Blue oceans for entrepreneurs

Kim, W & Mauborgne, R 2005, Blue Ocean Strategy, Harvard Business School

Image by Brendan Landis, under CC licence: http://www.flickr.com/photos/qf8/265819544/

What is a blue ocean?

• It’s the opposite to a red ocean• Pursues untapped market spaces• Focuses on demand creation• Has the opportunity for highly profitable

growth• It’s a framework to identify new markets and

manage risk

It’s all about breaking the value/cost trade-off

Costs

Buyer Value

Value innovation

Cost savings: eliminate and reduce the factors an industry competes on

Buyer value: raising and creating the elements the industry has never offered

Flexicar – a blue ocean industry

• Car sharing service, one of the first in Australia• Launched in Melbourne,

2005• 90 cars• 2500 members• 30% business members1

1. Flexicar 2005, ‘Media Kit’, http://www.flexicar.com.au/modules/uploader/images/uploaded/Media%20Kit%20-%20Overview%20at%20Jul%202010.pdf, accessed September 24 2010.

Flexicar’s value innovation approach

Reduce RaisePriceChoice of useAvailability

SustainabilityCar experience

Eliminate CreateOwner responsibilityMaintenance costs

Friendly serviceParking stations

Flexicar’s strategy canvas

Price

Choice of u

se

Availa

bility

Owner resp

onsibilit

y

Maintenan

ce co

sts

Susta

inabilit

y

Car exp

erience

Friendly

service

Parking s

tations

Car

Flexicar

Public Transport

Low

High

Reduce

Eliminate

Raise Create

How do you do it? The steps to a blue ocean strategy

1. Reconstruct market boundaries

2. Focus on the big picture, not the numbers

3. Reach beyond existing demand

4. Get the strategic sequence right

5. Overcome key organisational hurdles

6. Build execution into strategy

Why use this model?Strengths WeaknessesCompetitive advantage lasts for 10-15 years1

Can’t be used alone – companies must still master traditional strategies

Suits entrepreneurs – less organisational barriers

Little detail on choosing the relevant competitive factors

Sustainable strategy – focuses on profitable opportunities

Need to dominate your new market as soon as possible

Scalable – goes after new mass markets

1. van Stel, A & Burke, A 2010, “Blue Ocean vs Five Forces.” Harvard Business Review, p. 28.

Requires clear and careful strategic thinking, but the benefits are long-term