Blue Ocean Strategy: A Business Coach’s Perspective
In my work as a coach to small and medium enterprises (SMEs), executives, boards, and non-profits, I’m often drawn to the potential of the Blue Ocean Strategy. This concept, which emphasizes creating uncontested market spaces - “blue oceans” - offers businesses a way to grow by innovating rather than competing head-on with others in crowded “red oceans.” While this strategy can seem like a universal solution for escaping tough competition, it comes with its own set of advantages and potential downsides that any organization considering it should keep in mind.
Key Ideas Behind Blue Ocean Strategy
Developed by W. Chan Kim and Renée Mauborgne, the Blue Ocean Strategy’s premise is simple but powerful: instead of battling for market share in a saturated industry, create a new market space by delivering unique value that appeals to untapped customer segments. Here are its core principles:
Value Innovation: Blue Ocean Strategy encourages businesses to simultaneously pursue differentiation and low cost, a combination Kim and Mauborgne refer to as “value innovation.” By creating something that stands apart in terms of value and is accessible at a reasonable cost, businesses can open new markets and draw in customers who might not have considered their product or service before.
Non-Customer Focus: While most businesses focus on their existing customer base, Blue Ocean Strategy directs attention to the “non-customers” - those who aren’t currently buying within the industry. By focusing on this segment, businesses can expand their potential audience rather than competing over the same pool of customers.
Strategic Canvas: A core tool of Blue Ocean Strategy is the strategy canvas, which visually maps the key factors that industry players compete on. This tool helps businesses identify where competitors are focused and where opportunities lie to create distinctive value.
Eliminate-Reduce-Raise-Create Framework: This framework encourages businesses to challenge industry norms by eliminating or reducing factors customers don’t value as highly, and raising or creating new factors to distinguish their offerings. It’s a direct way to cut costs in areas where competitors overspend and to drive innovation where it matters most to customers.
Benefits of Blue Ocean Strategy
As an SME and executive coach, I often recommend exploring Blue Ocean strategies for the following key benefits:
Escape from Competitive Pressures: One of the greatest appeals of Blue Ocean Strategy is that it allows businesses to avoid the zero-sum game of direct competition. In crowded markets, businesses often find themselves in a race to the bottom on price or engaged in a relentless cycle of minor feature improvements that erode profits and drain resources. A blue ocean approach provides breathing room by offering a less competitive space to grow in.
Opportunities for Innovation and Differentiation: Blue Ocean Strategy is inherently creative, pushing businesses to rethink what they offer and how they offer it. This approach fosters a culture of innovation, which can lead to powerful breakthroughs not only in product development but also in how an organization operates. Many nonprofits and mission-driven organizations, for instance, have used this approach to broaden their impact without increasing costs.
Appeal to New Customers: By appealing to non-customers and offering fresh value propositions, businesses can gain new market share that may not have been accessible before. This approach aligns particularly well with organizations looking to scale up or diversify their revenue streams.
Long-Term Profitability and Growth: In many cases, blue oceans can provide long-term growth without the immediate pressures of competition. Once a business has carved out its niche, it often experiences higher customer loyalty and brand strength, leading to sustainable profitability.
Disadvantages and Challenges of Blue Ocean Strategy
While the Blue Ocean Strategy is appealing, it’s not a silver bullet. The following potential downsides need consideration:
Risk of Poor Execution: Blue Ocean Strategy requires significant shifts in mindset, culture, and operations. Executing this strategy well demands thorough research, creative thinking, and careful planning. Many businesses struggle with the shift, especially if leaders or teams are deeply rooted in a traditional competitive mindset.
High Initial Costs and Investment: Finding and creating blue oceans can require a substantial investment in R&D, marketing, or new technology. For smaller SMEs and nonprofits with limited budgets, this can be a barrier. Unlike traditional strategies that may leverage incremental improvements, blue ocean strategies may necessitate a large upfront commitment with uncertain returns.
Market Response and the Imitation Risk: If a new product or service proves successful, competitors will inevitably try to replicate it. Companies creating blue oceans may experience a period of competitive advantage, but they need to innovate continually to maintain it. Without a strong differentiation plan, there’s a risk of competitors closing in and turning the blue ocean into a red ocean over time.
Cultural Resistance: Creating a blue ocean often requires an internal cultural shift to embrace risk-taking and unorthodox approaches. For many organizations, especially established companies or nonprofits with longstanding practices, this shift can be challenging to implement.
Limited Direct Applications for Nonprofits: While Blue Ocean Strategy principles can guide nonprofits in expanding their reach and impact, some limitations exist. For instance, traditional funding models may not support the experimentation needed to explore blue oceans, and the value propositions often rely on donations rather than direct sales or revenue.
Blue Ocean Strategy in Coaching
For my clients, particularly those in SMEs or executive positions, the Blue Ocean Strategy offers a way to look at growth from a new perspective. While traditional strategic planning may focus heavily on benchmarking against competitors, the blue ocean approach provides a breath of fresh air, encouraging a forward-looking, innovative perspective. However, as with any strategic shift, the transition requires commitment and alignment across the organization.
For small businesses, nonprofits, or organizations led by boards who might find it challenging to step away from “how we’ve always done things,” my approach focuses on these practical steps:
Identifying Unique Strengths and Values: Working to pinpoint what sets an organization apart is foundational. Many businesses have unique strengths that, when properly positioned, can transform their market space. Often, this means stepping back and reevaluating the organization’s core competencies in light of customer needs.
Building a Value-Driven Team Culture: The blue ocean shift doesn’t just happen from the top down; it requires buy-in from teams and stakeholders at every level. For this reason, coaching leaders to foster a culture of continuous improvement and customer focus can make the difference in successful implementation.
Assessing Market Needs and Testing Ideas: While Blue Ocean Strategy encourages creating something entirely new, testing and measuring the appeal of new ideas is crucial. For many clients, particularly nonprofits or smaller businesses, trialing new initiatives on a small scale before a full rollout is a valuable way to manage risk and refine their approach.
Final Thoughts: Making the Blue Ocean Shift
Blue Ocean Strategy provides a promising alternative to traditional competition-based approaches, enabling businesses to create unique value propositions and avoid head-to-head competition. For SMEs and non-profits, it’s a path to growth that doesn’t rely on outspending or outmatching industry giants.
While it’s not without its challenges - especially for organizations with limited resources (including talent) or those deeply entrenched in traditional markets - the potential for creating and sustaining new market space is compelling. With careful planning, commitment to innovation, and a focus on value, Blue Ocean Strategy can be a transformative approach.
For organizations willing to embrace the mindset shift it requires, the rewards can be vast, often resulting in sustainable growth, increased customer loyalty, and long-term differentiation. In a world of constant competition, that may be one of the most valuable strategies of all.
If you want clear blue water between your offer and your competition so you can make bigger margins and grow your market share then we should book a strategy day to see how this approach can help you drive better results in your business through strategic differentiation.
