W. Chan Kim and Renée Mauborgne describe the “Blue Ocean Strategy” as a company’s creation of a new, uncontested market space which creates new customers, decreases incurred costs and renders competitors irrelevant. The invention of this new submarket involves balancing cost and production with customer value in an attempt to discover new opportunities in the market.
Red oceans are situations where industries are confined to boundaries, and competitive rules of the game are defined. Companies compete for a market share. As each firm aims to outperform the competitors in the pre-existing market, the market gets crowded, and returns of profit are significantly reduced. Competition turns the ocean "red" as products become commodities. In contrast, blue oceans are untapped market spaces. They are characterized by the creation of demand and a probable opportunity for increased profit. The boundaries of blue oceans are unlimited, and despite being created from red oceans, competition doesn't play a prominent role.
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An example of an organization which has continuously adopted a blue ocean shift is HP-Hewlett-Packard by introducing ways of outperforming the market in the computer hardware industry. A company's success in the market is based on the creation of new markets. Creation of blue oceans is an assured method of establishing sustained high performance. HP strategic move in the mid-1990s enabled it to create a multi-billion market. HP acquired Compaq in 2001and both companies benefitted from new markets. The strategic move is the critical determinant of success.
Cirque du Soleil a group created in 1984 is leading Canada's cultural exports. It comprises a group of street performers, and they have stayed successful for several years. Their achievement is remarkable because it was made in an industry which was declining and had little growth where other forms of entertainment offered great competition (Kim & Mauborgne, 2004). Rival groups Ringling Bros. and Barnum & Bailey threatened to turn the market into a red ocean. Cirque du Soleil did not attempt to compete them but instead chose to explore a new market space by examining a new group of customers. In the end, they rendered the competition irrelevant and went on to be one of the most successful circus groups over the years. Traditionally, children were the target group in the market. Cirque du Soleil decided to explore adults and clients who could pay more to be entertained individually. The shift is attributed to its success.
Starbucks Company has also been actively involved in strategy development in the coffee industry. Starbucks has revolutionized the coffee industry in ways other competitors have tried to imitate. Their stand-out feature is the continuous effort in improving customer experience. The business benefits from the environment which is conducive for the community to share a cup of coffee. As the coffee market evolved from a blue ocean to a red ocean, other companies offered competition. However, Starbucks survived by increasing their demand and introduced products such as baked goods, breakfast and lunch options. The Chief Executive Officer, Mr. Schlutz, additionally offered competitive retirement and health benefits which has gone a long way in reducing employee turnover rates. Moreover, use of new strategies like pay through a phone app and recycling has contributed to winning non-customers.
Amazon has shifted to be a digital platform than an online platform. From being an online retailer, Amazon has dramatically transformed into a digital platform where you can access the most extensive collection of books, read and review first-hand reviews of people who have read the book as well as the automatic confirmation of orders by buyers (Harrison, 2018) . Though it was a complicated process, the company has stayed afloat and maintained high profits in this market through adoption of this shift.
Components of Blue Ocean Strategy
The initial step is the adoption of this perspective. A blue shift perspective provides an advantage of shifting mind perspectives to open new horizons and the opportunity to comprehend where new opportunities can be found. It is difficult to find new markets which lack competition. Several organizations have adopted this shift. The strategy opens up a chance to open up unique value-cost opportunity in a straightforward way which doesn't limit an organization's horizons (Kim & Mauborgne, 2017) . Organizations that have adopted this perspective must have an aspect of creativity. The focus is on finding markets other than what is on the competitive market. Innovation is fundamentally based on in assessing opportunities and risks using this perspective.
New value-cost frontiers are actively thinking differently about offering different kind and extent of benefit to customers that are either lacking in the current market or have not been actualized to full potential by competitors. Majority of the ideas may have been rendered useless or impossible by the competitors in the market. Creativity is a crucial component of blue ocean strategy (Kim & Mauborgne, 2017) . Different sets of innovations have to be realized to achieve this shift ultimately. An extended field of change may, however, be a complicated process to complete. Most organizations in an attempt to get out of the red ocean may lack adequate market-creating tools and necessary leadership to achieve this shift.
The main principles in blue ocean shit are guided by three perspectives; industry is subject to changes. It can be modified, removed or added and new ideas can be conceived. The goal is not in trying to overdo the competitors but in overlooking the competition and rendering it inexistent, the creation of new demand thus a new market rather than obtaining a share of pre-existing markets.
Secondly, a humanistic process also termed "humanness" is a crucial component which motivates and inspires human resource to be a part of the process and offer voluntary cooperation to achieve efficient execution. It is a challenge to effect change in any organization primarily because most agencies prefer a status quo. Difficulties to effect change can either be a motivational challenge; insufficient passion and inspiration to effect change, political; differences in ideologies and divisions which bring out internal tensions, or cognitive difficulties brought by uneasiness and unwillingness to accept change. It is crucial to motivating your human resource to achieve this transformative change.
Majority of organizations don't acknowledge that creation and execution of change are inseparable. An organization may offer the creation part to a group of individuals, and a separate team is tasked with implementation of this change. Moreover, most agencies evaluate structural changes through critical indicators measurement on a timely basis without setting up the necessary infrastructure to effect change.
Execution of change needs to be tied to strategy creation and treated as one function from the beginning. It may play a significant role in ensuring your employees own and offer assistance to the implementation of change, thus adopting a humanistic approach. Part of this process includes alleviating organizational punishments and instead focusing on psychology and emotions of the employees while implementing change. Blue ocean strategy involves a shift from a mechanic structure and adopting "humanness." Arguably, motivating your employees and instilling confidence in their competence to effect change will go a long way in efficient execution of change. When they own it, they are likely to be committed and competent.
A humanistic process is designed to capture employees' minds and hearts and aligning them to the new shift. The blue ocean shift is challenging, and it places your workforce in a situation which moves them from a comfort zone to a new idea which they may not fully picture. Several organizations that have adopted the blue ocean shift have resulted in improved energy and creativity in their workforce. Over time, the process acknowledges fear, insecurity, the importance of the workforce in driving change, hence "humanness."
A humanistic process is fundamental to the success of blue ocean shift. It embraces without denial the human aspects, and thus this allows the human resource to be more competent and confident. It is this humanistic approach that promotes inspiration and motivation. Regardless of the number of the workforce, humanness recognizes fear, doubt, vulnerabilities, and skepticism. Therefore, an emotional and psychological landscape is realized. Additionally, the human need to be appreciated for our contribution and being valued is fully understood when a humanistic approach is incorporated into the organization.
The mechanism through which the blue ocean shift accomplishes this is not by a rigid mechanical framework but by calming fear and instilling confidence throughout the change process. The processes in humanness are atomization, fair process, and firsthand discovery.
Atomization is the process of breaking a problem or a challenge into smaller parts. Each of the smaller pieces is then handed to everyone, and new ideas on how to solve are adopted until a solution to the hurdle to change is found. First-hand discoveries offer innovations of either making or breaking a strategy. Ideas are generated from the workforce who are directly involved in process improvement. Everyone feels a part of the process since they may contribute to any changes that may come up. Human workforce needs to feel valued and appreciated. A fair process is founded on three actions; setting rules of engagement on sources of information and collaboration of the workforce, explanation of the reasoning behind every decision made and expectations; what is expected from the employees and what they should, in turn, expect from the process. A fair process should be cultivated throughout all decisions.
Thirdly, availability of market-creating tools is necessary to shift to this perspective. Market Creating Tools is the step that provides adequate information and competencies to be successful in the creation of a new market. First, a Pioneer-Migration-Settler map is a tool showing the three categories that can judge the value of your organization (Barraza, 2016) . Pioneers are products or services that define the organization. They provide a precise innovation value since the market readily appreciates this products/services, and thus they contribute mainly to profits.
Settlers do not bear a real innovative value. Competitors may offer similar products. Migrators are products that carry an original cost which is more than what the completion can offer. Blue ocean strategy aims to push products into the pioneer category.
These tools are vital in pushing for a shift. They provide answers on how to assess and review the impact your organization holds in the market. Additionally, they offer a step-wise approach to identifying non-customers to your products to create a new demand for this group, achieving obsolete competition through value-cost perspective; creating products that lower costs while delivering high demand uniquely. Visionary market-tools offer a compelling offering which is readily accepted in the market and ensures a goal is set which is easy to understand for all employees (Denning, 2017) . By providing everyone is on the same page, every professional will offer voluntary cooperation.
As organizations climb up to the blue oceans from the red oceans, they may unlock the powerful potential that will propel them to be value-cost frontiers.
References
Barraza, H. (2016). Blue Ocean Strategy Shift (Summary) . Retrieved from HJ Barraza Blog: https://hjbarraza.com/blue-ocean-strategy-shift-summary
Denning, S. (2017, September 24). Moving to Blue Ocean Strategy: A Five-Step Process to Make the Shift . Retrieved from Forbes: https://www.forbes.com/sites/stevedenning/2017/09/24/moving-to-blue-ocean-strategy-a-five-step-process-to-make-the-shift/#2a1c741d7f11
Harrison, K. (2018, January 7). Blue Ocean Strategy: Creating Your Own Market . Retrieved from Business News Daily: www.businessnewsdaily.com/5647-blue-ocean-strategy.html
Kim, C. W., & Mauborgne, R. (2004). Blue Ocean Strategy. Boston, Massachusets: Havard Business School Press.
Kim, C. W., & Mauborgne, R. (2017, October 11). The Three Key Components of a Successful Blue Ocean Shift . Retrieved from Blue Ocean Shift: https://www.blueoceanstrategy.com/blog/three-key-components-successful-blue-ocean-shift/
