. Even though this book was published almost two decades ago, I believe the business principles described in this book are extremely relevant during economic downturns that we are experiencing right now. Here are some focal points of the blue ocean business-building strategy and how you can apply them to your own business.
If we compare companies to fish swimming in a vast ocean, then we can say there are two types of oceans. The red ocean is full of blood because it is a space where sharks bite savagely, while blue oceans are new spaces where sharks are scarce, and they become your allies rather than foes.
What does this mean? If you are launching a startup or you are pivoting an existing company, you will have a hard time competing in the red ocean, because everyone in this part of the ocean is fighting for small pieces of the same pie. You are much better off creating a company in the blue ocean, with little or no competition.
Years ago, when I launched my first business, I did not know any better, so I created a red ocean business. It took many mistakes for me to realize I will succeed much faster if I swim with sharks as allies in the blue ocean. Nowadays, I apply the blue ocean strategy every time I analyze or discuss a new business idea.
There are no permanently excellent companies. Every single company that wants to stay above the competition needs to innovate constantly. The blue ocean company is a company that ventures into an untapped market space. This company creates demand and demonstrates highly profitable growth by creating unprecedented value for customers. Blue oceans need to be created continuously, as real innovations are not just one-time fads. The crucial strategy here is to stop competing with others. When you venture into the blue ocean, competition becomes irrelevant. One of the strongest approaches here is all about merging two existing market sectors into a new hybrid one.
Many female founders can be described as blue ocean leaders, yet only 20% of all startups have female founders. Working with other female founders has made me realize that women excel as leaders because we possess qualities like empathy, high emotional intelligence, mental strength, and great communication, people and analytical skills.
All companies succeed or fail based on the strategic decisions they make. Blue ocean companies focus mostly on offering a quantum leap in value for the customers. This is what Uber did for female travelers. Uber made transport much safer for women when it created an online tracking system with names and pictures of all drivers. Uber is a cashless transport service provider, which can be very useful for all women who might not carry cash and find themselves somewhere unknown and needing a safe ride back home.
Creators of blue ocean companies do not use competitors as their benchmarks. They focus on offering the highest possible value and quality to the customers, while aligning this approach with utility, cost and price.
I strive to apply these same principles each time I have a new business idea. I always ask myself what kind of value I can bring to customers with what I am creating. Customers come first. Technology comes second.
Existing industry structures are not fixed. They can always be shaped. Creating new market borders and spaces are strongly linked with using your imagination and strategic creativity to innovate. The human dimension is of key importance here. Employees, clients, business partners and investors all need to be aligned with the company’s mission. Becoming global is easier these days, and all industries are subject to external trends. But the companies that emerge as ultimate market winners are those that excel at being visionary. These companies continuously outperform the market and repeatedly create blue oceans. Apple is an example of such a company.
The point is not to focus on competition and not to focus on existing customers. While the ultimate objective stays the same, the blue go-to-market strategy is very different.
Both red and blue oceans will always exist, but companies should not stay trapped in the red ocean. Blue oceans are created via nondestructive creation in a space where winning partnerships for all are being created. Blue ocean creation is a continuous phenomenon.
Now, more than ever, companies need to swim out of the red ocean and venture into the blue one. Don’t forget what Steve Jobs said: “People who are crazy enough to think that they can change the world are the ones who do.”
