BLUE OCEAN vs RED OCEAN STRATEGY. ANY NUANCES?
Unchartered paths are the dream of any business that wants to start any venture, simply because the assumption is that there’s a propensity to capture a huge market share and dominate later. In other instances, becomes a monopoly. When INSEAD professors, Chan Kim & Renée Mauborgne authored the book on Blue and Red ocean strategy, they sought to unearth the benefits, challenges, distinctions and impact of it on major stakeholders in an industry. Before I proceed, I’d like to simplify what these terms are; the red ocean is essentially the known market space, where industry boundaries are defined and companies try to outperform their rivals to grab a greater share of the existing market. Everyone is aware of this industry and is trying to build an innovation around it and trying to outdo one another. A classic example is the ubiquitous Amazon FBA by e-commerce enthusiasts, another example could be fintech. On the other hand, the blue ocean is an unknown market space, unexplored and untainted by competition. Like the ‘blue’ ocean, it is vast, deep and powerful – in terms of opportunity and profitable growth. Not known by anyone who comes up with such an idea or product or seeks to capitalize on that to gain a vast market share and achieve total monopoly. To clearly understand this, let’s take McDonald’s. The fast-food industry is fiercely competitive, marked by prominent advertising, aggressive pricing, and a constant flow of new product offerings. McDonald's serves as a strong example of a company that has thrived using a red ocean strategy. Rather than creating a niche market, they have continued to excel by consistently offering quality burgers made with fresh ingredients in a familiar and traditional restaurant setting. An example of a blue ocean is the iTunes. In 2003, Apple uncovered a vast, blue ocean market for digital music providing free, convenient, and legal song downloads in iTunes. It allowed users to purchase individual songs for affordable prices. Previously, they had to buy a whole CD if they wanted only one or two pieces. Now iTunes has 99 million subscribers worldwide, having implemented the best of a blue ocean strategy.
image: differences between red and blue ocean strategy
However, when a blue ocean strategy is launched, there’s a hurdle that they would have to cross but that wouldn’t happen until the government feels a sense and a need to understand. More often than not, to protect the interest of users and tax (of course). From the business analysis perspective, the need to consider regulatory compliance is key. In the past years, some blue ocean strategies have had to deal with regulatory issues in their quest to venture into new markets in new geographical areas. For instance, Europe has had long-standing problems with Uber in areas of data breaches, reclassifying their drivers and so on. That is one of the major issues some businesses would have to deal with before they can move forward. But come to think of it, new government regulations could also trigger new business ventures. When the government enacts a regulation that mandates specific actions for businesses or citizens, it introduces a new challenge that needs to be addressed. This, in turn, generates economic opportunities. By creating a new problem through regulation, the government inadvertently opens the door for a Blue Ocean strategy, where innovative solutions and untapped markets can emerge seemingly out of nowhere. But with time, it might become a red ocean when new entrants rapidly get into it. In that case, the fight for the top spot could be met with innovation and aggressive marketing techniques. Red Ocean's strategies usually center on using well-known tactics to compete in already-established market spaces.
THE PRODUCT
Whether it is a red ocean or blue ocean strategy, the product owner or business analyst responsible for helping launch a product into the market would have to consider a plethora of factors. As mentioned earlier, the underlying objective of any business is to stay ahead of the curve and thus the need to fine-tune the product to make users stay glued to it is essential. Every step and process matters in this regard. From the determination of business goals to collecting requirements for the software team, business analysts should consider the user who would be a micro-factor in building a significant user base to translate into active and returning users.
Both red ocean and blue ocean strategies may not share similarities but the main goal of every company is profit, if it’s a not-for-profit organization, the impact of the project as the main objective stands out above everything else.
