How the Smartest Businesses Win Without Even Competing [Blue Ocean Strategy]

regardless of what business you're in or

what job you are doing you're always

competing with others if you want to

dominate the market and outperform 99 of

your competitors then the book called

The Blue Ocean strategy is exactly what

you need I have personally read this

book two times and will definitely read

it a few more times in the future if you

are an entrepreneur then this is the

type of book you need to study like a

school textbook not just read and forget

about it

in this video I'm going to share the key

ideas from the book with you so let's

get started

imagine you're about to dive your diving

instructor meets you and gives you two

options you can either dive into a vast

and pristine ocean where the water is

Crystal Blue and there is an abundance

of marine life and there are not many

other divers around which means you can

move around easily

or you can dive into an ocean where the

water isn't clear and the surrounding is

crowded with many other divers who are

trying to experience the same things as

you are

you can still experience a few nice

things but you have to be quicker than

the other divers which would you choose

obviously the first option right

starting a business is like diving and

most entrepreneurs unfortunately choose

the second option

according to this book The Market is

divided into two oceans a blue ocean and

a red ocean the blue ocean is exactly

like the first option there is no

competition the rules of the game

haven't been set yet and there's a lot

of opportunity for profitable growth on

the other hand the red ocean is crowded

with many businesses all competing for

the same customers and resources in the

red ocean the rules of the game are

known and companies try to outperform

each other to grab as much of the

existing demand as possible but as the

market becomes more crowded profits and

growth get smaller and smaller products

become generic and the competition is so

intense that water turns red with the

blood of competitors and creates the red

ocean

today it's becoming harder and harder

for companies to be profitable they are

fighting over the same limited customers

and resources if you've noticed products

are becoming more and more similar to

each other for example people used to be

very loyal to Brands like tide for

laundry detergent or Colgate for

toothpaste but now if some other brand

is on sale they might switch to that

instead it's getting harder and harder

to stand out from the crowd a study was

conducted to see the impact of creating

blue oceans versus competing in red ones

the study analyzed 108 companies and

their new business launches out of the

108 companies studied in the research 86

of them were simply improving their

existing product within the existing

Market space these launches brought 39

percent of total profits the remaining

14 of the companies focused on creating

a blue ocean they came up with new and

Innovative products the market had never

seen before these companies generated an

impressive 61 percent of total profits

this data clearly shows that creating a

blue ocean can lead to better profits

and growth now let's see what the Blue

Ocean strategy is exactly and how you

can apply it the Cornerstone of the Blue

Ocean strategy is something called value

innovation which basically means

providing higher value to your customers

at a lower cost

I can almost hear you saying how can a

company provide higher value to the

customer while reducing its cost doesn't

higher value mean higher costs

the answer is no value innovation is a

new way of thinking which provides

higher value at a lower cost let me

explain it with an example

the wine market is one of the most

competitive markets in the USA But

despite that the Australian wine company

called Casella wines became the number

one wine thanks to value innovation

Casella Wine's first analyzed the market

by using a blue ocean tool called

strategy canvas the strategy canvas is a

simple framework that helps you to

understand two important things about

the market what your competition is

offering to the customers and what value

customers are getting for their money

the strategy canvas is like the

screenshot of the market you are

freezing everybody and taking a picture

the information about the competition

and their offerings is captured in the

horizontal axis and the information

about the value the customers receive is

captured on the vertical axis for

example in the case of price a higher

score indicates a higher value to the

customer premium wines all have the same

conventional strategy which is to offer

a high price and high quality across all

factors budget wines on the other hand

have a low price and low quality across

all factors

after analyzing the market costella

wines used the second and most important

blue ocean tool called four actions the

four actions framework poses four key

questions to develop a Blue Ocean

strategy eliminate reduce raise create

number one eliminate which factors that

the industry takes for granted should be

eliminated number two reduce which

factors should be reduced well below the

industry's standard three raise which

factors should be raised well above the

industry's standard

four create which factors that the

industry has never offered should be

created

the purpose of the first two questions

is to reduce costs if you remember a few

minutes ago we were discussing how is it

possible to increase the value while

reducing the costs well this is where

the cost savings comes from

reducing the cost is half of the job you

still need to create new value and that

is where questions number three and

number four come in raise and create

now back to our example here is how

Casella wines applied the four actions

framework to create a blue ocean

eliminate

they eliminated all the factors the wine

industry had long competed on such as

complexity and aging with the need for

aging eliminated they also eliminated

costs on Oak barrels and Storage

reduce they dramatically reduced the

range of wines offered creating only two

white chardonnay and a red Shiraz the

Simplicity of offering only two wines

reduced the costs further plus it made

the wine selection process easier for

non-wine drinkers raise they removed all

technical jargon from the bottles and

created a simple and non-traditional

label they also raised their prices

above the budget wines but below the

premium wines

create they mainly focused on

non-customers of wine such as beer and

cocktail Drinkers and found out that

many of them rejected one because of its

complicated taste and difficulty to

select using this information they

created a wine called yellowtail that is

easy to drink easy to select and fun the

wine promised to jump from the glass

like a kangaroo the result is that

yellowtail appeared to a broad group of

alcoholic beverage consumers

in just two years yellowtail emerged as

the fastest growing brand in history of

both the Australian and the U.S wine

Industries it became the number one

imported wine into the United States

surpassing the wines of France and Italy

what's more yellowtail didn't just steal

sails from competitors it grew the

market the wine brought non-wine

drinkers into the wine market novice

wine drinkers started to drink wine more

frequently budget wine drinkers moved up

and drinkers of more expensive wines

moved down to become consumers of

Yellowtail the main idea of the Blue

Ocean strategy is to create a new market

by breaking away from the competition in

other words making the competition

irrelevant

but where do you actually look to find

ideas for creating a blue ocean

here are six practical tips that can

help you to identify blue ocean

opportunities the authors call this six

path framework

path number one look across functional

or emotional appeal to buyers

every industry companies compete based

on two bases of appeal functional or

emotional functional appeal means

offering a product or service based on

its usefulness and price while emotional

appeal means offering a product or

service based on feelings for example

coffee is a functional product but

Starbucks turned it into an emotional

product by creating a unique experience

around it Starbucks isn't just a place

where you get coffee it's also a place

where you can relax and forget about

your problems get some work done or meet

your friends

quite opposite to Starbucks a Japanese

barber shop called Quick Beauty created

a blue ocean by Shifting the industry

from an emotional one to a highly

functional one in Japan the time it

takes to get a man's haircut hovers

around one hour why a long process of

activities is undertaken to make the

hair cutting experience a ritual

numerous hot towels are applied

shoulders are rubbed and massaged

customers are served tea and coffee and

the barber follows a ritual in cutting

hair including special hair and skin

treatments such as blow drying and

shaving the result is that the actual

time spent cutting hair is a fraction of

the total time moreover these actions

create a long cue for other potential

customers QB house changed all that it

recognized that many people especially

working professionals don't wish to

waste an hour on a haircut

QB house Stripped Away the emotional

service elements of hot towels shoulder

rubs and teen coffee and reduced special

hair treatments to focus mainly on basic

Cuts QB house also eliminated the

traditional time-consuming wash and dry

practice by creating the air wash system

so to summarize tip number one if your

industry competes on functionality and

see how you can make it emotional if the

opposite is true and everybody competes

On Emotion then see how you can make

your product functional path number two

look across alternate Industries

a company doesn't just compete with

other companies in their own industry

but also with companies in other

industries that offer similar products

or Services different products or

Services can be substitutes for each

other because they provide the same

function or utility but come in various

forms there are opportunities for

companies to innovate and offer

Something New by looking beyond their

own industry and considering

alternatives

for example to sort out your personal

finances you can use Financial software

hire an accountant download an app or

use pen and paper the software the

accountant the pen and paper and the

financial app are largely substitutes

for each other they have different forms

but serve the same function helping

people manage their financial affairs

another interesting example you probably

know that Ford Model T was the first

mass-produced affordable car that

revolutionized the car industry this was

all possible because Henry Ford used an

assembly line production system where

one worker did only one single task

Henry Ford got the idea of the assembly

line production from visiting a

slaughterhouse and grain factories in

other words he looked at alternative

Industries to create a blue ocean

opportunity when people make purchasing

decisions they often think about their

options unconsciously they consider what

they want and how they can achieve it

however when companies sell products or

Services they don't always think about

how their customers are making

trade-offs across different Industries a

company called netjets observed that

business Travelers in the airline

industry had two choices they could fly

on a commercial airline or the company

could purchase its own aircraft

companies choose commercial airlines

because it's cheaper buying your own

aircraft and maintaining it is quite

expensive on the other hand buying your

private aircraft provides benefits such

as cutting total travel time avoiding

busy airports and allowing Executives to

arrive more energized and productive

netjets created a new way of air

traveling called fractional jet

ownership this means customers don't buy

a whole private jet but only a small

part of it this makes it a lot cheaper

than buying a whole jet plus you don't

have to change planes or wait in line at

the airport it only takes a few minutes

to go from your car to take off you can

complete trips much faster and arrive at

your destination energized and fresh

the final result is that buyers get the

convenience of a private jet at the

price of commercial airline travel

netjets created a new market by

combining the best parts of private jets

and commercial airlines and eliminating

everything else

this made them a multi-billion dollar

company and they are still the biggest

in the business so tip number two is to

look at industries that are alternative

to yours especially focus on the key

factors that cause customers to switch

from your industry to another industry

path number three look across

complementary product and service

offerings

for example in the movie theater

industry the ease and cost of getting a

babysitter and parking the car affects

the perceived value of going to the

movies by offering a babysitting service

a movie theater could tap into this

hidden value and create a blue ocean

by considering the entire customer

experience including what happens before

during and after the use of a product

you can uncover New Opportunities

despite its importance to British

culture the British tea kettle industry

had been struggling to make a profit

until Philips Electronics came along and

turned the red ocean blue Phillips

realized that the problem people had

with brewing tea wasn't with the tea

kettle itself but with the water used to

make the tea the tap water had a mineral

called lime scale that built up in the

kettle as it boiled and then ended up in

the tea people had to use a spoon to

scoop out the lime scale before drinking

their tea the tea kettle industry didn't

think this was their problem but

Phillips saw an opportunity to create a

new product that solved this issue and

made the tea kettle more valuable to

buyers this helped Philips create a new

market space in the tea kettle industry

so tip number three to discover a blue

ocean opportunity is to look at the

entire customer experience and analyze

what happens before during and after

they use your product

path number four look across strategy

groups within the same industry

a strategy group is a group of companies

within an industry that pursue a similar

strategy for example online shoe stores

versus physical shoe stores they both

serve the same need choose another

example the luxury car market versus the

economy car market both fall within the

same overall industry automobiles but

they pursue very different strategies

for serving the same need and because of

that they don't see each other as

competition thinking that luxury car

buyers wouldn't be interested in

economic cars and vice versa but the

truth is that customers can trade up and

buy more expensive options or trade down

and buy cheaper options you only need to

understand the factors that determine

customers decisions to trade up or down

for example people who buy expensive

cars are interested in luxury on the

other hand people who buy economic cars

are concerned about the price

the Blue Ocean strategy would be to

produce a car that is a luxury but the

price is not so much higher than the

economic car price this way the economic

car buyers can trade up and luxury car

buyers can trade down this is exactly

what Toyota did with its Lexus offering

the quality of high-end cars such as

Mercedes and BMW at economy car prices

by doing that Lexus captured customers

from both segments not just that it also

Drew many new customers to the market so

tip number four for creating a blue

ocean is to combine the most attractive

factors of different groups within your

industry

path number five look across the chain

of buyers

creating a blue ocean can also be

achieved by looking across the chain of

buyers in the industry there are often

multiple groups involved in the buying

decision including purchasers users and

influencers for example the

pharmaceutical industry primarily

targets influencers such as doctors

while the clothing industry targets

users by gaining new insights into how

to redesign the product to appeal to

different buyers companies can create a

blue ocean Market Novo Nordisk a Danish

insulin producer wanted to create a blue

ocean in the insulin industry the

industry had always focused on doctors

as the key influencers in insulin

purchasing decisions however Novo

Nordisk saw an opportunity to create a

blue ocean by Shifting the industry's

focus from doctors to patients

themselves they found that insulin

supplied to diabetes patients presented

significant challenges in administering

patients had to handle syringes needles

and insulin and administer doses

according to their needs which was

complex and unpleasant this led Novo

Nordisk to develop the novopen the first

user-friendly insulin delivery solution

that looked like a pen the pen contained

an insulin cartridge that allowed the

patient to easily carry roughly a week's

worth of insulin the pen had an

integrated click mechanism making it

possible for even blind patients to

control the dosing and administer

insulin patients could take the pen with

them and inject insulin with ease and

convenience without the embarrassing

complexity of syringes and needles this

Innovative insulin delivery system

shifted the industry landscape and

transformed Novo Nordisk from an insulin

producer to a Diabetes Care company

today almost 30 years after its initial

blue ocean strategic move Novo Nordisk

Remains the global leader in Diabetes

Care and around 70 percent of its total

turnover comes from this offering

path number six look across time

all Industries are subject to external

trends that affect their business over

time for example think of the rapid rays

of the internet or the global movement

toward protecting the environment by

looking at these Trends in your industry

you can find Blue Ocean opportunities

for example as Netflix saw internet

Broadband explode it realized that fast

and real-time streaming of movies would

soon be able to take off this Insight

inspired Netflix to create a blue ocean

for itself so can you identify the

trends that have a high probability of

impacting the industry you are in how

will they change your industry using

this information can provide higher

value to your customers and create a

blue ocean for yourself

this is it for this video hope it was

useful if you are an entrepreneur who is

always busy feels burnt out and doesn't

see results despite the hard work then

check out the video you see on your

screen it's the summary of a book called

who not how this book will save you so

much time and increase your income

thanks for watching