By Mpho Dipela, Chairman and shareholder of Legacy Motor Group
As a business leader, I can attest to how challenging entrepreneurship can be. However, being successful in business is extremely fulfilling, and there are certain ideologies that I find particularly helpful and inspirational which could be helpful for business owners and aspiring entrepreneurs.
One of the business philosophies that I firmly believe in is the Blue Ocean Concept of Strategy. The term was introduced in the book Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne – a book that I highly recommend for any business owner or aspiring entrepreneur, as it is important to have a good understanding of this concept as a businessperson.
Red Ocean vs Blue Ocean
A Red Ocean refers to all the existing current industries or the market space which is known. This is where companies attempt to outperform their competition to gain a bigger share of an existing market. Red Ocean strategies are focused on creating dominance over the competition, and taking a larger share of a limited market in which growth is increasingly curbed.
However, this means that you are competing for the same customers while using the same techniques. So, as more competitors enter the market, the prospect for growth decreases and the resulting cut-throat competition quickly turns the ocean a bloody red. Thus, the term ‘Red’ Oceans.
By contrast, Blue Oceans refer to industries that are currently not in existence. These are the unknown and unexplored markets which remain unspoiled by competition. A Blue Ocean strategy thus gives birth to an uncontested market space which creates and seizes new demand. This demand is created as opposed to fought over like with the Red Ocean, creating abundant prospects for growth that are quick and profitable. Through introducing disrupting innovation and value, this can prove to be an extremely effective strategy for businesses.
This concept encourages entrepreneurs and business leaders to focus on value innovations to grow their market presence and share, focusing on this metaphoric endless Blue Ocean of possibilities rather than actions of potential competitors.
However, the process of discerning and creating Blue Oceans should be very well thought-out, forcing entrepreneurs to restructure markets in a profoundly new way.
There are effectively two ways in which you can create Blue Oceans. The first way is by creating a brand-new industry. The second and more common way is to create a Blue Ocean inside a red one. This occurs when a company modifies the market boundaries of an existing industry.
Tips for a Blue Ocean strategy
Here are two important tips for implementing a Blue Ocean strategy:
- Offer advantages that your competitors may find unimportant: Develop a combination of benefits for different product lines or types of business. The idea is to offer a holistic solution that customers need.
- Look for other buyer groups or other sectors for your product or service: Find a new appeal for your business by seeking underdeveloped markets.
You may be facing a Red Ocean and lack a clear competitive edge. Ultimately, you need to concentrate on locating a Blue Ocean, and carefully consider where you want your business to go.