What precisely is Blue Ocean Shift?

Blue Ocean Shift Book Cover by W. Chan Kim, Renée Mauborgne, 2004

A red ocean is distinguished as a market with many competitors struggling to gain share and profit, while the blue ocean is identified by its little to no competition. Blue Ocean Shift shows the process to shift the organization’s mindset and products towards a market where current competitors are irrelevant. The book outpoints the human blockers derived from challenging the comfort zone and stir from the foundations.

This article presents the main ideas from the book “Blue Ocean Shift,” highlighting the main tools and steps for shifting from red to blue ocean.

To give you a quick overview of the book, I invite you to look over this mind map with all the points I am covering in this article.

A quick overview of Blue Ocean Shift
Mind map adapted from Blue Ocean Shift

You may be leading a team, division, or company and realize that keeping pace with revenue growth and achieve a superior profit margin is getting more difficult every year. As the market is attractive, newcomers will continue to fight for a chunk. The well-known differentiation or lower-cost strategies will arise as a fantastic way out, prompting a bloody war to hold a share of the market and attract new customers.

Like one of the blue ocean strategies promoters, your first tool to avail is the Pioneer-Migrator-Settler map allowing you to overview your offering and understand the leading player in the industry, drawing the overall picture in a Strategy Map. Then plunge into the next layer, research the customer’s behavior, and experience what they need with the Buyer Utility Map. Identify and measure the total demand landscape with the Non-Customer Categories. Then explore Six Paths Structure, redefine new boundaries for your industry, and act upon the Strategy Canvas: Eliminate, Reduce, Increase, and Create. Blue Ocean Mindset decisively fosters human-side teamwork to address an organization’s cultural transition to challenge the state of play strategies.

WHAT IS A BLUE OCEAN SHIFT?

Blue ocean shift is a five-step methodology to move from an existing overcrowded market to a new clear one addressing breakthrough solutions to a new market.

Organizations break out of the red oceans by switching from a market-competing to a market-creating move. Three notions are essential to underpin a successful transition (1) Understand The Idea of Market Creation, (2) Develop a Blue Ocean Mind, and (3) Create “Humanness” inner your team.

SETTING THE STAGE

Understanding Market Creation

Market creation strategies take one of three forms:

  • Disruptive creation: A breakthrough solution to an existing problem displacing current offerings in the industry. For example, digital photography destroyed and replaced the photographic film industry.
  • Nondisruptive creation: When Pfizer launch Viagra, any solution aimed to enhance the sexual men’s performance; therefore, any market was disrupted, but Pfizer identified and solved a brand-new problem. Likewise, think of life coaching for stressed workers, which seizes a brand-new opportunity. Nondisruptive creation implies both identifying and solving a brand-new problem or making capital out of a brand-new opportunity.
  • Redefining and solving an existing problem with a new offering: Between the two above, for instance, Cirque du Soleil shift the traditional circus offering taking away starring artists and animals but bringing up the best of theater with incredible acrobats and fancy tents. They set aside the competitive circus market and emphasized putting forward a breathtaking performance, engaging some theater customers.

Getting to see the full picture make the theory simpler:

A Growth Model of Market-Creating Strategy
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

New technology is attractive and related to market innovation, but the tech itself rarely creates value. Blue Ocean Shift mindset opens a new value-cost frontier and constitutes value for the organization once it successfully moves beyond the traditional industry boundaries.

From Market-Competing to Market-Creating
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

The Blue Ocean Mindset

Pinpointing new-found opportunities and strive for blue oceans instead of red requires a mindset aligned throughout the organization. The Blue Ocean Mindset lays on four fundamentals:

  • Challenge the boundaries in your industry; do not take them for granted.
  • Make irrelevant the competition means not wasting time in gaining an advantage in the market; instead, focus on creating profitable blue oceans.
  • Differentiation and low-cost strategy make the red ocean bloody, and eventually, a minimum benefit is redistributed among the players. Concentrate on identifying and creating new market opportunities.
  • Go for differentiation and low cost at the same time and pursue thriving beyond the value-cost frontier.

Humanness

Team confidence is key to success in shifting in favor of the blue ocean; hence this notion ground in “humanness” deep inside your team to inspire people and giving them the courage to drive the change. Achieving emotional participation and apply the tools to perform the blue ocean shift. Humanness attitude embodies three elements:

Atomization

Break down the problem into small, interconnected pieces facilitating the understanding and fostering the execution.

Firsthand Discovery

Allowing people to learn and experiment by themselves will help develop a forward-looking mindset and willingly commit to the process.

Fair Process

Entail (1) engagement; hence team members are the protagonists of driving the process, (2) explanation, as the ability to comprehend every step of the process, and (3) clear expectations, so people are aligned, and no one is gone missing. These three fundamentals provide an environment for cooperation, motivation, and trust inside the team.

The three key components together inspire people to buy into the entire development and foster the willingness to move toward Blue Ocean Shift.

The Three Key Components of a Successful Blue Ocean Shift
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

FIVE STEPS FROM BLUE OCEAN SHIFT

Step One: Getting Started

First, identify the product or industry to address. Work with the Pioneer-Migrator-Settler Map, see beyond the current landscape, and develop breakthrough attributes for your product or service:

· Pioneers: Protagonist expected to make the competitor irrelevant in the future, creating value innovation and expanding the cost-value frontier. Unlike the settlers, they do not have customers, have fans.

· Settlers: The other extreme, they compete with traditional competitive strategies leading low cost or offerings differentiation. The market is overloaded with competitors, and growth moves slowly or hardly achieve.

· Migrators: Lie in between the two, some improved offering far from representing innovative value.

To kick off with the process of plotting the Pioneer-Settler-Migrator map, group the organization’s head of the leading units and decision-makers, including legal, finance, compliance team, among others, and involve them in.

Once the team plots the map, they can see whether the organization is vulnerable around many settled competitors or is plausible to make money out. Look over your settler segment and think out whether those offerings are stagnant or declining. Some of them would profit and grow, although, eventually, turning into a settler, suggesting the organization urges to develop new pioneers.

Portfolio composition hinges on your industry. Fast-changing industries call for more pioneers. Whereas, in an industry with a high fixed cost, a small number of pioneers and migrators are necessary to develop innovative value propositions and pursue upcoming goals.

Pioneer-Migrator-Settler Map
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

The overview helps the team to ponder about the need to shift. Team members are around 10–15, capable of bringing forth a new offering, and willing to spend a portion of their time on the project.

Step Two: The State of Play

In the second step, the team creates a clear, shared Strategy Canvas showing the current landscape aligning everyone from the picture. Strategy Canvas shows the main attributes in which companies compete. The horizontal axis shows the key attributes companies compete on, while the vertical axis represents the offering level perceived by the consumer. The team works in developing from five to twelve attributes in the industry related to the product, post-sales service, among others. This step is worked out individually first, then reconvene to discuss the best key factors. As soon as people decide the factors, select the leading player to plot its offering‘s attributes. The team rates them both; the best reference player and the company, showing the industry leader’s divergences and convergences.

Strategy Canvas
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

Step Three: What Could Be

Draw up a Buyer Utility Map

To foresee the next steps to shift from red to blue ocean, draw up a Buyer Utility Map to understand the underlying issues that make up the main pain points limiting the industry opportunities. As the team develops this map, many ideas to solve the current problem arise. The horizontal axis lists the six stages of the shopper experience, and the vertical axis shows the six levers for activating and enhancing the experience.

Buyer Utility Map
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

To fill in the chart spaces, the team asks for the worst pain and the underlying reasons. For every pain point in the industry, place an X and an O for every attribute to act upon.

Identify the total demand landscape

In the non-customers categories picture, see three tiers of customers. The first smaller group is your current industry or market. The second group is consciously refusing your offering, consuming an alternative solution accordingly to their needs. The third group is out of reach and not considered potential customers, but your offering possibly will benefit them. Think about the frequent buyer per tier to identify them and deepen their needs. Group discussion will support thought creation and get to the bottom of the untapped demand out there.

Non-Customers Categories
Source: Blue Ocean Shift, by W. Chan Kim, Renée Mauborgne, 2017

Step Four: A Structure for Blue Ocean Creation

To efficiently structure and identify market opportunities, the team will use the Six Paths Framework, deepening research on the ground, generating new insights, and revealing hidden opportunities.

Path One: The Industry

What are the main issues your offering address? what are the alternative offerings, and which one holds the most market share? What are the worst pains on your solution that give rise to customer trade across the industry?

Path Two: The Strategic Group

Define your strategic group as a set of companies with a business model or offerings akin across the industry. Restaurant groups, for example, encompass fast food, takeout food, haute cuisine, among others.

Choose one strategic group according to market share and another by the highest earnings growth within the industry.

Path Three: The Buyer Group

The buyer group is defined as the chain of buyers spanning from the influencer creating consciousness and the last link in the chain, the target customer. Many opportunities come about in the field when asking the untargeted group about value burdens perceived in the industry.

Path Four: The Scope of the Offering

When your offering is consumed, look along the customer journey, think out how the context affects the behavior, break down the problem, and figure out where the blocks are and how they depict a pain.

Path Five: The Offering’s Appeal

Listen to your customer and recognize whether your industry is most perceived as functional or emotional and think out on a flip in orientation. For example, health care is often perceived as disinterested doctors lacked eye-to-eye contact and are more concerned about the digital record than patients. A solution will emerge, comprising a health service with more humanness and empathy.

Path Six: Trends Over Time

The red ocean mindset adapts to outside trends as it happens, whereas the blue ocean mindset endeavors to shapes the trends that redefine the industry. Point out three to five trends with a considerable impact on the industry during the following years. A good case is Netflix on the rise of broadband internet churning out on-demand videos.

Four Actions Framework

The field’s insight must progress toward being opportunities to pull off low cost and differentiation to complete Step Four. The framework helps determine the state of play factors in the industry and the following steps. For this, start off answering these questions:

· Which can be Eliminated?

· Which should be significantly Reduced?

· Which should be Raised?

· Which should be Created?

First, define the factors to Reduce, Eliminate, Raise, Or Create. Glean from the Six Paths Structure draws on the most common elements that the team can address. Then eliminate or reduce attributes representing a little to no value to your customers and is taken for granted in the industry. Raise and create factors that will bring up insight into a brand-new offering. The four components together will allow them to come up with breakthrough ideas to open a value-cost frontier.

Fill in the Strategy Canvas spaces and rate the factors beginning from Eliminate, Reduce, Raise, and Create, as did in Step Two. Rate zero for those factors to eliminate and in a one-to-five score scale for the remaining. Plot your organization resulting overlaying the previous state-of-play canvas and look over the opportunities.

Step Five: Making the Move

The ultimate step in running the Blue Ocean Shift involves holding a Blue Ocean Fair and establishing the business model. Join the team members together with the key decision-makers. Counting with some customers and non-customers play a valuable input in the Blue Ocean Fair. 5 steps are followed:

· Bring up an overview of the state-of-play in the industry and support the Blue Ocean Shift.

· Strategic alternatives brought about by the team are displayed, highlighting the opportunities to avail and the potential financial returns.

· Participants look into every single pitch viewing the Canvas Strategy plotted for each submitted brand-new offering.

· Participants decided on their favorite options and provided feedback on the rationale for their decision.

· Decision markers resolve the best alternative to take up.

The next step after carefully choosing the solution, the team tests a prototype in-the-field and redefines the business model and the offering according to feedback. Once the plan is validated, the team will commit full time to launch and introduce new operational experience members. Now the sponsors define the target profit margin, and people figure out ways to streamline and innovate the entrenched operation, process, and mindset. Leveraging on the people’s positive energy, empowering, and delivering confidence boosts productivity. The team is finally ready to embark on the Blue Ocean Shift. Star small, iron out some unnoticed bug, and grow fast and steady.

Enjoy sharing knowledge and inspiring for the better