The only way to beat the competition is to stop trying to beat the competition
In the fast-paced world of business, where Red Oceans become increasingly crowded and competitive, entrepreneurs often find themselves at a crossroads. The question arises: should they continue swimming in the red, bloodied waters of fierce rivalry, or should they set sail for the uncharted territories of the Blue Ocean? This is the story of an entrepreneur who dared to explore the Blue Ocean, despite its challenges.
As market saturation turned oceans red and profit margins diminished, our entrepreneur realized the urgency for change. The market demanded innovation to address changing customer needs, technological disruptions, and globalization. The tipping point came with the realization that continuous growth and renewal required a shift from the competitive mindset to one of innovative thinking.
From where the need and the urgency?
In the midst of the Red Ocean, our entrepreneur faced high competition, limited growth opportunities, and price wars. The emphasis was on exploiting existing customers and incremental innovation, leading to market saturation and commoditization. The waters turned red as competitors fought fiercely for market share.
The need for change stemmed from a recognition that the existing strategies were no longer sustainable. Customers were seeking more value, and technological advancements were reshaping industries. The urgency was clear – adapt or risk sinking in the bloodied waters of intense competition.
In the Red Ocean, our entrepreneur witnessed a landscape of intense rivalry, where companies fought tooth and nail for a share of existing demand. Growth was stagnant, and the focus on incremental improvements led to a sea of undifferentiated products. It was a challenging environment where survival meant constant battles and diminishing returns.
The allure of the Blue Ocean lay in the promise of uncharted waters, where competition was irrelevant. Our entrepreneur envisioned a space where innovation could thrive, and new market segments could be created without the constraints of existing demand. The Blue Ocean represented an opportunity to escape the fierce competition and sail towards uncontested market space.
What color is your strategy or why we tend to focus on Productivity?
In the Red Ocean, the entrepreneur was accustomed to the routine of Productivity Management, dedicating 70 to 90% of the time to day-to-day operations, cost management, and operational efficiency. It was familiar, manageable, and seemed like the logical approach.
However, the realization dawned that while productivity was essential, it wasn't the sole driver of long-term success. Creativity Management, though perceived as less tangible and challenging to measure, was the key to innovation. The decision was made to allocate 10 to 30% of the time to growth, innovation, and future strategy.
How You Can Approach Innovation in a Structured Way in Blue Ocean
The entrepreneur adopted a systematic approach to innovation in the Blue Ocean. The ERRC Grid became a guiding compass, helping to eliminate, raise, reduce, and create factors that would set the business apart. The focus shifted from a random, trial-and-error approach to a systematic, pattern-following methodology.
The Strategy Canvas Grid provided a visual tool to evaluate the impact of strategic decisions. It helped in understanding industry standards and making informed decisions on what to eliminate, reduce, raise, or create. The systematic approach ensured that the innovation wasn't left to chance but was a deliberate, strategic initiative.
The entrepreneur embraced the principles of Blue Ocean Strategy, understanding that the key to success lay in reconstructing market boundaries and focusing on the big picture. Reaching beyond existing demand and getting the strategic sequence right became the guiding principles for charting the course in the Blue Ocean.
Execution principles became equally crucial. Overcoming key organizational hurdles and building execution into strategy ensured that the journey into the Blue Ocean wasn't hindered by internal obstacles. The principles provided a roadmap for sustained success in uncharted waters.
Value Innovation became the cornerstone of the entrepreneur's strategy. By simultaneously pursuing differentiation and low cost, the business aimed to create a new market space where it stood out.
The Strategy Canvas Grid provided a visual representation of the business's positioning in the market. It helped in making strategic decisions based on the ERRC Grid exercise, ensuring a clear understanding of the impact on industry standards.
Profit Generation in Blue Ocean Market
In the Blue Ocean, profit generation wasn't about competing in the existing market; it was about creating a new market. The systematic approach involved using a system to build utility for customers or non-customers, determining the value customers were willing to pay, identifying the target cost to build a solution, and devising a plan to achieve the target cost.
The entrepreneur understood that profit in the Blue Ocean wasn't solely about cost reduction but about delivering unique value that customers were willing to pay a premium for. It involved a strategic alignment of value proposition, profit proposition, and people proposition.
As the entrepreneur sailed into the Blue Ocean, the once turbulent waters of the Red Ocean became a distant memory. The business thrived in uncontested market space, guided by the principles of Blue Ocean Strategy. The decision to explore the unknown, despite its challenges, proved to be the catalyst for sustained innovation, growth, and success.
In the vast blue ocean lie untapped opportunities.
Let's venture where others fear
Why Should You Care?
Ten-Year Predictions:
Envision the fruition of ten-year predictions.
What would your business look like?
Survival hinges on proactive adaptation to future trends.
Competition Irrelevance in Blue Oceans:
Competition is irrelevant because the rules of games are waiting to be set.
Navigate uncharted waters where competition is not the focus.
Beating Competition Differently:
The only way to beat the competition is to stop trying to beat the competition.
Go where profits and growth are, where competition isn't.
Creating Uncontested Market Space:
Make the competition irrelevant by creating uncontested market space.
Shift from battling competitors to innovating and attracting new demand.
Red Ocean (Existing Market):
Battle for existing demand share in a crowded market.
Expanding and exploiting existing demand leads to shrinking profits.
Intense competition turns the water bloody red.
Focus on competitive advantage and segmenting existing customers.
Red Ocean exists due to supply exceeding demand.
Accelerated commoditization and shrinking profit margins.
Blue Ocean (New Market):
Explore new markets and create uncontested space.
Produce market segments without direct competition.
Create and attract new demand, avoiding direct competition.
Focus on value innovation and attracting non-customers.
Refocus the organization on carving out new market space.
Productivity Management vs. Creativity Management
Productivity Management (70 to 90% of Time):
Involves day-to-day operations, cost management, quality control, asset utilization, operational efficiency, logistics, and cycle times.
Traditional focus as it's more manageable and familiar.
Creativity Management (10 to 30% of Time):
Involves growth, innovation, creativity methods, new brand development, global reach, corporate brand, and future strategy.
Perceived as less tangible, abstract, and challenging to measure systematically.
Classical Innovation Approaches (Schumpeterian):
Random, entrepreneurial, trial and error.
Opportunities and risks come together.
Embedded in the DNA and culture of the company.
Involves units of experimentation.
Blue Ocean Innovation:
Systematic, follows patterns.
Guided by theory and methodologies.
Aims to minimize risk while maximizing opportunities.
Utilizes analytical frameworks.
Requires systematic strategic alignment.
Blue Ocean Strategy Principles:
Reconstruct market boundaries, focus on the big picture.
Reach beyond existing demand, get the strategic sequence right.
Overcome key organizational hurdles, build execution into strategy.
Value Innovation, ERRC Grid and Strategy Canvas
Value Innovation:
Focus on value and transformation.
Four actions: Eliminate, Raise, Reduce, Create.
Achieve cost savings by eliminating or reducing competitive factors.
Set a price that attracts a mass of buyers.
ERRC Grid (Eliminate, Raise, Reduce, Create) Visualize the impact on industry standards.
Elimination:
Identify factors taken for granted in the industry that should be eliminated.
Erase factors irrelevant to core competencies.
Evaluate cost factors not generating appropriate income.
Raise:
Identify factors buyers care most about and consider raising them.
Raise factors above industry standards.
Enhance factors the company excels at.
Reduction:
Identify factors to be reduced below industry standards.
Reduce factors your company does but doesn't want to eliminate.
Creation:
Identify important elements not offered by other companies.
Bring elements from other industries to create value.
Consider factors that increase buyer value, profits, or create a strong people proposition.
Strategy Canvas for Blue Ocean Innovation:
Use key factors to evaluate the effect of Blue Ocean Strategic decisions based on the ERRC Grid exercise.
Visualize the impact on industry standards
Horizontal axis represents aspects the industry believes are valuable to customers.
Vertical axis represents the offering level of the industry or competition.
Decide what to eliminate, reduce, raise, and create.
Focus on reducing costs in certain industry aspects while increasing value in others.
The Difference in Profit Generation in Blue Ocean Market:
Use a System: Build utility for customers or non-customers.
Determine Customer Value: Identify the value customers are willing to pay.
Target Cost: Identify the target cost to build a solution.
Devise a Plan: Devise a plan to achieve the target cost.
Comments