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Blue Ocean Strategy


Vishwadeep Khatri
Message added by Mayank Gupta,

Blue Ocean Strategy is an organizational strategy that helps open up new markets thereby creating more demand for their products and services. It is about creating and capturing uncontested market space, thereby making the competition irrelevant. This was first published in a book (by the same name) in 2004 written by INSEAS professors - W. Chan Kim and Renée Mauborgne.

 

An application-oriented question on the topic along with responses can be seen below. The best answer was provided by Anish Mohandas on 6th Mar 2024.

 

Applause for all the respondents - Anvitha Chowdary, Lalit Ratnani, Anish Mohandas, Ousmane Fall, Jay Nanwani.

Question

Q 649What is Blue Ocean Strategy? Both Blue Ocean Strategy and Lean Six Sigma focus on value creation. What are the similarities and differences in the two approaches. Support your answers with examples.

 

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Before we explore the Blue Ocean Strategy, it's important to discuss the Red Ocean Strategy. This strategy revolves around traditional competition within existing market boundaries. Companies engage in fierce competition, striving to outshine rivals and secure a larger market share. This often leads to price wars, product commoditization, and minimal differentiation. Companies focus on incremental improvements and cost efficiencies to gain an edge over competitors. The Red Ocean Strategy represents a crowded marketplace where companies fight for the same customers, often resulting in limited growth opportunities and intense rivalry. According to me, Lean Six Sigma serves as a cornerstone in the Red Ocean Strategy, offering organizations a pathway to attain competitive advantage in terms of pricing and value addition. 

Understanding the dynamics of the Red Ocean Strategy provides valuable context for appreciating the innovative approach of the Blue Ocean Strategy.
In contrast, the Blue Ocean Strategy involves creating new market spaces uncontested by competition. Companies employing this strategy innovate to offer products or services that appeal to different customer segments. By combining differentiation and low cost, companies break away from competition and tap into unexplored market opportunities. Blue ocean thinking prioritizes value innovation to deliver significant value to customers while simultaneously benefiting the company.

The Blue Ocean Strategy and Lean Six Sigma are both strategic approaches that aim to improve business performance, but they have distinct focuses and methodologies. Here's a comparison of their similarities and differences:

 

Similarities: 

Aspect 

Blue Ocean Strategy 

Lean Six Sigma 

Focus

Penetrating uncontested markets and delivering significant customer value

Minimizing waste and maximizing customer value through process enhancement

Customer Centric Approach 

Emphasizes innovation to create new market spaces aligned with customer demands

Prioritizes understanding customer needs and tailoring processes to meet them

Competitive Advantage 

Targets untapped markets to avoid direct competition and innovate offerings

Achieves a competitive edge through enhanced processes, efficiency, and value addition for customers

 

Differences: 

Aspect 

Blue Ocean Strategy 

Lean Six Sigma 

Scope and Focus

Concentrates on pioneering new market territories and fostering innovation in value creation by recognizing and capitalizing on unexplored market opportunities.

Targets the enhancement of existing processes by eradicating defects, streamlining operations, and elevating efficiency levels

Methodology

Involves strategic ideation, innovation, and imaginative problem-solving to identify nascent market potentials and differentiate offerings.

Employs a systematic approach (DMAIC: Define, Measure, Analyze, Improve, Control) to systematically pinpoint and eradicate process discrepancies, fostering continuous enhancement.

Risk and Innovation 

Advocates for bold risk-taking and innovative endeavors to forge new market paths and disrupt established industries.

Emphasizes the reduction of variability and risk mitigation through data-centric decision-making and meticulous process refinement.

Application

Primarily suited for industries characterized by intense competition or those aspiring to pioneer new markets and innovate.

Widely applicable across diverse industries, notably in manufacturing and services, aiming to heighten quality, reduce expenses, and amplify customer satisfaction


TATA Nano as a Blue Ocean Example:


The TATA Nano, introduced by TATA Motors in 2008, exemplifies the Blue Ocean Strategy in action. Recognizing the need for affordable transportation in India, TATA Motors embarked on a mission to create a revolutionary product. Through innovative engineering and design, TATA Motors developed the Nano, positioning it as the world's most economical car.
The Nano's design and production processes were optimized to minimize costs while maintaining safety and quality standards. By prioritizing essential features and utilizing lightweight materials, TATA Motors succeeded in offering a basic yet functional vehicle at an unprecedented price point. This affordability appealed to millions of middle and lower-income consumers who previously relied on two-wheelers or public transportation.
With the launch of the Nano, TATA Motors carved out a blue ocean of untapped market space within the automotive industry. Despite encountering challenges such as production delays and quality issues, the Nano remains a testament to the power of blue ocean thinking in driving disruptive innovation and market success.

 

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BLUE OCEAN STRATEGY: This strategy is inclined with the three strategic propositions-Value, profit and people. As an integrated approach this strategy shows how to align these three propositions. It shows us how to create a win-win outcome.It focuses on innovation and value creation to attract customers and to achieve sustainable outcomes.

Both Blue ocean strategy and Lean six sigma focuses on value creation but either ways their approach is different. Blue ocean strategy highlights on creating value by adding innovative thoughts and finding uncontested markets where competition is not relevant.This strategy encourages companies to show a difference between them and competitors by offering unique proposals to customer.Whereas Lean six sigma focuses on value creation by minimising waste,improving efficiency and reducing defects. 
Both Blue Ocean strategy and Lean six sigma are centred around creating value to the customer and both  prioritise understanding customer needs and preferences.With the both strategies the end goal is to enhance customer satisfaction.

Differences in two approaches are

for value creation BOS focuses on creating uncontested market spaces by offering innovative products or services where as lean six sigma focuses on reducing defects,eliminating waste in the process.

Examples:

1.Netflix is the best example for Blue ocean strategy.Netflix adopted from traditional video rental to subscription based streaming services.

2.Toyota is the example for Lean six sigma. Toyota adopted lean principles to strengthen and streamline its production processes resulting in reduced lead times and improved product quality.

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Blue Ocean Strategy as the name suggests is a strategy with an underlying principle of 'out of the box' thinking.

The vast and open expanses of blue ocean signify the potential of doing something innovative and different rather than competing in an already crowded  industry .

 

Companies that have successfully adopted Blue Ocean strategy have created new industries. By doing so, they have managed to keep the balance between cost, value and quality and introduce disruptive products and services. Due to the unique  nature of the products/services on offer, these companies have created a brand name and unparalleled reputation in the marketplace.

 

Although Blue Ocean strategy and Lean Six Sigma focus on value creation there are both similarities and differences between the two.

 

In terms of similarities, both blue ocean strategy and Lean Six Sigma  focus on utilizing innovative thinking to create demand and build reputation. Lean Six sigma has the DMADV model in place that can be utilized to design innovative products and services once the analysis of the existing ones is completed. Likewise, blue ocean strategy also promotes strategic and innovative thinking that promotes development of new products and services

 

In terms of differences, while blue ocean strategy is based on creating new markets with innovative products , LSS also promotes process improvement and defect reduction in existing products and services. The LSS DMAIC methodology and the the LSS tool suite focus on the improvement of existing products and services and thereby enable competition in an already existing industry wherein the scope for higher margins may be limited due to existing competition.

 

Thanks.

 

Reagrds,

LALIT

 

 

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Blue Ocean Strategy is very important in nowadays business market. Today, competition is very rude in existing Markets. 

Ansof Matrix explains some strategies that will help us understand the blue ocean one.

As far as the Ansof matrix is concerned, an Existing product in a new market and a new product in a new market could be considered a Blue Ocean strategy. In a nutshell, when we talk about the blue ocean, we think about higher growth and gross profit increase by creating brand-new demand instead of struggling in a saturated market. This strategy is about supply and demand. For blue ocean creation, the company needs to have a clear and strong vision in addition to an orientation towards innovation and creativity.

 

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Six Sigma's main target is to increase quality by reducing defects, and errors and eliminating variation in production in both goods and services.
So we can easily say that the blue ocean strategy and Six Sigma objectives are common. Both of them have as primary objectives, the increase in profit for a company. The creation of blue oceans will increase profit by increasing sales via new markets. whereas Six Sigma will increase profit by reducing waste (Muda), creating savings, and increasing product and service quality.

The difference between the blue ocean strategy and Six sigma is that Blue Ocean acts upon new markets giving the chance to be the only supplier in that market; and Six Sigma acts on both existing and new markets guaranteeing competitive advantage through product quality and waste elimination.

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Blue ocean strategy is a strategical framework popularized by W. Chan Kim and Renee Mauborgne. It focuses on creating uncontested business space called “Blue Oceans”. In this framework, strategies are derived considering competition as irrelevant and non-existent.
The differentiating factor in this strategy is to constantly innovate and thereby create new demand and value for the customers.
Organizations adopt this strategy to capture untapped market space and opportunities by delivering innovative products or services to address unmet customer needs.
There exist some similarities between BOS (Blue Ocean Strategy) and LSS (Lean Six Sigma) such as:

Both BOS and LSS focus on value creation for customers. While LSS emphasizes eliminating waste from the value chain and improving operations efficiency to deliver value, BOS aims to create new value by offering innovative products & services.
Both strategies are implemented considering the customer at the center of the framework. LSS identifies and addresses customer requirements by encouraging organizations to focus on process improvement initiatives, while BOS prescribes to creation of new markets or reimagining the existing ones based on customer requirement insights.

Along with some similar characteristics BOS and LSS also have a few differences in terms of 

a.) Application: BOS is applicable for high-level strategic planning and market analysis, While LSS is applicable for operational processes across various functional areas to enhance efficiency, improve quality, reducing waste.


b.) Innovation scope: BOS emphasizes introducing groundbreaking innovations to create new market space and fulfill unmet customer needs by unlocking new demand and value, while LSS focuses on continuous and incremental process improvements by optimizing current operations rather than creating a new market space.


c.) Time & resource requirement: BOS involves long-term strategic planning and implementation as it requires a very high level of innovation and market creation efforts, while LSS focuses on short to medium-term improvement initiatives which usually do not require such extent of resources.

 

Let us consider an example from the automobile manufacturing industry:
Where Tesla and other Electric vehicle manufacturers adopted Blue ocean strategy by investing heavily in battery tech innovation, creating a new market demand, and providing transformative value to the customer, other regular automobile manufacturers such as Toyota are still focused on improving operational efficiency, reducing cost by waste elimination through various LSS improvement initiatives.
Both manufacturers are fulfilling the customer demand but the fundamental difference between both of them is that one has created new demand and the other one is fulfilling an existing demand. 


Let us see one more example from the hospitality industry:
The Bread & Breakfast (Air B&B) concept was an innovative strategy derived from the Blue Ocean framework where existing market competitors were considered irrelevant or non-existent. The existing demand in this business was reimagined and transformed by capturing customer insights and utilizing that data to fulfill existing customer demand innovatively.
Other renowned hotels such as JW Marriot are also improving their traditional operations by continuously implementing LSS improvement projects to provide better value to their existing customer demand.

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Guess all the respondents are very passionate about Blue Ocean Strategy and Lean Six Sigma. At least I got that feeling while I was reading the answers :)

All answers are very well written and hence one must read all of them. The best answer has been provided by Anish. Well done!

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