Find Your Blue Ocean

To effectively implement the Blue Ocean Strategy, you must understand its foundational concepts, including value innovation, the strategy canvas, the four actions framework, and the eliminate-reduce-raise-create (ERRC) grid. These tools and principles provide a roadmap for organizations seeking to create uncontested market spaces.

2.1. Value Innovation

Value innovation is the cornerstone of the Blue Ocean Strategy. It is the process of aligning innovation with utility, price, and cost positions to create new value for customers while simultaneously reducing costs for the company. This approach allows businesses to break the traditional trade-offs between low cost and differentiation, making unique and innovative offerings that appeal to a broader market.

Value innovation involves two primary components:

1. Creating value for customers: This is achieved by offering unique products or services that address unmet needs or provide solutions to existing problems in a new, innovative way.
2. Lowering costs for the company: This is done by streamlining operations, eliminating unnecessary features or services, and optimizing the use of resources to reduce overall costs.

By focusing on value innovation, businesses can create a competitive advantage and attract customers away from existing market players.

2.2. Strategy Canvas

The strategy canvas is a visual tool that helps businesses identify and compare their current strategy to those of competitors. It allows organizations to see the factors that drive competition and determine where to differentiate themselves in the market.

A strategy canvas consists of two axes:

1. The horizontal axis represents the range of factors that affect competition in the industry.
2. The vertical axis measures the offering level of each element, from low to high.

By plotting their current position and that of their competitors, businesses can identify gaps in the market and areas where they can create new value. The goal is to create a unique value curve that distinguishes the company from its competitors and appeals to a broader customer base.

2.3. Four Actions Framework

The four-actions framework is a crucial component of the Blue Ocean Strategy that helps businesses reconstruct buyer value elements by challenging industry assumptions and rethinking their approach. The framework consists of four essential actions:

1. Eliminate: Identify the factors the industry has long competed on and consider eliminating them to reduce costs and create a new market space.
2. Reduce: Determine which factors can be reduced well below the industry standard to cut costs further and differentiate from competitors.
3. Raise: Identify factors that should be raised above the industry standard to create additional value for customers and drive demand.
4. Create: Discover new factors that can be introduced to the market, offering unique value and generating uncontested market space.

By applying the four actions framework, businesses can rethink their competitive strategy and create a new value proposition for customers.

2.4. Eliminate-Reduce-Raise-Create Grid (ERRC)

The ERRC grid is a practical tool that complements the four actions framework, providing a structured way for businesses to apply the framework and identify opportunities for value innovation.

The grid is divided into four quadrants:

1. Eliminate: List the factors that could be eliminated to reduce costs and shift the focus to new value drivers.
2. Reduce: Identify the factors that could be reduced below the industry standard to differentiate the offering further and streamline operations.
3. Raise: Determine which factors should be raised above the industry standard to create a unique value proposition that appeals to customers.
4. Create: Pinpoint the new factors that could be introduced to generate uncontested market space and attract a new customer base.

Using the ERRC grid, businesses can systematically identify opportunities for value innovation and develop a strategic plan to create a blue ocean market space.