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What is a Blue Ocean vs. Red Ocean Strategy?

Have you ever heard the terms "Blue Ocean Strategy" and "Red Ocean Strategy" and wondered what they mean? In the world of business strategy, these terms are used to describe two different approaches to competing in a market. In this article, we'll dive into the history, overview, common uses, and implementation of Blue and Red Ocean Strategies, and how Scaled OKRs can help facilitate strategy creation sessions.

History of the Blue Ocean Strategy

The Blue Ocean Strategy was first introduced in the book "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant," written by W. Chan Kim and Renee Mauborgne in 2005. The authors argued that companies often find themselves in a "red ocean," where they are competing in a crowded market and struggling to differentiate themselves. In contrast, a "blue ocean" represents a new, uncontested market space, where a company can create and capture new demand without worrying about competition.

The concept of the Blue Ocean Strategy is based on years of research by Kim and Mauborgne, who analyzed more than 150 strategic moves made by various companies in 30 different industries over the course of 100 years. They found that companies that succeeded in creating new markets or industries did so by breaking away from the traditional way of doing things, and by creating value for customers in ways that had never been done before.

The Blue Ocean Strategy has since become a popular framework for strategic planning and innovation and has been applied by companies across various industries, including technology, healthcare, and consumer goods.

Overview of Blue & Red Ocean strategy

Blue Ocean Strategy and Red Ocean Strategy are two different approaches to strategic planning and market competition. In a red ocean, companies compete in existing markets by trying to outperform their rivals. This leads to cut-throat competition, with companies fighting over the same customers and trying to gain an edge over each other. In contrast, a blue ocean strategy seeks to create uncontested market space, by offering a unique product or service that opens up new market opportunities.

W. Chan Kim and Renée Mauborgne, argue that the traditional approach to strategy is flawed, as it focuses on beating the competition rather than creating new market opportunities. The authors suggest that companies can create new markets by developing products or services that appeal to a new group of customers, or by offering existing products or services in a new way.

In a blue ocean strategy, companies focus on innovation rather than competition. By creating new market space, they can avoid the intense competition that characterizes red ocean markets. This can lead to higher profits and greater long-term success. A red ocean strategy, on the other hand, is focused on beating the competition in existing markets. While this approach can lead to short-term gains, it may not be sustainable in the long run, as competitors are likely to respond with their own strategies and tactics.

Common uses for Blue & Red Ocean Strategy

The Blue Ocean Strategy is commonly used by organizations looking to differentiate themselves from their competitors and create new market space. This is achieved by identifying untapped customer needs and wants and creating products or services to meet them. Companies can also use the Blue Ocean Strategy to pursue a low-cost differentiation strategy by eliminating or reducing certain features or services that are not valued by customers.

Red Ocean Strategy, on the other hand, is more focused on competing in existing market spaces by capturing a greater share of the existing demand. This is done by competing on factors such as price, quality, and customer service to gain a competitive advantage over rivals. Common uses for Red Ocean Strategy include cost-cutting measures to improve profitability, product differentiation to appeal to specific customer segments, and focusing on customer service to create brand loyalty.

Both Blue and Red Ocean Strategies can be useful in different contexts, and organizations may use a combination of both strategies depending on their goals and objectives.

Do Blue Oceans exist today, despite such a competitive market?

Yes, blue oceans do exist today despite the competitive market. Blue oceans can be found by creating new demand in untapped markets or by disrupting existing markets with new innovative solutions. Some companies have successfully created blue oceans in recent years, such as Airbnb and Uber, by introducing new business models that revolutionized the way people think about lodging and transportation. The key to finding a blue ocean is to focus on the unique value proposition and to differentiate from existing competitors.

Getting started with Blue Ocean Strategy

To get started with Blue Ocean Strategy, you need to first identify the market space you are currently competing in, and then identify opportunities for differentiation and value innovation. This involves thinking about factors such as customer needs and preferences, current and potential competitors, and the overall market landscape.

One common approach to Blue Ocean Strategy is to use the Four Actions Framework, which involves asking four key questions:

  1. What factors can be eliminated that the industry has long competed on?

  2. What factors should be reduced well below the industry's standard?

  3. What factors should be raised well above the industry's standard?

  4. What factors can be created that the industry has never offered?

Once you have answered these questions, you can start to identify potential blue ocean opportunities and begin to develop a strategy for pursuing them. This may involve creating new products or services, entering new markets, or leveraging emerging technologies or trends.

It's important to note that implementing a Blue Ocean Strategy requires a significant shift in thinking and a willingness to challenge traditional industry assumptions. It may also involve significant investment and resources to bring new ideas to market.

Ultimately, the key to success with Blue Ocean Strategy is to focus on creating new market space rather than competing in existing ones. By identifying and pursuing new opportunities, you can create a unique and differentiated position for your organization that allows you to thrive in a highly competitive market.

How to incorporate OKRs into blue ocean strategies?

Integrating OKRs with Blue Ocean strategy can help to create a more focused and measurable approach to achieving the desired outcomes. Here are some steps that can be followed to incorporate OKRs into Blue Ocean strategies:

  1. Define Your Strategic Focus: Identify the key areas where you want to create differentiation and develop a unique value proposition. This can be achieved through market research, customer feedback, or any other relevant data points.

  2. Identify Objectives: Based on your strategic focus, define the key objectives that will help you achieve your unique value proposition. These objectives should be specific, measurable, achievable, relevant, and time-bound (SMART).

  3. Set Key Results: Develop a set of key results that will help you measure progress towards achieving your objectives. These key results should be quantifiable and aligned with your objectives.

  4. Assign Ownership: Assign ownership of the OKRs to individuals or teams within your organization. This will ensure accountability and drive the necessary actions to achieve your desired outcomes.

  5. Monitor Progress: Regularly track and monitor progress towards achieving your objectives and key results. Use this information to adjust your strategy and OKRs as needed to stay on track towards achieving your desired outcomes.

By incorporating OKRs into Blue Ocean strategies, you can create a more focused and actionable approach to achieving your desired outcomes. This can help to ensure that your organization is aligned and working towards a common goal, while also being agile and responsive to changes in the market or competitive landscape.

Blue and Red Ocean Strategies can help companies innovate and differentiate in today's highly competitive markets. By incorporating OKRs and strategy execution patterns into these strategies, companies can create a clear roadmap for achieving their objectives and executing their strategy effectively. Scaled OKRs can help facilitate strategy creation sessions and provide guidance on how to incorporate OKRs and strategy execution patterns into Blue and Red Ocean Strategies. Contact us today to learn more.

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