The Blue Ocean is a strategy, a concept of competitive differentiation used by large companies worldwide. Developed in 2005, it is based on 8 fundamentals for companies “to navigate more calm waters”.
That the business world is full of terms, strange words and expressions, you may already know.
Whether it’s running a business or selling, we’re always learning (and that’s great!).
The Blue Ocean strategy goes exactly in this direction, of course, with a lot of content.
Her mission is explained through a popular saying: “a calm sea never makes a good sailor”.
So, if you want to be a good sailor (in this case, gesture, right?), You need to explore new lands (markets … ok, you understand).
Find opportunities, get rid of direct competitors and explore these new frontiers with high performance.
This is how the strategy works: it directs companies to explore new paths, expand their sales and, of course, the reach of the brand.
Today’s article will talk about the origin, fundamentals and application of the Blue Ocean strategy.
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What is the Blue Ocean strategy?
Oceano Azul is a business concept, a strategy that was presented to the world in a book with the same name.
However, of course, in English: Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant.
It is common to be associated with the acronym “BOS”, in fact, thanks to its creators, researchers W. Chan Kim and Renée Mauborgne.
The book, launched in 2005, has already been translated into 43 languages because of its success – both theoretical and practical.
The strategy uses 8 fundamental points as a basis and also suggests some management tools.
Its central idea for companies is to emerge from a red, raging and bloody sea (arising from fierce competition) towards smoother navigation conditions.
In other words, the blue ocean, a market still little – or nothing – explored.
The guiding thought is – and always will be: “how do I beat my competitor?”.
If you get a new market segmentation and start to dominate it, then, congratulations: you are in the blue ocean.
However, as soon as the competition perceives your new “land” and goes there, you will return to the red ocean.
But the big question is: how long will a company be able to swim alone in a blue ocean?
This can be the key, the secret to your business thriving until the “color of the water” changes.
The benefits of the Blue Ocean
The so-called “red ocean” is an extremely competitive scenario.
It makes profit margins very small or even turning products and services into commodities – which would be very bad.
That is, all this struggle and digladiation to be able to win customers can end all technology and innovation that the solution offered has.
Even if you offer a benefit associated with the product or you manage to reduce the operating cost, you will still need an immense effort to navigate these waters.
That is why the book brings the strategy of the Blue Ocean and firmly hits the key of ““ detect and explore new markets, free from competitors ”.
In this sense, before going into the 8 fundamentals, we need to understand a little better the benefits it brings to companies.
Competitive markets involve huge expectations and a limited budget to hire services or purchase products.
In other words, companies that face a segment with many competitors need to be willing to have a small profit margin and offer a service with consistently high and standardized quality.
However, the Blue Ocean strategy guides companies to move away from markets like this and look for an audience that would consume the solution and that, today, is in need of good offers.
With the index of ideas, it is possible to use data and study in detail the opportunities that exist.
The path that the strategy points is aimed at improving innovations – even adapting the solution – so that it reaches the desired point and serves this new market.
In other words, you change halfway: you turn to that audience that was not initially your focus because that is where your great opportunity is.
8 fundamentals of the Blue Ocean strategy
Are there, in fact, markets that have not yet been explored? There are so many people doing so much …
And, for that, it is necessary to create a completely innovative product or service, different from everything that has already been seen, in order to find an unexplored market?
Well, that is not how the strategy works. A simple brand positioning, some adaptations and research can open an ocean of opportunities for companies.
These – and others – are the foundation of the Blue Ocean strategy. Shall we better understand each of them?
1 – Use data to support the strategy
The first point that supports the strategy and that can be replicated in companies is to use data and research to support an idea, an objective.
In the book, the research process analyzed the trajectory of several companies and their 150 acts – of all types – in search of better results.
The study was based on more than 30 industries and segments between 1880 and 2000 (quite a lot, isn’t it?).
This helped to identify untapped markets as well as opportunities. After all, it was a large sample with reliable data.
This thought made, for example, in recent years, several companies migrated their physical stores to virtual ones.
The 2018 survey by E-commerce Trends showed that 71% of consumers prefer to buy online because they find cheaper prices.
2 – Combine differentiation and low cost strategies
Another basis of the strategy is to demystify that a company to be competitive and offer an attractive solution cannot be differentiated even with products or services that cost less.
For this, the objective here is to reduce efforts and expenses in solutions similar to those of the competition.
And, at the same time, focus on product or service differentials – the so-called innovative values.
These values are identified from the decision-making process by the buyers, better understanding their buying journey and the factors that were decisive in the acquisition.
In this way, taking into account what is necessary to focus on as a differential, moving away from sameness, the creation process is optimized so that costs remain low.
If you have to increase production costs, then you may fall into a trap: even if you navigate calmer waters, your profit margin will not be what you want.
3 – Expanding market boundaries
The third focal point is in identifying those markets that have the potential to be explored.
It is expanding the frontiers and target audiences, as well as changing the level, if necessary, of the service or product based on the offer of innovative values.
An example of this is what Casas Bahia has done in the past. It served a layer of society that no one did, in a totally new way.
Then, of course, the competition realized and turned to the same market.
The same can be said of other innovative initiatives. Examples of this?
App for food delivery or for ordinary people to share their cars and earn money from it.
There are opportunities. What needs to be done is study and / or detachment from your original product or service idea or an adaptation of it to meet the new market.
4 – Use tools to identify opportunities
The research done by the authors of the book over the years has allowed patterns to be found in actions that have had an effect and brought innovation to companies.
In the same way in organizations that failed and failed to leave the red ocean in which they found themselves.
Based on these studies and analyzes, the Oceano Azul strategy had compiled management model, graphics and also guidelines.
These link the discovery of innovative values with both expansion and the discovery of new markets.
There are 4 phases and 6 paths to follow in this direction (we will talk more about this below).
But, back: a tool that serves your company to identify opportunities today is your sales CRM.
Through it you know which segments you sell the most to; by CNAE; region of the country; the origin and sub-origin of your sales.
Another way is to understand your reasons for loss: perhaps there is the answer you need.
Clients who don’t close are great sources for feedback. They may be pointing out the innovation you need to do.
5 – Be faithful to the strategy development stages
These steps allow companies that have different structures and are from different niches to develop the method to identify which blue ocean will be explored.
It is the foundation that also ensures that managers and teams create strategies that are concrete, realistic and efficient.
And, more than that: that they are fulfilled, being faithful to the step by step, potentially enhancing the chance of being able to identify an innovative value with each attempt made.
6 – Maximize opportunities; minimize risks
Strategies will always involve risks, especially when the goal is to innovate and find new opportunities.
However, the book preaches that it is possible to reduce danger and maximize opportunities to test the viability of ideas.
For this, it is necessary to answer 4 questions:
- Is there an unbeatable reason why the potential customer wants your product?
- Is the pricing appropriate for the audience that the company wants to reach?
- Is it possible to produce the same product with a new innovative value, with a more attractive price and a good profit margin?
- What are the obstacles to the viability of this project? And what does it take to face them?
7 – Simultaneous strategy and execution
Here, strategy and execution are carried out basically simultaneously in the so-called “Fair Process”.
Its premise is to have the professional engagement of everyone on the team and demands a detailed explanation of the strategy, making the project’s goals and objectives very clear.
This is due to a series of action models that can easily be transformed into execution, which the book details in greater detail how it works.
This foundation is important because it contributes to making the decision-making process more assertive, within what was planned.
8 – Achieve win-win results
Creating strategies within this philosophy allows companies to have 3 key factors aligned:
- Innovative values;
In other words:
- The Oceano Azul strategy creates innovative and relevant values for customers;
- It brings profits that allow the structure to remain strong, competitive and remunerate investors;
- It makes employees feel really motivated and with a purpose they believe in.
6 paths and 4 phases: identifying the innovative value in the Blue Ocean strategy
The analyzes carried out in the book brought 6 paths 4 phases for companies to identify ways to differentiate themselves and impact new audiences and markets.
- Analyze companies that operate in the same niche and that can help in building non-standard value;
- Analyze companies that offer alternative products that serve their current audience;
- Analyze the buyer chain and understand its peculiarities – and even if there are intermediaries.
- Analyze complementary services and understand the values that your audience believes – which can guide a change in product design;
- Analyze the temporal context and anticipate customers’ needs based on their habits today;
- Analyze the functional and emotional stimuli that your solution offers and reinvent it according to the sensations that your audience wants to feel.
And the 4 phases?
From there, 4 steps must be taken.
- Visual awakening. Compare your company with competitors and see what needs to be changed to differentiate yourself;
- Visual exploration. Explore the 6 paths above, observe the advantages of others, look internally and see what should be eliminated, changed or created;
- Visual strategy presentation. Build a value assessment matrix based on what you have seen and collect feedback from everyone: customers, competitors’ customers and non-customers;
- Visual communication. Condense the information and improvements developed in the process and focus on those that are most likely to bring profits with the lowest possible risk.
This is how the Blue Ocean strategy works: it seeks to direct your business to people and markets that offer more efficient results.
Or, at least, where the competition is less and you, with less spending and competition, can stand out in relation to other businesses.
So one thing is important and you always need to keep in mind: innovation.
Chase her all the time. Consume successful cases. Read the book to better understand the strategy and increasingly improve your capacity and thirst for innovation.
So, how can we help you?
If you want to better understand how CRM helps your company to identify better sales opportunities, talk to a consultant.
Enjoy and read two articles that will help you better understand the behavior of your buyers.
The first talks about what the NPS method is and how it helps to understand customer behavior and satisfaction.
The second covers ways to define the profile of the ideal customer (ICP) in companies.
A hug from CWT, your CRM. #RunCWT