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Blue Ocean Strategy Reshapes Industry Profiles

Industries are in a continuous evolvement and new markets emerge due to technology advancement and shifting market demand influenced by globalization. We now start to see the downside of it as markets become overcrowded and products commoditized. Market segmentation seem to offer limited support as this only tends to downsize market shares while launching and marketing new products and services is becoming more and more expensive.

Some ten years ago W.C. Kim and R. Mauborgne of INSEAD launched their Blue Ocean Markets Strategy that help define “uncontested market space to make competition irrelevant”. They recommend extraordinary measures to expand markets by applying differentiation and low cost strategies simultaneously, define exceptional buyer values and applying strategic pricing and cost innovation in a way that offer a new products at affordable prices for consumption by large masses.

The corner store of BOS is what is called Value Innovation that occurs only when companies align innovation with utility, price and cost positions. A successful application would have a strong impact on the industry in question and may change the overall industry profile.

Consider e.g. Novo Nordiska that looked over their chain of buyers and turned themselves over from an insulin producer to a diabetic care company approaching patients directly. Or take Curves chain of gyms that in a, what was thought to be an oversaturated market in the US, seriously looked at a the desires of a potential group of customers that did not use the services of any gym. This resulted in a highly successful franchise operation to offer ladies a service they genuinely wanted. Similar results can be obtained by looking across complementary products or functional vs emotional appeal or across time as a function to consider emerging megatrends.

The findings of truly exceptional buyer values can be plotted in a strategy canvas and compared with competitive factors invested in by the competition. The result in an ideal case is discovery of an entirely new clientele that form an uncontested market that is ready for an early acceptance and offer higher growth and profitability rates. It is not unusual that buyers from the conventional market redefine their demand and choose the new alternative. Overall, the market characteristics and the industry profile has changed and a stagnant market show significant growth. To achieve this three major things are required:

  • Focus on a limited number of exceptional competitive factors
  • Divergence or a proactive uncompromised definition of unique buyer values and
  • A compelling tagline.

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