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Let's now unpack Blue
Ocean Strategy and
its application in pricing
and value creation.
Blue Ocean Strategy is a
transformative business concept
developed by W. Chan Kim
and Renée Mauborgne.
It refers to the
simultaneous pursuit of
differentiation and
low cost to open up
a new market space and create
uncontested market
opportunities,
what they call a Blue Ocean.
At the heart of this approach is
something called
value innovation.
This means creating products
or services that significantly
raise prior value while
also keeping cost
low for the company.
Rather than fighting
competitors in
saturated markets which we
consider the Red Oceans,
companies pursuing a
Blue Ocean Strategy
redefine the rules by focusing
on what to eliminate,
reduce, raise, and create.
When done correctly, this
strategy can lead to
an increase in value for both
the business and the buyer.
Cost savings come
from eliminating or
reducing traditional industry
practices while new value
is created by raising
elements customers care
about and introducing features
the market has never seen.
Value innovation
places equal weight on
delivering customer value and
on breakthrough innovation.
To be clear, value alone without
innovation typically results in
small improvements that don't
make your business stand out.
It's like putting
a better engine in
an old car but not
redesigning the vehicle.
On the flip side, innovation
without value can
be too futuristic,
too tech-driven, or simply
too early for the market.
That's when companies build
brilliant solutions that no
one's quite ready to buy.
The key idea here, and
this is central to
Blue Ocean thinking, is
that we don't have to
choose between being affordable
and being different.
Value innovation breaks
the traditional trade-off
between low cost and
differentiation.
While conventional wisdom says
you can either offer more at
a higher cost or offer
less at a lower cost,
Blue Ocean Strategy
invites us to
challenge that idea completely.
Cirque du Soleil.
