BLUE OCEAN
STRATEGY
BY : JOMARD P. DULLANO, LPT
Lesson Objectives:
1. Illustrate blue ocean strategy;
2. Distinguish blue ocean strategy from red ocean
strategy;
3. Identify the six (6) basic approaches (six paths
framework) to remaking market boundaries;
4. Determine the strategy canvas; and
5. Enumerate and differentiate ERRC (Eliminate,
Reduce, Raise, Create).
Red Ocean vs. Blue Ocean
“In blue oceans, demand is created rather than
fought over. There is ample opportunity for growth
that is both profitable and rapid.”
Blue oceans are not about technology innovation.
Leading-edge technology is sometimes involved in
the creation of blue oceans, but it is not a defining
feature of them. This is often true even in
industries that are technology intensive.
Occupying an Uncontested Market Space
One principle of blue ocean strategy is to
reconstruct market boundaries to break from the
competition and create blue oceans. This principle
addresses the search risk many companies
struggle with. The challenge is to successfully
identify, out of the haystack of possibilities that
exist, commercially compelling blue ocean
opportunities. This challenge is key because
managers cannot afford to be riverboat gamblers
betting their strategy on intuition or on a random
drawing.
Six (6) basic approaches (six paths framework) to
remaking market boundaries:
1. Define their industry similarly and focus on being
the best within it.
2. Look at their industries through the lends of
generally accepted strategic groups (such as luxury
automobiles, economy cars, and family vehicles),
and strive to stand out in the strategic group they
plan in.
3. Focus on the same buyer group, be it the
purchaser (as in the office equipment industry), the
user (as in the clothing industry), or the influencer
4. Define the scope of the products and services
offered by their industry similarly.
5. Accept their industry’s functional or emotional
orientation.
6. Focus on the same point in time – and often on
current competitive threats – in formulating
strategy.
To break out of red oceans, companies must break
out of the accepted boundaries that define how they
compete. Instead of looking within these boundaries,
managers need to look systematically across them
to create blue oceans. They need to look across
alternative industries, across strategic groups, across
buyer groups, across complementary product and
service offerings, across the functional-emotional
orientation of an industry, and even across time. This
gives companies keen insight into how to reconstruct
market realities to open up blue oceans.
Strategy Canvas
The strategy canvas graphically depicts a
company’s and its competitors value proposition
investments, suggests areas of opportunity on which
to escape/eliminate competition, captures the
current and future state of activity within a market
space, and documents current and future
competitive investment. It graphically captures, in
one simple picture, the current strategic landscape
and the future prospects for an organization.
ERRC (Eliminate, Reduce, Raise,
Create)
A helpful tool in crafting a future strategy canvas is
the Four Actions Framework as it facilitates in
identifying the value elements to be created,
increased, decreased, or eliminated.
The Eliminate-Reduce-Raise-Create (ERRC) Grid
developed by W. Chan Kim and Renee Mauborgne is
a simple matrix like tool that drives companies to
focus simultaneously on eliminating and reducing
as well as raising and creating while unlocking a
new blue ocean.
The ERRC Grid is a tool for the creation of blue oceans. This complements
the Four Actions Framework. It pushes companies not only to ask the
questions posed in the Four Actions Framework but also to act on all four
(4) to create a new value curve (or strategic profile), which is essential to
unlocking a new blue ocean. The grid gives companies four immediate
benefits:
1. It pushes them to simultaneously pursue differentiation and low cost
to break the value-cost trade off.
2. It immediately flags companies that are focused only on raising and
creating, thereby lifting the cost structure and often over-engineering
products and services – a common plight for many companies.
3. It is easily understood by managers at any level, creating a high
degree of engagement in its application.
4. Because completing the grid is a challenging task, it drives companies
to thoroughly scrutinize every factor the industry competes on, helping
them discover the range of implicit assumptions they unconsciously
make in competing.
Thank you
jomarddullano@gmail.com
