Creating Blue Oceans

Blue Ocean Strategy Action #3: Raise

Continuing with our Blue Ocean Strategy Wisdom series, our focus is the Four Actions Framework as seen through the example of Cirque du Soleil. Once featured, each entry is made accessible through the Blue Ocean Strategy Basics archive of this site.  Having covered the first two actions, Eliminate and Reduce, we move to the third action, “Raise,” as depicted on pages 36 - 37 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Cirque du Soleil kept and raised the physical structure of the traditional circus, so as to create a unique venue:  It glamorized the tent, which many circuses had abandoned in favor of rented venues in major cities. Instead, realizing that the tent, more than anything else, captured the magic of the circus, Cirque designed this classic symbol with a grand external finish and a high level of audience comfort, and had it assembled at each venue of the tour.

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Buy the Blue Ocean Strategy book.

[Image via Bag Snob.]

Are you being taken to the cleaners?

A principal credo of Blue Ocean Strategy is to challenge taken-for-granted industry assumptions. While most businesses are stuck competing within boundaries and rules set by others, questioning such assumptions can lead to unprecedented value propositions for customers, and hence blue oceans.

As an illustration, consider the outrageous prices of dry-cleaning. You buy a $20 shirt then pay $4 to dry-clean it pretty much after each wear. In other words you pay twenty percent of the purchase price of an item just to have it cleaned.

 Using the same ratio you would pay four thousand dollars for every car wash if you own a twenty thousand-dollar car. The expression "being taken to the cleaners" is no joke. Such an out-of-whack cleaning cost to purchase price ratio seems like a strong justification for introducing disposable shirts, suits and dresses even.

[Image via Mazda6.]

Invest in Blue Oceans

A forerunner in India’s technology sector, HCL’s  Blue Ocean has emerged through the combination of collaborative outsourcing (client companies can pick and chose which part of their IT infrastructure operations to outsource) and remote management, as well as its strong focus on partnering.  HCL continues to be one of  the fastest-growing IT companies today.

Recently, Vineet Nayar, CEO of HCL Technologies discussed Blue Ocean Strategy with Forbes India:

If the current slowdown has taught us anything, it is the importance of interpreting weak signals, to invest in new opportunities, in ideas for tomorrow.

When I read Blue Ocean Strategy in 2006, I realised that the thought of finding these uncontested markets fit very well into what I had already planned for my company. Till date, this has remained my most influential book.

A “red ocean” refers to a saturated market where there is fierce competition among companies offering similar services; a “blue ocean” is new markets untouched by competition. The aim of this strategy is to create a new market space, making the competition irrelevant.  When we decided to chase integrated services by outsourcing in 2005, we had few believers. We surprised people with our big deal announcements, but the market soon followed us. We created new engines of growth, business lines and pricing models; shifted from being volume-driven to value-driven; ventured into new geographies; identified SAP as a potential market and growth engine to catapult us into global leadership.

[Image via Forbes.]

Can you spot common needs across all your customers?

Most businesses are focused on market segmentation and customization, in an effort to better differentiate customers. This is an increasingly complex and costly proposition. Instead, why not seek out commonalities, needs and aspirations that all your customers share, thus creating a foundation for mass appeal and a Blue Ocean Strategy?



In the early 90's when foreign eateries began penetrating Eastern Europe in larger numbers, a Mexican restaurant opened in Budapest. Craving some basic Tex-Mex, I went there during its first week of operation and ordered a taco.



Much to my surprise, instead of a crunchy taco, I was presented a traditional Hungarian-style, thick eggy crepe. When asked about the apparent mix-up, the proprietor energetically retrieved a pack of real taco shells from the kitchen and exclaimed "Who in their right mind would ever want to eat this hard, dried-out piece of nothing?" He had obviously took it upon himself to question the appropriateness of Mexican culinary tradition for his clientele, and opted to mix in strong local elements in order to make his food selection sizzle with mass appeal.

[Image via IPKat .]

Blue Ocean swoosh

We recently spotted two similar articles which help illustrate a core principle of Blue Ocean Strategy:  The simultaneous pursuit of lower cost and differentiation.  The underlying theme from both of these articles is the creation of new products from discarded materials, or in a much cheaper, new way. For both companies featured, it affords the immediate and coveted label of being ‘environmentally-friendly.’  Meanwhile, Nike’s initiative allows it to lay claim to being ‘lifestyle market driving’ — as opposed to being market driven.

First, the article on Nike from BusinessWeek:

Nike (NKE) isn't anyone's idea of a scrappy company. But one style of its athletic shoes is—literally. The Trash Talk is made from scraps of leather and synthetic materials that are stitched together and attached to a recycled rubber sole. The shoe is constructed well enough for NBA play, yet with sufficient style and eco-cred to win Best in Show in this year's International Design Excellence Awards.

Next up, the article on TerraSkin from BusinessWeek:

Used to be bag options at the store were paper or plastic. Now shoppers can choose cloth bags, too. They may have another alternative: rock. Shopping bags and boxes from gift stores at New York's Museum of Modern Art, bags from personal-care company Erno Laszlo, and packaging of consumer products from Burt's Bees look, feel, and fold like paper, but they're made of crushed stone.

[Image via Springwise.]

Can You Make Your Competition Disappear?

You can make your competition irrelevant by really understanding what target customers ultimately want.  If your offering is nothing more than an imitation or incremental improvement of your competition, then you are stuck treading water in a red ocean.  But if you can clearly distinguish yourself and deliver superior value, then your competition becomes irrelevant and you will be in an uncontested Blue Ocean.

Consider an example from the world of sports. In the 2000 Sydney Olympic Games a swimmer from Equatorial Guinea qualified for competition not by meeting the minimum time standard, but by winning a wild card entry.  Such cards are randomly allocated to athletes from small, third world countries who otherwise would have no chance to meet the competitive standards.  The intent is to make the Olympics a truly world-encompassing event. 

This particular athlete gained instant celebrity status by flailing and splashing his way to an unforgettable last place showing.  Being exposed to a full size swimming pool for the first time, and uninitiated in the ways of a diving start, he somehow managed to finish the 100-meter heat to the spectators’ uproarious reception.  Such a display of courageous dilettantism made him one of the most talked about athletes of the games, winning him worldwide fame, celebrity invitations and attractive promotional opportunities.  Why such raving success for the worst swimmer in Olympic history? Because he unintentionally sidestepped head-on competition with his much more qualified rivals, and instead gave spectators what they really wanted: inspirational entertainment.

[Image via Terry.]

Following the example of Ukrainian bandits

Instead of manufacturing products or providing services within certain industry limits, businesses should be in the business of providing comprehensive solutions to customers, even if that means overstepping traditional industry boundaries.

As an illustration, consider the following anecdote. In the 90’s, scores of Ukrainians would pack into buses headed for Central European destinations such as Budapest, where they could buy all kinds of western consumer goods for the first time.  These elaborate shopping excursions caught the attention of the Ukrainian underground.  Packs of modern-day bandits started raiding the buses in mid-journey, knowing that they were full of cash on the way out or full of goods on the way back home. 

As this ritual evolved, empathetic bandits began issuing certificates to their victims which stated that they have already been robbed.  This way, if the bus was to be intercepted again, the passengers could prove to the next group of robbers that they have already been cleaned out and were not trying to hide anything.  As such, the certificates saved time and confusion, and by overstepping traditional boundaries of banditry, much improved the overall experience of the victims.

[Image via JMC.]

Motel 6 got mojo

What is the  common link among all the companies that are successful in creating Blue Oceans?  The  answer can be distilled down to two words: lifestyle enrichment. Companies that understand that they are not in the business of selling certain products or services, but rather in the business of delivering lifestyle or ‘workstyle’ enrichment to customers, are the ones that prosper.

When one thinks of lifestyle enrichment and the hospitality sector, Motel 6 is not likely the first brand to come to mind.  Its parent company, Accor, however, was behind the big Blue Ocean move in the mid 1980’s with the creation of the Formula 1 hotel chain.  Now, in a Blue Ocean-like move of its own, Motel 6 is looking to re-invigorate the brand by taking away certain features as a way of cost savings, simultaneously targeting a new customer group (business travelers) and going after a more hip and trendy look. 

From BusinessWeek:

To stay within its budget (Motel 6 declined to share figures for this article), Priestman Goode aimed to get the most use out of every piece of furniture. "We had to reduce costs wherever we possibly could," says the design company's co-founder and director, Paul Priestman. In fact, the restrictions led to moments of design ingenuity. For instance, the firm designed one unit to house a flat-screen TV, closet space, and a lighting system. The new beds have space underneath for luggage storage, while there's a compact work area for business travelers. Recycled materials and energy efficient systems were also used.

The redesign comes at a time when the company is looking to market itself to corporate customers. Last year, the company pulled in $60 million from business customers, but it forecasts $100 million next year, despite the downturn. 

[Image via Starving Vendors.]

How much are your customers willing to take?

Few products and services are used in a vacuum. In most cases, other products and services affect their value, or perception of value. So you should think about what associations your customers make with your offerings, what do they perceive as complementary ones, and what could you offer as a new value proposition.

Consider the following perceived association: Car advertisements often give much weight to describing the stereo system of a new car model. The stereo must represent a relatively small part of the overall cost and complexity of a vehicle, yet commercials often say things like: "the car features a roaring 24 valve, 6 liter engine and an impeccable six speaker, high fidelity stereo system."  This is presented as if the two were of equal importance. The reason must be that consumers have acquired the notion that the quality of a car's audio system closely reflects its overall driving performance.

If this is the case, it may open up a great new value proposition shift: Offer Yugo-quality cars, but equipped with a previously unheard-of, thirty-six speaker stereo system, and in advertisements de-emphasize driving performance while greatly up-playing the dream-like musical experience. Taking it further, the strategy could eventually feature a top of the line stereo package with a car attached to it.

[Image via alokemon.]

Defying Conventional Wisdom: Sold to the highest bidder

Blue Ocean Strategy is all about challenging conventional wisdom – questioning taken-for-granted assumptions, and overstepping industry boundaries. It’s a frame of mind of continuously questioning and searching for a different angle and fresh perspective. You can draw inspiration from everyday life, and train your mind by having a discerning view of the world around you.  As a follow up to our story from yesterday, consider the following bit of comic insight as example of challenging conventional wisdom.


In order to promote free enterprise as well as to greatly increase town revenues, municipalities should position and operate road signs and traffic lights based on public auctions. This would enable busier or more prominent residents to pay for the convenience of customized traffic flows. For example, a VIP resident could pay for the convenience of having favorable traffic lights installed from the end of her driveway all the way to work and back. This system would also inject a spirit of joviality and fun competition into neighborhoods. For example, to humor a neighbor one could pay to have consecutive speed bumps installed right in front of his house, and to designate a “no parking” zone all around his property.

[Image via Soggy Semolina.]