Defining and continuously refining the product Strategy is an important activity for Product Development. It helps to keep the Product in the market for a long time competing with the competitors effectively and also to create expected value. In this article the key differences between Blue Ocean and Red Ocean strategy are explained.
Blue Ocean Strategy is a business approach that focuses on creating new market spaces, or “blue oceans,” rather than competing in existing, saturated markets (“red oceans”). In product development, applying a Blue Ocean Strategy involves innovating in ways that make the competition irrelevant by introducing products or services that fulfill previously unmet needs or by creating entirely new demand.
Here are key aspects of the Blue Ocean Strategy in product development:
- Value Innovation: Instead of focusing solely on improving current products, Blue Ocean Strategy combines innovation with value creation. This means developing something that provides a quantum leap in utility while reducing costs, essentially crafting a product or service that buyers will find irresistible.
- Non-Customer Focus: Traditional product development often focuses on current customers and how to better serve them. Blue Ocean Strategy, however, focuses on non-customers—those who are not yet participating in the market—and attempts to find out why they aren’t buying existing products or services.
- Differentiation and Cost Leadership: The strategy seeks to break the traditional trade-off between differentiation (higher costs) and low-cost leadership (lower differentiation). Instead, it encourages companies to achieve both by rethinking how they deliver value.
- Four Actions Framework: To apply Blue Ocean Strategy, businesses use this framework to reconstruct market boundaries:
- Eliminate: Which factors that the industry takes for granted can be eliminated?
- Reduce: Which factors should be reduced well below the industry’s standard?
- Raise: Which factors should be raised well above the industry’s standard?
- Create: What factors should be created that the industry has never offered?
- Avoiding Competition: Instead of competing head-on in a crowded marketplace, a company developing products through a Blue Ocean Strategy seeks to sidestep competition by offering something so distinct that it opens a new space where competition is less relevant.
Example: Cirque du Soleil
Before Cirque du Soleil entered the entertainment industry, the traditional circus industry was declining. It was a “red ocean” full of competitors like Ringling Bros. and Barnum & Bailey Circus, where companies competed on similar attributes like star performers, animal acts, and concessions.
Cirque du Soleil applied the Blue Ocean Strategy to create a whole new market space by combining elements of circus and theater, fundamentally changing what people expected from a “circus” experience.
Here’s how they applied the Blue Ocean Strategy:
- Eliminate: They eliminated costly aspects of traditional circuses like animal shows, star performers, and three-ring displays.
- Reduce: They reduced the emphasis on expensive concessions and slapstick humor, which were standard in traditional circuses.
- Raise: They raised the level of artistic performance by incorporating more sophisticated themes, live music, and acrobatic stunts that appealed to adults and corporate clients—not just families with young children.
- Create: They created a brand-new form of entertainment that was a blend of theater, dance, and circus performance with artistic themes, stunning visual effects, and storylines. This broadened their appeal to a new customer base—people who typically attended the opera or theater but were not regular circus-goers.
Impact:
Cirque du Soleil didn’t compete with other circuses by offering more of the same. Instead, they crafted a blue ocean, creating a unique space in the entertainment industry. This allowed them to charge premium prices, attract a more affluent audience, and reduce costs (no expensive animal care or star performer salaries). Their success demonstrated how innovation, rather than competition, could drive market creation and profitability.
This is a textbook example of Blue Ocean Strategy in product development: Cirque du Soleil tapped into a new market by redefining the product and creating entirely new demand.
Key differences between Blue Ocean and Red Ocean Strategies:
Parameter | Red Ocean | Blue Ocean |
MARKET SPACE | Existing Market focus | New Market Focus |
COMPETITION | Intense competition | Reduced Pressure |
VALUE CREATION | Cost Leadership focus on price based | Cost Leadership based on Innovation and unique Value Focus |
CUSTOMER BASE | Existing customers | New untapped Customers |
GROWTH OPPORTUNITIES | Less due to heavy competition | More due to reduced competition |
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