Blue Ocean Strategy : Strategy Frameworks Top CEOs Use

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1. What Is Blue Ocean Strategy?
Blue Ocean Strategy is about creating new market spaces—"blue oceans"—where competition is minimal or nonexistent. This contrasts with "red oceans," where companies fiercely battle over existing demand, often leading to shrinking margins.

• Key Idea: Focus on noncustomers or unmet needs, rather than outcompeting rivals in the same crowded market.
• Simultaneous Differentiation & Low Cost: Break the usual trade-off by rethinking industry assumptions and creating value innovation.

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2. Core Tenets of Blue Ocean Strategy
Use these four key principles to reshape your market approach:

• Value Innovation
  - Create a leap in value for buyers (better benefits, novel features) and for the company (cost efficiencies).
• Reconstruct Market Boundaries
  - Look beyond standard definitions of your industry, customer segments, and product categories.
• Reach Beyond Existing Demand
  - Convert noncustomers by removing adoption barriers such as high cost or complexity.
• Align Your Entire System
  - Realign operations, cost structures, and organizational processes to support the new strategy.

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3. The Four Actions Framework (ERRC)
A practical tool within Blue Ocean Strategy is the Four Actions Framework (E-R-R-C). It guides you to:

Eliminate	Factors taken for granted in the industry that may add little or no value.
Reduce	Lower certain factors below industry standard to cut costs.
Raise	Elevate select factors above the industry norm to create standout value.
Create	Introduce entirely new elements the industry has never offered before.

This leads to a new value curve, setting you apart from competitors on both cost and differentiation.

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4. Formulating Your Blue Ocean
Use a Strategy Canvas to visualize your shift from red to blue ocean:

• List key factors of competition (price, speed, design, etc.) on the horizontal axis.
• Plot competitors to see how they invest in these factors.
• Draw your current curve to spot similarities with rivals.
• Apply ERRC to create a new curve—raise what matters, reduce/eliminate what doesn't, and add unique elements.

QuoteSimple Formula (Value Curve Index):
Value Index = Σ (W × S)

Where:
- W = Weight or importance of factor i
- S = Your performance score (0–10) on factor i

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5. Example: Cirque du Soleil

Traditional Circus (Red Ocean)	High costs (animals, multiple rings, star performers). Declining attendance, ethical concerns, price wars.
Cirque du Soleil (Blue Ocean)	Eliminate: Animal acts, multiple rings. Reduce: Star performers, concession sales. Raise: Artistic theme, venue ambiance. Create: Theater, dance, immersive storylines.

By removing expensive elements (animals, star acts) and emphasizing art, storytelling, and theatrical flair, Cirque created a premium experience at lower operating costs.

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6. Another Example: Nintendo Wii

• Red Ocean Rivals: Sony PlayStation 3, Xbox 360 (emphasis on high-end graphics, advanced processors).
• Nintendo's Blue Ocean: Targeted casual gamers, families, and non-gamers with motion controls and simpler hardware.

Actions:
Eliminate – Chasing top-tier CPU/GPU specs
Reduce    – Hardware complexity, production cost
Raise     – Accessibility, social/family fun
Create    – Motion-based control, new demographic reach
They expanded the gaming market to first-time console users while keeping hardware costs low.

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7. Common Pitfalls

• Ignoring Noncustomers: Focusing only on existing buyers can limit innovation.
• Adding Cost without Real Value: "Fancy" extras might not raise willingness to pay.
• Internal Misalignment: A new strategy won't stick if processes and culture don't adapt.
• Copycats: Competitors may try to mimic your success—be ready to evolve again.

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Conclusion
Blue Ocean Strategy enables you to escape "red ocean" battles by creating new demand and innovating on both value and cost. The Four Actions Framework (Eliminate, Reduce, Raise, Create) helps reshape industry boundaries. Examples like Cirque du Soleil and Nintendo Wii show how rethinking traditional offerings can lead to remarkable growth and profitability. Regularly revisit your strategy to keep ahead of imitators and maintain your blue ocean advantage.