Marketing Review

Which ocean are you in?

If you are professionally a corporate person and have still not heard about the Blue Ocean Strategy, then you are seriously missing out! Google it, Wikipedia it, read up thoroughly. For this could really be life-changing, especially if you are involved in planning, strategizing and policy making. If building a competitive advantage is your responsibility, then devouring the Blue Ocean theory and pondering how you can apply it to your task is really a must.

Developed by 2 professors at INSEAD back in 2005, the Blue Ocean strategy is based on a comprehensive study of 150 strategic moves spanning more than 100 years and 30 industries. It provides a systematic approach to making the competition irrelevant and creating uncontested market space. The basic premise of Blue Ocean thinking is simple. Most companies, irrespective of the sector they belong to, are constantly in an intense rivalry with their competitors, in order to try and build an edge over others, or in other words, try and achieve a competitive advantage.

Generally speaking, this head-on competition cuts into profits and at best gives only temporary advantage in most cases, with the gains also being incremental only, before the competitors fight back and develop their own temporary, incremental advantage. And so the battle continues, blood flows and the ocean (sector) the companies are in, turns red. Examples of Red Oceans abound. Consider the cellular industry in Pakistan for example. Constant price wars and countless ‘packages’ personify how the cellular companies are strategizing their marketing. The results? Shrinking margins, distributed loyalty (an estimated 20% users own multiple SIMs) and amongst the lowest ARPU (Average Revenue Per User) figures in the world.

Even if competitors in a Red Ocean are still chalking up some profits, it is clear to many that sustainable profits in the long-run are by no means guaranteed, and the more astute are seriously concerned about their very survival in the future. These are the very issues that the Blue Ocean Strategy (BOS) addresses.

The cornerstone so to speak, of the Blue Ocean Strategy is the concept of Value-Innovation, which stipulates that:
Instead of focusing on beating the competition, focus on making the competition irrelevant, by creating a leap in value for your clients and your company, thereby opening up new, uncontested market space.
Value innovation places equal emphasis on VALUE and on INNOVATION.
Value without innovation is value creation – incremental benefits.
Innovation without value (usually technology driven) is little more than a gimmick.
So Value Innovation is breaking new space and offering clear benefits.

The Blue Ocean Strategy provides an analytical framework and the tools for successfully creating and capturing blue oceans. For marketers in particular and strategists in general, both at the brand and overall company level, an in-depth study and understanding of the BOS can be really insightful. Of course each company and each brand needs to adapt the Strategy to its own particular circumstances, within the broad parameters and guidelines of the Strategy.

Looking ahead, the choice then is to continue thrashing around wildly in the Red Ocean and risk drowning, or change over to the clear waters of the Blue Ocean and swim with powerful strokes to sustainable profitability.

Red oceans represent all the industries in existence today – the known market space.
In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood.
Here, companies try to outperform their rivals in order to grab a greater share of existing demand.
As the space gets more and more crowded, prospects for profits and growth are reduced.
Products turn into commodities, and increasing competition turns the water bloody.

Blue oceans denote all the industries not in existence today—the unknown market space, untainted by competition.
In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid.
There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as eBay did with the online auction industry.
But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.