Blue Ocean Strategy

When Google was launched in 1997 as a search engine, Reliance Communications in 2001, the services they offered were unprecedented. They had come up with business ideas which had never been heard of, and thus never had had a market for the same. But once the search engine caught the imagination of the people and the telecom giant made it possible for the common man to use mobile phones, it created a vast market, and untapped potential waiting to be captured all the while.

These companies used the Blue Ocean Strategy which focuses on making the competition irrelevant by creating a leap in value for your customers. It is essentially a vast ocean of opportunities, with plenty of space to expand and sail where you want. There often is no competition, and even if there is any, your product is such that it makes the competition irrelevant, because it can’t touch you. Here demand, customers and growth are yours for the taking. There is no benchmark set for you as per the industry rules and you travel along a road and leave behind a trail which others can only follow. The BOS is about navigating your organization into a vast potential market where it can achieve rapid growth and dramatically increase profits.

Blue Ocean Strategy as we know it, is contradictory to the Red Ocean Strategy where industry boundaries are defined and accepted and the competitive rules of the game are known. Companies try to outperform each other in a cutthroat competition with the aim of grabbing a greater share of the existing demand. Prospects for profits and growth are reduced with the market space of red oceans getting crowded. As opposed to this the BOS creates demand in the market space for its products. Some blue oceans are created well beyond existing industry boundaries (for example Google), whereas most are created from within red oceans by expanding existing industry boundaries (for example Reliance).

Though the term Blue Ocean is an analogy to describe a wide, untapped potential market and seems like a promising idea for businesses, it always entails a risk of the idea being backfired since its untested waters that the business ventures in. let’s take the case of Google’s latest innovation Google Wave. The web application software for real-time communication and collaboration was hailed as a new wave (pun not intended) in online and real-time communications. But it backfired for the company, as it didn’t receive as much enthusiasm and support from Google fans as the company would have liked. It resulted in the company dumping the product only recently.

It is not always possible for companies to come up with new ideas to tap potential, untouched markets, and this is where the red ocean strategy is in action. Pepsi and Coke are the two largest players in the soft drink business, where each tries to grab the other’s customer base. It is a classic example of red ocean, where the rules are set and the competition is cut throat. It is about staying a step ahead of your competition, as opposed to making your competition irrelevant in BOS.

How did Apple know exactly when to launch the iPod, when we were all going around showing off our cumbrous CD players, carrying them around with a number of CD’s when we were going on a long trip, to listen to a wide range of songs? Apple came up with its mini music player, where you could feed hundreds of songs and which was also easy to carry around. Another example of the BOS would be Facebook, which changed the way the world looked at social networking.

As I said earlier in my post, it is not always possible to tap into an untouched market space, and often it is the red ocean way that companies have to follow. But to sustain themselves, companies spend huge amounts in R&D, to plan ahead into the future, by dint of which they can create new ideas and venture into the vast ocean of market space, and making competition irrelevant.