In their best-selling book, “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant” and “Blue Ocean Shift,” world-renowned professors Chan Kim and Renée Mauborgne argued that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool.
Embraced by organizations and industries worldwide, the book challenged business leaders to change their way of thinking. The authors broke the competitive landscape into two bodies of water, a “red ocean” where the same people with the same services ate away each other’s margins, and a “blue ocean,” where demand is created rather than fought over.
Kim and Mauborgne believe that red oceans are all the industries in existence today—known market spaces. This is where industry boundaries are defined and accepted, and the competitive rules of the game are known. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. This analogy describes the wider, deeper potential to be found in unexplored market space.
In essence, the process of Blue Ocean Strategy is to create and increase elements of positive customer experience to differ from the competition, and to reduce or drop the parts that have been taken for granted—once not deemed necessary in the market.
The thinking is in line with the strategy that Terwiesch and Siggelkow say companies must adopt today, and why they must transform themselves to compete with an increasingly connected and educated consumer. They break the customer journey into four stages: Recognize, Request, Respond and Repeat. The fourth stage is the most fundamental of the strategies because it helps transform stand-alone experiences into long-lasting, valuable relationships.
“It is this stage that allows companies to learn from existing interactions and shape future ones,” Siggelkow says. “If they can, they will be able to create a sustainable competitive advantage.”
The Repeat dimension helps brands with two forms of learning. First, it allows them to learn how to better match the needs of an individual customer with the company’s existing products and services. Over time, and through repeated interactions, Disney learned that a customer seems to like ice cream more than fries, and theater performances more than rides. The information enabled it to create a more enjoyable itinerary for the customer.
Second, beyond this sort of customer-specific learning, Repeat allows companies to engage in population-level learning, which in turn allows them to adjust their existing portfolios of products and services. If Disney learns that the general demand for frozen yogurt is increasing, it can add more stands serving frozen yogurt.
Over time, Terwiesch says these two levels of learning have another very important effect: “The knowledge can create opportunities for companies to create an even wider range of services, and to develop trust relationships with customers that become very hard for competitors to break.”
In a competitive landscape filled with journeys that force you to decide from swimming in the red or blue oceans, it is important to find the right process and tools for the ride. And if there is one thing that Kim and Mauborgne taught us in “Blue Ocean Shift,” you have the power to decide.
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