Sean Parnell is a Blue Ocean Strategy practitioner and president of Innovaxis, a B2B marketing consulting agency.
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Many companies—from startups to established industry leaders—find themselves struggling against the red ocean of competition, unable to break free from the stagnation of flat growth to penetrate new markets.
This is where Blue Ocean Strategy sails in, offering a lifeline to businesses trying to circumvent these challenges and propel themselves into uncharted waters of opportunity.
The Growth Plateau
It’s a juncture virtually every growing business will face eventually: the dreaded plateau where traditional growth strategies no longer yield results, leaving owners and executives scrambling for ways to reignite their expansion engines. Startups, on the other hand, may aim for triple-digit growth but find themselves stalled in the single or double digits due to an inability to gain traction in new or existing markets.
With many U.S. businesses still dealing with the lingering economic effects of the pandemic and supply chain interruptions, as well as a tight labor market and rising interest rates, many business owners see trouble ahead, an annual survey by JPMorgan Chase shows. Despite this slowdown, there are elements of resilience, such as continued consumer spending and growth in exports, buoyed by a relatively strong job market, according to Deloitte.
Amid these conditions, businesses must be prepared to manage challenging conditions for growth:
• Flat Growth: Established companies often hit a growth plateau and struggle to reignite upward mobility and engage new prospects.
• Underwhelming Market Entry: Startups and expanding businesses may find it difficult to gain a foothold in new markets, with a pace of growth far below the potential.
• Competitive Myopia: Many businesses obsess over the moves of their competitors, leading to a destructive price war or a "race to the bottom" due to a lack of true differentiation.
• Misaligned Pricing Strategies: Adding value often translates to higher prices, potentially alienating customers if the perceived value does not align with demand, causing some to price themselves out of the market.
• Market Saturation: Companies that have fully tapped their current markets face the critical question of "What next?"
What Is Blue Ocean Strategy?
Blue Ocean Strategy challenges traditional competitive strategies by advocating for the creation of new market spaces—"blue oceans"—that are ripe with opportunity and devoid of competition. The strategy is built around the concept that businesses can achieve high growth and profitability by systematically redefining market boundaries instead of battling competitors.
A fundamental tenet of Blue Ocean Strategy: It's a fallacy that growing rapidly requires businesses to continuously add value and increase prices accordingly. Instead, blue oceans of demand are achievable by increasing value for customers and charging less than strategic alternatives, which may include direct competitors as well as alternative solutions the market hasn't yet considered.
Key to this strategy is adhering to the ERRC framework, which stands for:
• Eliminate & Reduce: Cut down on “features and benefits” (and related costs) that offer little value to customers even when touted by competitors.
• Raise & Create: Enhance elements that deliver greater value, and introduce new features that the market hasn’t yet seen or that address unmet needs.
By focusing on what customers truly value and de-emphasizing less significant factors, companies not only add value but also reduce costs, rendering the competition irrelevant. Not sure what your customers and prospects value? Market research will help you understand.
For example, CitizenM Hotels targets “mobile citizens” who value a central location in popular cities, a very comfortable bed, streaming services on TV, a large lobby where they can mingle with other guests, and a quick check-in/out process. They do not value a front desk, bellhops, concierge or large rooms that guests won’t spend much time in, so these costs are not incurred. The result: a four-star hotel experience at a three-star hotel price. Here are seven other examples.
3 Tiers Of Non-Customers
An integral part of the Blue Ocean Strategy is targeting not just the existing customers in your market—the "red ocean" of competition—but also reaching out to "non-customers." These are segmented into three tiers:
• “Soon-to-Be” Non-Customers: Those who use the current market offerings but are dissatisfied and may no longer be a customer soon.
• “Refusing” Non-Customers: Those who consciously choose against your market’s offerings because they do not meet their needs or expectations.
• “Unexplored” Non-Customers: Those who have never considered your market’s offerings as an option but could see value there.
By understanding and converting these non-customers with messaging that resonates with them, businesses can tap into new demand, creating a blue ocean of growth.
Practical Steps To Navigating Blue Oceans
For businesses keen on adopting this transformative strategy, the journey begins with education and expertise:
• Read & Learn: While Blue Ocean Strategy was a groundbreaking book, I recommend reading its more current sequel, Blue Ocean Shift, to understand the foundational concepts and recent advancements to the strategy.
• Consult With Practitioners: Partner with experts who specialize in implementing Blue Ocean Strategy. They offer invaluable insights and can guide you through the complex process of redefining markets and breaking away from competition.
Developing a deeper understanding of your ideal client profiles (ICPs) through a brand story process and primary market research is essential before embarking on a Blue Ocean Strategy. This strategic orientation is vital for companies that aspire to navigate the complexities of today's economic landscape and emerge as market leaders in newly created blue oceans.
Blue Ocean Strategy offers a powerful framework for companies that aspire to shift their focus from competing within confined markets (red oceans) to creating new ones (blue oceans), where the potential for growth is vast and untapped.
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