Dive Into The Blue Ocean,Find Your Money With No Hesitation

You are a fresh entrepreneur, you have tons of ideas, you are highly determined, and thirsty for success. You are completely new to the business world, and you have one big problem – you do not have the sufficient know-how to optimise costs in your business so that you can make not just revenue, but lots of profit. You attended talks and seminars from experienced bosses and you constantly hear them talking about the Blue Ocean Strategy, but none of them tend to explain it in detail – it is nothing but a foggy idea to you. You know it by name, but you do not know its background, its principles. What confuses you more is when successful bosses always tell you that you are stuck in a RED OCEAN, you need to swim out of the bloody competition! I have zero clue what you are talking about, how am I supposed to relate it to me?!

Ever since the day you received the comment from those bosses, you started doing your own research on both the Blue Ocean Strategy and Red Ocean Strategy. Wow. There definitely is a lot of information regarding it all over the internet. You start understanding how these theories are meant to help bosses like you, tackle the issue of competition in the market. However, your findings are all merely theoretical information, which is much easier said than done in reality! You are very keen on knowing how to apply it. You are certain that this is the answer you have been searching for to help your business resolve its issue with money. There must be a step-by-step model for this, right?

So, in what area does the Blue Ocean Strategy that is being all hyped up by successful bosses tackle? Yes, the central idea is to increase revenue, to make money for your business. But how? Is it by reducing costs? Or, to sell more products? Perhaps, selling different products compared to other people? Which one of these helps businesses generate more money? Is one effort enough to solve your whole problem? If you were to ask a professional, for instance, a CFO, the answer is NO.

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You have to use a set of formulas involving the four basic mathematical operations: addition (+), deduction (-), multiplication (x), and division (÷). How could you tackle this? We’ll look further into that soon.

Xena is the owner of a physiotherapy centre. She not only provides physiotherapy services like every other physiotherapy centre, Xena even gives talks and provides training to physiotherapists. She has been in the industry doing the same thing for many years, and she reckons it was time for her to start building her business. She wanted to be more than just a physiotherapy professional. With her capabilities, it was a waste if she did not build her empire with her own brand.

The term ‘Blue Ocean Strategy’ is not something uncommon to Xena. She read books, she understood the concept of it, but she had one problem: she did not know how to apply it into her business. She believes that just like a doctor who needs a doctor, a coach who needs a coach, and a consultant who needs another consultant, Xena needed someone to help her out with her plan in expanding her business. With her determination to make her dreams into reality burning strong, Xena decided to appoint a CFO to help her out; and this CFO wasn’t just any CFO, he was one who uses the Blue Ocean Strategy extensively to transform businesses from nothing to something spectacular.

If you are reading this, there are chances that the Blue Ocean Strategy is something absolutely foreign to you. You may or may not have heard of its name before. Do not worry about that as I will simplify things for your knowledge, this is why I am here for you!

The masterminds of the Blue Ocean Strategy are W. Chan Kim and Renée Mauborgne. The idea behind this strategy is to educate how companies, rather than competing in the same market, create new demands in a completely new market. It is an entirely different approach that is designed by the joint forces of W. Chan Kim and Renée Mauborgne, following a study done on 150 strategic moves covering a period of 100 years that involves 30 industries. Their extensive findings were officially published in a book entitled ‘Blue Ocean Strategy’ in 2005.

The Blue Ocean Strategy, in simpler terms, is a mental strategy to increase the value of a business for its customers. Of course, the big question here is HOW? Well, it is as simple as creating new products, benefits or services for the customers, while at the same time, reducing costs by eliminating or removing features or services that are deemed to be less valuable. Four key steps should be done to be part of the blue ocean – eliminate, raise, reduce, and create. So, if you are aiming to make your business stand out using the Blue Ocean Strategy, you have to think of a way where you could attract customers without the need of competing with others in the same industry. The idea of this may sound vague and difficult at this point, but a simple coaching session will be helpful to lead you into the blue ocean.

Now that you have heard of the Blue Ocean Strategy, you should also know about the Red Ocean Strategy to make things clearer for you. In contrast to the blue ocean, the red ocean represents the industries that have been existing in the market, also known as the KNOWN market space. When a new business enters an existing industry offering the same products or services, the market space becomes very concentrated, demand becomes limited, and competition becomes significantly high. Competition will reach a point where it is considered to be ‘cut-throat’, turning the ocean, i.e. the market, red.

Why is being in the blue ocean more favourable for businesses compared to being in the red ocean? The Blue Ocean Strategy helps make your business unique when you offer a product or service that is uncommon in the industry. You attract new customers, you attract a unique market that are interested in trying something new. As compared to the Red Ocean Strategy, you are just offering what is already in the market and this means you have to put extra effort in proving that you are better than your rivals. As a result of the Red Ocean Strategy, wealth is divided among rivals but opportunities for these companies to make profits and grow are slowly diminishing. Would you want this for your business? If your answer is no, then the Blue Ocean Strategy is the best plan for you.

The Blue Ocean Strategy strategy is so famous, that it is even used by big enterprises across the globe. One of the best examples is iTunes, a software launched by Apple in 2003. To tackle the issue of illegal music downloads, Apple established iTunes to make music downloads not only easy, but legal for its users as it has signed an agreement with five major music corporations to make this happen. Rather than competing with music stores that sell physical CDs, with iTunes, Apple has created a completely new demand where customers can purchase music digitally, according to their liking – be it a whole album, or just one song. As of up to date, iTunes does not only offer music downloads to its users, but also movies, TV shows, books, and even podcasts. Apple has now dominated the blue ocean for more than a decade, proving how successful a company could get by implementing the Blue Ocean Strategy.

Like I mentioned above, you could work your way towards the blue ocean through a simple coaching session. To help you master the Blue Ocean Strategy, the coaching session can be broken down into four steps:

1. Building a Business Model Canvas (BMC)

The Business Model Canvas (BMC) is a 9 block sheet used for you to see your money clearly. Not only could it be used for your internal decision-making purposes, but the BMC is also a useful tool for you to attract investors by showing them where the money will go, and how money will be made.

2. Plotting a Competitive Chart

A competitive chart is a visual representation that gives you a clearer sight of your position among competitors in the market space. For beginners, a non-complex chart is good enough for your analysis purposes. The horizontal axis represents score values of 1 to 5; whereas the vertical axis will represent the value type numbers. Once you have done this, you should be well prepared for the next step.

3. Blue Ocean Strategy elicitation

Questions are asked at this point to help you have a clearer idea on what components of your business should be eliminated, reduced, raised, and created.

4. Mapping across Value & Cost into BMC to innovate

Remember when I mentioned a CFO will tell you that implementing the Blue Ocean Strategy will involve the four mathematical operations? This step is where the operations come in:

➗ Eliminate Cost, preserve Value with the perspective of Key Partners, Key Activities, Key Resource, Cost Structure.

➖ Reduce Cost, preserve Value with the perspective of Key Partners, Key Activities, Key Resource, Cost Structure.

✖ Raise Value exceeding Cost with the perspective of Cost Structure, Customer Relationships, Channel Distribution, Revenue Stream.

➕ Create Value exceeding Cost with the perspective of Cost Structure, Customer Relationships, Channel Distribution, Revenue Stream.

With all four steps done, you have your strategy of diving into the blue ocean clearly identified. Just take action as you have planned, and you are good to go!

The Blue Ocean Strategy does seem a little more complicated compared to Micheal Porter’s generic competitive strategies, but both exhibit the same business mindset, i.e. “differentiation”. Rather than just competing with others in the red ocean, wanting to be in the blue ocean is challenging in the sense where you must think of ways to make you stand out, come up with something outstanding that makes you unique and convincing in the eyes of your customers. Humanness is, therefore, the key element of the Blue Ocean Strategy. Establishing humanness involves the change in mindset in people, in this case, bosses like you and your top management, to not only shift processes, but to also help you develop the confidence to act.

Humanness involves atomization, firsthand discovery, and fair process. Atomization is a process of breaking the challenge down into smaller actions so that you have more confidence in executing them, in a step-by-step manner. This is similar to what is being done in the coaching process. Next, firsthand discovery is allowing you to see things you have never seen before, making you realise that “hey, it is time for a change!”. Lastly, fair process, or a method of communicating through action to recognise your people for their intellectual and emotional worth. Fair process is the key to building trust and inspiring your people to voluntarily corporate throughout the process of implementing the Blue Ocean Strategy. Overall, making your way into the blue ocean is a process that goes one step of a time, but I could guarantee you that it is worth the effort.

If you are still unsure whether your business has the elements relevant to execute the Blue Ocean Strategy, you can conduct a SWOT analysis beforehand to understand your business’ gain points and pain points better. This is a very useful tool which I have elaborated on future blog “Having an Analytic View of Your Profit with SWOT” for your better comprehension.

Finally, back to Xena. The CFO has helped her create her own Blue Ocean Strategy. From that, Xena decided to eliminate technology and administration tasks from her business, and decided to share it with her partners instead. By this, she should share the costs of KA and KR. In addition to that, Xena created mobile applications for her business by working with companies in the technology industry. A backend product is offered through subscriptions. With this, she managed to reduce the number of physical outlets. She has even raised the standards of her business by selling reasonable packages for senior citizens. With that, Xena has actually executed the Blue Ocean Strategy using all four methods. Now swimming happily in the blue ocean, Xena has successfully achieved her dreams of building an empire for her business.

1. Building a Business Model Canvas (BMC)

2. Plotting a Competitive Chart

3. Blue Ocean Strategy elicitation

4. Mapping across Value & Cost into BMC to innovate

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