Working with something completely new is always thrilling and a little bit scary as you don’t have any guides or templates to help you. You have to experiment and take risks if you want to achieve success.
Very often, startup owners who come up with an innovative product don’t know where to start and how to implement all their thoughts into a real product that speaks its value.
Eleken is a design agency. We had a chance to work on HandPrinter, a startup that has no analogs in the world. It encourages people to make a positive impact on our environment. Despite the great idea, HandPrinter had difficulties with converting new customers, because of a poor user experience of their application. Our team had to be extremely creative when working on HandPrinter’s design as there were no similar products to use as a reference (check out the case study).
This case study proves that sometimes a bare idea is not enough to see the growth of your startup. It is very important to implement it correctly and make the product look valuable for its users.
While people tend to think that the secret of innovative products lies in a unique idea, the blue ocean strategy guides entrepreneurs on how to turn their ideas into a profitable company.
Blue ocean key characteristics
The terms blue and red oceans were introduced by W. Chan Kim and Renée Mauborgne in their book Blue Ocean Strategy.
Authors believe that the red ocean stands for a market that is overwhelmed with competitors, and the blue ocean represents an unknown market without rivals.
While in the red ocean a lot of businesses sell similar products and try to compete mainly using different pricing strategies, in the blue ocean companies try to create new demand.
For example, Dollar Shave Club offers its clients razors on a subscription base providing great service and affordable prices. This way they manage to successfully compete with their main rival Gillette.
Blue sea market is characterized by:
- Low competition or absence of it
- Products that combine good value and affordable price
- Large enterprises on the market
If you decide to follow the Blue ocean strategy it means your goal is not to be better than your competitors but to make this competition useless by creating a new market space. Here are some pieces of advice on how to implement this strategy.
Tips on applying the strategy
To cut the long story short, the blue ocean strategy suggests business owners focus on their idea, perform a blue ocean market research to find something that differentiates the company from other propositions and create a catchy tagline that communicates the product’s value.
Now, let’s talk in more detail about applying the blue ocean strategy.
- Analyze industries. First of all, you should start with a precise analysis of popular industries and their products to identify a new trend or demand. Check if customers are fully satisfied with already existing services.
- Define a problem. As soon as you find something that is not as good as it could be, think about what you can do to solve this issue for customers and make them happier with your offer. Do not think about what your competitors have done wrong, think about how you can make the customers' lives easier.
- Follow four action blue ocean strategy framework. The authors of the book give us the scheme to apply the strategy that includes the following points:
- Raise. What can be improved in the existing industry?
- Reduce. What results did the competition with other companies cause and can we remove them?
- Eliminate. What features of the existing industry should be eliminated?
- Create. What new features can the company create that other businesses have never offered?
- Implement. In case you have answers to these four questions, it’s time to implement the strategy.
To better understand the way we can apply the blue ocean theory into practise let’s analyze three well-known companies that successfully coped with this task.
Companies that created an uncontested marketplace
Adding something innovative to an already existing industry doesn’t mean you have to develop a completely new product.
For example, Netflix is focused on providing great customer service instead of opening DVD stores.
Uber didn’t spend money on buying cars to compete with taxi owners. They decided to create an application that would connect drivers and customers in one place.
Airbnb didn’t buy houses in different locations, instead, they created an easy-to-use service that unites already existing houses for rent in one place.
All the above companies used the blue ocean strategy to create new demand. Read further to learn how they did it and what a successful blue ocean strategy requires.
The first company that used the blue ocean strategy is Netflix, a popular subscription-based streaming service. But at the beginning of its existence, in 1997, it was one more company competing in the industry of DVDs rental and sales.
With the increasing popularity of the Internet, Netflix has become a streaming service with a wide choice of films and TV series. Later they launched their shows and movies available only on their platform. Netflix managed to change the shrinking red ocean into full of opportunities for blue waters.
Let’s see what steps Netflix took to change the rules of a game.
According to the blue ocean strategy, Netflix analyzed the existing market and came up with a couple of issues that could be improved to better satisfy customer’s needs. Netflix’s strategy can be analyzed in four points:
- Eliminate. First of all, they removed physical stores and made all the films available online. From that moment Netflix needed to pay only for a film license, without spending money on buying and storing DVDs. At that time it was innovative for this kind of industry.
- Raise. The process of watching movies has become much more comfortable. You don’t have to leave their houses to buy a DVD. As well, if you close the movie at some point, it is very easy to get back to the moment where you’ve stopped watching. Finally, the payment process is very simple as it requires only a card number.
- Create. Customers have a great choice of movies available online. Netflix created personal subscription-based accounts. Users can pay monthly and watch as many movies as they want, without any limitations. As well, the service learns users’ preferences and suggests films based on their previous views.
- Reduce. Netflix managed to reduce the cost as they pay only for obtaining licenses. They got rid of expenses that are not compulsory in their industry but continued to offer high-quality movies at an affordable price.
Netflix’s blue ocean idea was to make movies available online. When their competitors started applying the same strategy, Netflix launched its original shows and films. This way they proved that it is possible to switch to the blue ocean more than once in the same industry.
Uber is an online taxi service available in 42 countries and more than 200 cities all around the world. Is Uber a blue ocean strategy? Yes. Though it didn’t invent anything new when it comes to a product itself, Uber has changed the traditional way the transportation industry works. In other words, they sailed into the blue ocean.
And again we will analyze their strategy in four points:
- Eliminate. Uber eliminated the inconveniences of booking a car, paying the driver without change, the procedure of leaving a complaint, and the issue of booking cancellation. Customers can easily find a taxi and track its location with their smartphones. The application charges the user automatically after the ride so that passengers don’t have to search for cash and pay the driver personally.
- Reduce. Uber solved problems of both drivers and customers by connecting them in one app. The driver receives his/her order and money from the application and Uber just takes its percentage from each ride.
- Raise. Uber has dramatically improved customer service. The application is fast, easy to use, and very convenient. Passengers can rate the driver, so taxi owners care about their reputation and strive to provide the best service.
- Create. With the help of new technologies and devices, Uber created a new market that changed the essence of traditional taxi service.
At the introduction stage, Uber managed to create a market with no competition. Of course, later other companies filled the niche, but Uber still dominates the market as it spread the service all over the world.
Airbnb is an online platform for vacation rental. This service gives a unique opportunity for those who own houses to make money with their apartments and for those who travel to find an alternative to traditional hotels. This online platform is a mediator between the host and the traveler.
Airbnb created a service that possesses both value and affordability. Let’s see how they achieved this result by analyzing their strategy in four actions.
- Eliminate. Airbnb eliminated all the problems connected with finding and reserving a room in the hotel, as well as problems with service quality. On Airbnb’s website, the user can find a list of possible offers with photos, information about the host, and reviews of each accommodation. It takes just a few minutes to find and book a room, which makes this platform simple and hassle-free.
- Reduce. Airbnb provides its users with a large list of apartments, rooms, houses, or even tree houses available in different countries. Airbnb doesn’t have to spend money on buying and keeping hotels, so they reduced the cost of accommodation and made it easier to find the most suitable variant for different budgets in different locations.
- Raise. As users tend to choose an apartment based on other customer’s reviews, apartment owners do their best to provide high-quality customer service. Also, the application itself is highly intuitive and easy to use. This way Airbnb raised the customer satisfaction level.
On the other hand, Airbnb raised the profits of hosts. It’s free to place your offer on the website. Airbnb takes the percentage from both sides after the owner confirms the booking request.
- Create. Airbnb created a new, blue ocean competition-free marketplace that is based on the principle of a shared economy (people both buy and offer the service).
Airbnb service is beneficial for both sides, customers can find a unique location for their vacation and owners can easily offer available space for a great number of travelers. .
To sum up
As you can see from the blue ocean products examples above, these companies didn’t invent new products, they just offered a valuable upgrade of their service and changed their business model.
Coming up with the strategy of blue ocean is complicated and risky, but if you manage to create a product/service that clearly communicates its value people will notice you on the market.
Read more about the way Uber, Netflix and Airbnb show their value propositions:
Uber value proposition
Airbnb value proposition
Netflix value proposition