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If you want to be a winner in the future, you have to put aside the need for destructive competition between companies, and to expand the horizons of the market by creating value through innovation.

There are two common competitive situations in any industry: red oceans and blue oceans.

Red Oceans: They represent all of today's existing industries, in which industry boundaries are well defined and accepted as they are, and the rules of the competitive game are known to everybody. In this world, companies try to outdo rivals by slowly scratching a market share. As more competitors appear, the potential for profits and growth decline, the products are standardized to the maximum, and competition becomes bloody.

Blue Oceans: They are, to the contrary, characterized by the creation of markets in areas that are not exploited at present, and which generate long term opportunities for sustained and profitable growth. There are blue oceans that have nothing to do with existing industries although most of them come from red oceans in which the boundaries of existing firms have been expanded.

Take the example of world-renowned Cirque du Soleil, created in Canada in 1984 by a group of actors. Their performances have reached over forty million people in ninety cities around the globe. At a first glance, few would have considered a good idea to start a new business related to the circus. In fact, the circus, as a traditional concept, is in the doldrums. Children, who were the circus natural audience, live now much more interested in electronic games than in what happens under a tent.

Cirque du Soleil has managed to create a blue ocean characterized by an innovative show business concept, which is clearly differentiated from preexisting industries (the circus and the theater). It has significantly reduced costs on the industry's traditional competition factors, and has expanded the boundaries of the market by diversifying its audience.

The synchronization of the sales force must be performed under 3 dimensions:

The principles to create a blue ocean strategy are:

1. To create new consumption spaces.
2. To focus on the global idea not on the numbers.
3. To go beyond the existing demand.
4. To ensure commercial viability of the blue ocean.

The process of discovering and creating blue oceans does not consist in trying to predict the trends of an industry or of an industrial sector through a purely divinatory exercise. It is neither about implementing the new ideas that occur in the minds of managers using the method of trial and error. The first principle for the creation of such strategy is to establish a structured process with the capacity to expand the boundaries of the market as conceived today.

The first principle for the creation of such strategy is to establish a structured process that succeeds in expanding market boundaries as conceived today

We must concentrate on the whole, not on numbers. An alternative to the traditional strategic planning process is: instead of developing a formal document, it is more advisable to draw on a canvas a "value curve", and in the clearest way possible, the strategy that we want to implement. When performing this –apparently simple- exercise, it does not mean that we will not have to make numbers and to place all our compacted ideas into a final document (that will happen later). The details are easier to grasp if we first have a clear vision of the way that we want to distance ourselves from the competition.

No company wants to venture beyond red oceans to be found swimming in a ridiculous puddle. How can we maximize the size of the market we are creating? This question leads to the formulation of the third principle of the blue ocean strategy: to go beyond the existing demand. In order to maximize the range of blue oceans, instead of focusing on clients, companies have to direct their gaze towards non-clients, and instead of maximizing the focus of their attention on the differences among clients, they should enhance the common elements that they all value.

The objective is no other than reducing the risk involved in implementing such a strategy. To ensure the viability of the strategy, an answer to the following questions must be found: • Will customers obtain an exceptional profit from the new business idea?
• Is the price marked for products or services available to the great mass of potential clients?
• Taking into account the price objective that we have set; is the cost structure that we have, feasible?
• Are there obstacles to transform our current value proposal?

An important aspect that we must not forget is to determine an appropriate price for the viability of the blue ocean strategy. The strategic price to be fixed for the supply of goods or services must not only attract clients massively, but must also be an incentive to retain them. When an exceptional profit is combined with a strategic price, the possibility of being imitated by the competition is reduced.

Innovation in the value offered to clients is not equivalent to technological innovation. In order for the new product or service to succeed in attracting consistently the masses, it must make clients' lives much easier, more productive, more comfortable, more fun, and less risky; and all that, while respecting the environment. Furthermore, it must do that at each of the phases that make up the client's consumption experience: purchase, delivery, and use or maintenance. The new proposal must not only provide a clearly differentiated profit from the existing one, but must break down the barriers that prevent non-clients to switch to our side.

After applying the four listed principles that were briefly described above, we are ready to implement our strategy. However, giving birth to a blue ocean is not a static process. When a company embarks on this type of strategy, sooner or later imitators can appear on the horizon. Therefore, they have to learn not to rejoice in their current success. To successfully navigate in a saturated market, it is a must to remain on permanent alert.

Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, Harvard Business School Publishing Corporation © 2005.

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