The Power of the Blue Ocean Strategy for Small Businesses

Blue oceans – areas where your business can thrive away from the carnage of too much competition, too much supply, and too little demand. A blue ocean business strategy can bring unprecedented value to your company, doing away with traditional competitive rules as you target new value in a new market.

But isn’t this just for more prominent businesses? Can a Blue Ocean Strategy for small businesses be successful? Small businesses can gain a lot from a blue ocean approach, but only if they pursue this plan carefully and carefully. Read on to learn more about what blue oceans mean and the difference they can make to your digital business strategy.

Definition of Blue Ocean Strategy

Blue ocean strategies are methods your business can use to move into an untapped market, bringing in new customers while getting ahead of your competitors. Saturated markets are found in most sectors, and yet growth is still the target for businesses.

There is no room to maneuver in overcrowded industries, and an increasing number of businesses compete for the same number of customers. Blue ocean opportunities target new markets to move into rather than pursuing dwindling opportunities from your existing lead base.

It’s a new way of thinking. Your organization creates a new market space rather than competing for limited space. The opposite of this is a red oceans strategy. In a red ocean, the metaphorical waters are stained red by companies fighting against each other as supply exceeds demand. In a Blue Ocean Strategy, these waters remain clear and blue because there is plenty of room to achieve profitable growth without conflict or distraction.

Benefits of Blue Ocean Strategy for small businesses

Why are blue ocean strategies so important? Moving in a new direction can immensely benefit your business in several ways.

You can focus on what you do best

Creating and developing products and services are the things you do best, and your customers love you for this. If you are distracted by trying to out-position your competitors in a red ocean environment, it isn’t easy to meet the needs of your customers.

Your products sell at a fair price

Pricing is also important. Adopting a blue ocean model means you can increase demand for your offerings. In other words, you won’t need to devalue your products and services by selling them below their worth. You also won’t be forced to raise prices to counter the cost of competition.

You won’t need to compete with bigger fish

Mega corporations don’t mind operating in a red ocean environment much, simply because they have the resources required to dominate. For smaller businesses, blue ocean opportunities offer a chance to thrive rather than being crushed by the big players in the field.

There is huge growth potential

One of the defining features of the blue ocean pathway is its growth potential. In more traditional market environments, attempts at progress get thwarted repeatedly, and businesses become distracted by oversaturation and a crowded marketplace. Blue ocean strategies avoid these obstacles and distractions, creating an uncontested market space with real opportunities for growth.

You have the opportunity to explore a new market

Making a blue ocean strategic move means operating in a new market. This new market might provide you with opportunities you never even realized existed as you explore new areas of development for your brand and products.

Freed from dwindling opportunities and constant competition, you can research and develop new products and services that solve your customers’ key pain points.

Analyzing current market space

Creating a blue ocean space begins with analysis. This is the process of examining the market your business is currently operating in, providing the foundation you need ahead of your shift towards something better.

As part of the analysis, think about the following questions:

• Who are my key competitors in this market?
• How many rival organizations are operating in this same market space?
• Who is the dominant force in this market?
• What is the existing demand for my products?
• Does supply outpace demand in your sector, or is it the reverse?
• Which businesses have entered the market in recent years?
• Is the consumer base growing, remaining the same, or shrinking?
• How can you add to your current product range?
• How is competition impacting your operations – is dealing with competition distracting you from developing products and serving customer needs?

All business strategies need a focus – a factor that makes them necessary. If your current industry includes only a small number of competitors, you are the dominant force in your field, and there is a healthy demand for your products, there may be no need to make a significant change.

On the other hand, you may have many competitors. You may feel squeezed by bigger fish in your market, and you may find that your space is already saturated. In this case, creating blue oceans could be the answer. Your analysis will tell you if this is the case.

Identifying untapped markets

Competition is healthy, but there is a limit. When the market becomes too crowded, everyone suffers – including your business and customers. This is where expanding into untapped markets can change the game, opening the door to a world of possibility.

But how do you find these untapped markets?

Adopt a problem/solution mindset

The best products are solutions – in other words, they solve a problem. So, what issues do consumers currently have? Put yourself in the shoes of your customers, think about the pain points and areas of friction, and consider how these could be solved.

Deconstruct your existing product range

It’s time to get up close and personal with your existing products. Think about these products in detail – what is working, and what is not? You’re looking for an issue that needs to be improved, something that could revolutionize your market space. This is the starting point for many blue ocean success stories.

Be a listener and a communicator

Finding untapped markets requires excellent communication skills – mainly listening. Draw upon customer feedback to find out more about the issues consumers are facing. Open up the floor in the office so that everyone on your team gets to put forward their ideas about how to solve critical customer problems.

Seek out new viewpoints

Some of your customers are happy to make their voices heard. Other customers, however, might be more hesitant. Seek out a diverse array of viewpoints, broadening your search for an opportunity. Your blue ocean strategic moves might begin in the place you least expect.

Creating an uncontested market space

Remember – when working to identify untapped markets, you are not looking for product ideas from potential customers. Instead, you are looking for an opportunity to create products that customers don’t even know they need. Once you’ve identified an untapped market, you must create your uncontested market.

This requires a shift in focus:

• Rather than being defensive over what you’ve got, you need to be proactive and innovative as you look for new opportunities.

• Rather than defeating the competition in your current space, you need to make the competition irrelevant.

• Rather than working to get the best from the current demand, you need to actively generate new demand.

• Rather than working within existing market boundaries, you need to deconstruct and reconstruct market boundaries.

• Rather than accepting compromises over value and cost, you need to create bold, user-focused products and services.

All of this can be difficult to get your head around at first. We’ll look at some case studies later, but here’s a brief example of how this focus shift works in practice.

As music publishers and record labels found their profits squeezed by illegal downloads in the early 2000s, Apple saw an opportunity. Using the tech concepts already in use by pirate platforms, Apple created iTunes – a simple, easy-to-use, totally legal alternative.

Rather than scrap for a piece of an ever-shrinking pie, Apple shattered industry boundaries and moved into new markets – chiefly, legal music downloads. This led to products like the iPod, which dominated the space over the next decade.

Developing a unique value proposition

Unfortunately, it’s not enough to recognize a customer’s need and to fill that need. You have to market your solution – make sure your consumers understand what makes your solution so unique. It would help if you had a unique value proposition or UVP.

Use the problem/solution dynamic discussed above

We’ve already touched on the problem/solution dynamic, and we’ve also described how customers may have a need they have yet to be aware of. By clearly defining an issue that consumers are facing and demonstrating how your products and services overcome this issue, you are creating a solid value proposition.

Remain focused

It’s tempting to go overboard, offering lots of different solutions to lots of other problems. This can result in a loss of focus. Find a single, clear need and emphasize overcoming this obstacle. You can always look at solving other problems further down the line once you have created a blue ocean opportunity.

Pick out key sources of value

There may be many reasons why your product or service can make a difference for your users, but keep your customers manageable with messaging. Choose one or two key points of value, and lead with these points as you market your UVP.

Craft a compelling tagline

Communicating your unique value proposition is crucial. It would help if you had impactful messaging that shows your audience what you are all about and tells them why your offerings are so valuable. Keep it short and simple, and use words that resonate with your customer base.

Differentiating from competitors

Taking advantage of a blue ocean opportunity means diverging or differentiating yourself from your competitors. To monitor this differentiation, you need to create a new value curve. This is a handy tool that helps you visualize the key points of difference between you and your rivals.

Yellow Tail gives us an excellent example of how this can work.

To begin with, Yellow Tail competed with its market rivals on price. Budget wines were the low-cost option, higher-end wines carried the highest price tag, and Yellow Tail wines were somewhere in between.

Rather than competing with premium and budget brands in all areas, Yellow Tail scaled back on some of these factors. They didn’t use technical winemaking terms in their messaging, and they didn’t advertise the aging quality of the wines. Instead, they let their competitors scrap it in these red ocean battlegrounds.

They raised the prestige of their vineyard in their messaging, as well as the complexity of their wines, but they didn’t oversell either of these points. They decided instead to find a point of divergence. They focused on their value innovation – the easy drinkability of their wines, the ease of selection, and the fun and adventurous feel of the brand.

This is where the curve began to rise more steeply. In the strategic sequence, Yellow Tail operated alone in new, untapped market areas. They had differentiated and were now operating in blue ocean territory, serving customers responding well to their wine products.

Apply this value curve to your approach as you make your blue ocean strategic moves and stay differentiated from your red ocean competitors.

Implementing Blue Ocean Strategy

If your blue ocean approach is to be successful, you need to have all your people on board. This is especially true when discussing the Blue Ocean Strategy for small businesses. Up to now, we’ve looked at a few examples of how this can work for big enterprises – but the margins are a little slimmer for smaller organizations.

Demonstrate the value of the Blue Ocean Strategy to your team

Share case studies and examples of how the blue ocean works. Hold meetings and facilitate discussion that gets people interested and confident in the potential of the blue ocean.

Show your people the existing demand/supply ratio in your current market

Communicate the current state of affairs in your market. Discuss how there are just not enough existing customers to fuel demand. Reinforce the idea that a red-to-blue shift is the right way to go.

Define practical steps for success

Outline different tiers of non-customers. These include customers who are ready to jump ship from a competitor to your business, customers who are not interested in making the switch, and customers who do not need the product. Discuss and define practical steps for reaching each of these categories.

Focus your team with the value curve

Use the value curve tool discussed above to demonstrate how your company can move beyond the red ocean environment into more transparent waters. Begin planning how you will communicate the point of differentiation to your customers and how you will launch your product offerings into the new market.

Measuring success

Measurement is key to your blue ocean strategic shift – this is what will tell you whether or not the project has been a success.

Choose your metrics

To begin with, you’ll need metrics. Are you looking to increase your overall revenue, grow your reputation among customers, bring in more long-term subscribers, or build your business another way? Select the most relevant metrics and define the base level you will measure from.

Monitor the strategy as it develops

Keep checking the performance of your strategy according to your chosen metrics. Assess how long it takes to reach each incremental milestone – are you ahead of schedule, on track, or falling behind? Gain quantitative data – like sales figures and customer numbers – and qualitative feedback from customers and stakeholders.

Decide what is working and what’s not

Once you have gathered your data, you can begin to see what is working and what is not. Don’t expect your strategy to be 100% successful immediately – you will likely have to make adjustments and modifications as you strive to achieve complete differentiation in your new blue ocean market.

Keep the cycle moving

The Blue Ocean strategic shift is an ongoing process. After deciding what’s working and where you can improve, you must return to the beginning of the monitoring cycle as you examine your modifications and adjustments.

Case studies and examples

We’ve already looked at some examples of companies that created blue oceans, innovating new value and generating new demand from an expanded target market. Let’s examine how this worked and how these brands overcame key organizational hurdles.

Ford

Ford was one of the early pioneers of blue ocean thinking. In 1908, they introduced the Model T – one of the first mass-produced, broadly available autos in this sector.

There were plenty of manufacturers operating in the market in 1908, but these organizations provided expensive, custom-made vehicles to their customers. They often needed to be more reliable, and they represented novelty items rather than everyday modes of transport.

Ford turned the market on its head with a new business model. Constructed to the exact specifications, ultra-reliable, highly durable, and more cost effective than many of their competitor vehicles, the Model T laid the groundwork for the automobile market we know today.

Canon

Copiers used to be office machines. Business owners, office purchasing managers, and print shop operators wanted to buy large-scale copiers and other technical solutions. These machines would be working around the clock, printing out vast quantities of documents. They needed to be robust, fast, and big enough to handle large-scale jobs.

The major industry players had all forgotten about individual consumers. As personal computers became increasingly common in households worldwide, individuals still had to go to print shops and other businesses to handle printing and copying needs.

Canon recognized this need. They launched the first affordable and reliable at-home printer and copier machines. These machines quickly took off, shaping the home office environment for decades.

Cirque du Soleil

The example of Cirque du Soleil shows how the blue ocean model can be extended to almost any industry, like the circus industry for example. Circuses had been around for centuries and were mainly out of fashion by the late 20th century.

There were also organizational difficulties within the industry. Shifting attitudes to animal welfare put the whole medium in crisis, while the target audience of the circus – children – were bored with the idea of watching clowns run around a drafty big top.

Cirque du Soleil envisaged something very different. They understood the enormous gap in the market for a circus in which spectacle and artistry took center stage. This would not be a faded sideshow aimed at making children giggle – an extravaganza of acrobatic excellence that would captivate an adult audience.

The organization did something that would once have been considered unthinkable. They made going to the circus a sophisticated experience; they made it cool.

Meet core customer needs and expand into blue ocean markets

At the heart of the blue ocean model is the consumer. Suppose you can solve real customer problems, delivering a neat and innovative solution that aligns with consumer needs. In that case, you can set your business apart from your rivals in the market. Adopt a considered and careful approach to this competitive strategy, and move towards a new, more effective business model.