To find your organization's blue oceans, you need to reshape the boundaries of the market in which you operate. Most organizations tend to define their strategic playing field -- and limit their opportunity horizon -- on the basis of six conventional boundaries: industry, strategic group, buyer group, scope of the product or service offering, nature of the offering’s appeal and time. Path by path, the framework explains how to uncover plausible blue ocean opportunities by looking across an industry’s self-imposed boundaries, instead of remaining stuck within them. Path 1: Look across alternative industries. Path 2: Look across strategic groups within your industry. The key to a blue ocean shift is to understand what factors determine buyers’ decision to trade up or down from one strategic group to another. Again, the focus here is not on why buyers choose one particular organization over another, but on why they trade up or down across strategic groups. Path 3: Look across the chain of buyers. Competition in a given industry or strategic group tends to converge, not only around an accepted view of the scope of an offering, but also around the bases of its appeal. A new value-cost frontier can often be opened up by shifting the appeal of a product or service from one basis to another, or by blending the sources of its appeal.
Instead of fighting for scraps in existing cutthroat markets, produce more creative strategies that open up new frontiers.
Today tighter profit margins, rising costs, sinking sales and market share battles are hitting industries across the board from retail to media, construction to publishing. Even in public and nonprofit sector industries like post offices, museums and classical orchestras demand is down, costs and competition are up, and organizations are struggling financially.
If your business has plateaued, take heart. There is a way out of this. Consider how Square and Salesforce.com seized new growth in two intensely competitive industries: the credit card and the customer relationship software (CRP) industries. Both saw the opportunity to open new frontiers of demand and growth by asking different sets of questions which allowed them to see new opportunities and reshape industry boundaries. And as they did it, you can too.
Instead of fighting for scraps in existing cutthroat markets, you can learn to produce more creative strategies that open up new frontiers of opportunity, growth and jobs, where success is not about dividing up existing, often shrinking markets, but about creating a larger economic pie for all — what we refer to as Blue Oceans. Blue oceans are less about disruption, and more about nondisruptive creation.
To find your organization’s blue oceans, you need to reshape the boundaries of the market in which you operate. But how can you favorably shape market boundaries and change the conversations you have about where opportunities reside so as to conceive and open up a new value-cost frontier? Every organization, even the most innovative, must face this question sooner or later.
Most organizations tend to define their strategic playing field — and limit their opportunity horizon — on the basis of six conventional boundaries: industry, strategic group, buyer group, scope of the product or service offering, nature of the offering’s appeal and time.
Yet these boundaries do not define what must be or should be. They merely define what is. None is a law of nature. All of them are the product of people’s minds, and, as such, they are open to change. The six paths framework, shown below, provides six systematic ways to shift the lens you use in looking at the market universe and open up a new value-cost frontier. Path by path, the framework explains how to uncover plausible blue ocean opportunities by looking across an industry’s self-imposed boundaries, instead of remaining stuck within them. It also incorporates seasoned advice on what to look and listen for as you pursue each path. Let’s explore the six paths in turn.
Path 1: Look across alternative industries.
This path requires you to identify the problems or needs your offering currently solves, and then to generate a list of other solutions or industries noncustomers use to address the same problems or satisfy the same needs. Remember that the focus is not on alternatives within your industry—why people choose to fly on one airline over another, for example—but on alternative industries that serve the same function or solve the same problem, but that have a…