By Jamil Shirinov, July 2024
Theme: Business, Marketing
This article is devoted to the study of the concept of the “blue ocean” and the “red ocean” strategies, a presentation of the “clear ocean” strategy, and a consideration of its features and principles.
Keywords: Business, Competition, Strategy, Innovation, Marketing
Introduction
“The Clear Ocean is a new direction. It is a new stage, a new life, a continuation of business.”
Blue Ocean Strategy was published in 2005 but is still in demand – in 2017, Amazon recognized it as the best business book of the year. The authors of the book are W. Chan Kim and Renée Mauborgne. They are professors of Strategy and Management at INSEAD, and co-directors of the INSEAD Blue Ocean Strategy Institute in Fontainebleau, France.
In 2008, W. Chan Kim was awarded the Nobels Colloquia Prize for Leadership on Business and Economic Thinking. In 2019, they were named the most influential management thinkers in the world by Thinkers50. In 2022, Harvard Business Review selected Blue Ocean Strategy as one of the most influential and innovative articles published in Harvard Business Review over the last 100 years.1 In 2023, W. Chan Kim and Renée Mauborgne were honored as two of the four leading thinkers in the 100 years of Harvard Business Review’s publication for the global impact of their far-reaching body of research and ideas. Renée Mauborgne is the first woman ever to secure the top spot as the world’s most influential management thinker.2
W. Chan Kim and Renée Mauborgne analyzed 150 strategic moves in business over the last century and realized that businessmen achieve success not in competition with competitors, but in unoccupied areas – “Blue Oceans”. This is what the authors called markets without competition, but with clear and stable demand.
What is the Blue Ocean strategy?
The book’s authors divide business into 2 types – red and blue oceans.
The Red Ocean strategy emphasizes competition and gradual improvements while taking on established competitors in a well-known market. On the other hand, the Blue Ocean strategy stimulates businesses to venture into uncharted territory, establishing new markets through creative thinking and originality.3
Red Oceans are all the industries in existence today – the known market space, where
industry boundaries are defined and companies try to outperform their rivals to grab a greater share of the existing market. Rigorous competition turns the ocean red. Hence, the term ‘red’ oceans.
Blue oceans denote all the industries not in existence today – the unknown market space, unexplored and untainted by competition. Like the ‘blue’ ocean, it is vast, deep, and powerful in terms of opportunity and profitable growth.
The table below summarizes the distinct characteristics of competing in red ocean (Red Ocean Strategy) versus creating a blue ocean (Blue Ocean Strategy).4
Blue Ocean strategy is a fundamentally new approach to business development that provides a valuable opportunity for a “quick takeoff” for start-ups or young companies.
Unfortunately, most companies seem becalmed in their red oceans. In a study of business launches in 108 companies, it has been found that 86% of those new ventures were line extensions – incremental improvements to existing industry offerings – and a mere 14% were aimed at creating new markets or industries. While line extensions did account for 62% of the total revenues, they delivered only 39% of the total profits. By contrast, the 14% invested in creating new markets and industries delivered 38% of total revenues and a startling 61% of total profits.5
Over time, many goods and services fade, and only those who were able to create a new unoccupied market manage to stay afloat.
Below are several companies that have successfully created a blue ocean in various industries:
- The famous Cirque du Soleil
A fundamentally new approach to entertainment has become the brand’s main trump card:
- Without animals – it is inhumane and expensive to keep;
- Original concept – bright plot, beautiful scenery;
- Expansion of the audience – adults also watch Cirque du Soleil’s spectacular productions with delight.
Circus du Soleil was years ahead of its competitors by simply abandoning animal performances. This way, it solved 2 problems: it got rid of criticism from animal rights activists and significantly reduced costs. Today, Cirque du Soleil's performances are applauded in more than 300 cities around the world.
- iTunes
iTunes, launched in 2001 by Apple, made listening to music more convenient – the service fully covered the needs of music lovers. Before its release, favorite hits had to be copied onto CDs, stored on a PC, and transferred to the memory of players. The advent of iTunes significantly simplified the process: just load the disc, and you are given lots of options for greater convenience, such as creating a playlist, dividing it into categories, and many more.
- RALPH LAUREN
As a designer, he conjures up all that is dear to every American: native lands, shrouded in fog in the mornings, summer evenings, endless distances, horses, corn fields, green gardens, warm fireplaces, and Jack Russell terriers.6 His works are not limited to fashion trends and fleeting moments – they are about the meaning of life and established values. Not only did he create an entire concept of fashion and style but also protected it with his consistency and impeccable reputation. It constantly reminds us of the best moments in life. It’s enough to just say “Ralph Lauren”, and everyone immediately understands what we’re talking about.
He adored old things. He loved cowboy boots and cars and was inspired by them. As a result, all this was somehow embodied in clothes. He said that he did not work in the fashion industry. He was often called a “fashion designer”, but he hated the word. By doing this, he was showing his resistance to being an inhabitant of the Red Ocean. Anti-fashion is what has always inspired Ralph Lauren.
Ralph Lauren had incredible imagination and creativity, which are vital for the Blue Ocean. He said, “You must always strive for more, you must dream. You look at the world and realize that you can live better.” He created a suit made of linen. Before this, no one dared to sew loose, wrinkled suits. He understood the power of the American dream. Ralph Lauren was the first fashion designer to present a complete home collection and to open a chain of retail stores.
Ralph Lauren had the audacity to open an amazing store on Madison Avenue, a few blocks from Bloomingdale’s. He sold not only clothes but also saddles and all kinds of riding crops. Most of the people who entered the store had similar interests with Ralph Lauren, as with all Americans, who loved horse riding. They were happy to buy everything from socks to jackets; they were not averse to buying cowboy boots and even a saddle just to look like a tough guy. Ralph Lauren's clothes instilled confidence and prestige and created a true concept of American style for the whole world. By purchasing a polo T-shirt, foreigners became a part of America.
Ralph Lauren was the first American designer to be knighted. He was presented with the Lifetime Achievement Award.
He is a patriot. All his work is imbued with love for America. Thanks to him, the concept of the American Dream will never disappear.
We all are consumers. Create what you are comfortable with and you will see how people will be drawn to what you have created. Ralph Lauren started with clothes that he enjoyed wearing himself. That's the whole secret. While all the fashion designers were swimming in the Red Ocean, drowning each other, Ralph Lauren was leisurely enjoying his swim in the Blue Ocean.
The Clear Ocean
Having studied and absorbed every line of the best-selling book Blue Ocean Strategy, where the world's giant management thinkers describe the market universe, I dare to propose my own strategy: The Clear Ocean.
The Clear Ocean is a "new market space".
From my point of view, the Blue Ocean strategy is only applicable to those who are just starting to take their first steps in business.
My strategy is the Clear Ocean, the inhabitant of which is a company that has been a proud representative of the Blue Ocean. Stifled by competition in the Red Ocean, it, with renewed vigor, creates a new product, different from the one with which the business began. A company with a reputation that consumers value only needs advertising. The consumer will be happy to purchase a new product.
Let's look at several examples:
- Shell
Shell's history began in 1833, when English merchant Marcus Samuel opened a small shop in London with an emblem of a shell selling a variety of seashell jewelry and other exotic oriental items.
The enterprise turned out to be profitable, and, soon, he managed to build a profitable trading business focused on the countries of East and Southeast Asia, thereby laying the foundation for its export-import business. Ships going from metropolises to colonies carried various cargoes on board, including petroleum products. Having started from the Blue Ocean, the company got into the Red Ocean, as the antiques business had expanded by then.
Marcus Samuel, being a talented businessman, saw a great future for the oil business during the period of its birth. He and his sons decided to change the type of activity of the company and began transporting oil. Thus, they smoothly passed into the Clear Ocean.
After the death of Marcus Samuel senior in 1870, his sons took over the business. The brothers wanted to create a full-fledged international trading company and began to import rice, silk, porcelain, and copper products into the country. They founded their own company in 1878. In 1897, Marcus and Samuel renamed the tanker syndicate Shell Transport and Trading.
- Samsung
Samsung is a South Korean company that is one of the world’s largest producers of electronic devices.
Samsung was founded as a grocery trading store on March 1, 1938, by Lee Byung-Chul.
He started his business in Taegu, Korea, trading noodles and other goods produced in and around the city and exporting them to China and its provinces. This made it possible to officially register the Samsung Trading Company trademark. The company was swimming in the blue ocean.
After the Korean War, Lee expanded his business into textiles and opened the largest woolen mill in Korea. In the late 1950s the company acquired three of Korea’s largest commercial banks as well as an insurance company and firms that made cement and fertilizer. Samsung in the 1960s acquired more insurance companies as well as an oil refinery, a nylon company, and a department store. In 1969, their first products were black and white televisions. During the 1970s the company began to export home electronics products overseas.8
In 1988, having entered the mobile phone market into the Red Ocean, Samsung fought a fierce battle for the mobile phone market share with its competitor Apple. The companies were periodically blaming each other.
Constant invention and innovation did not allow Samsung to remain in the Red Ocean. Samsung became an inhabitant of the Clear Ocean, beginning to supply microprocessors for Apple's iPhone models and becoming one of the largest microprocessor manufacturers in the world in the late 20th and early 21st centuries.
- Avon
Avon Products Inc., or simply known as Avon, is a London-based Anglo-American company selling cosmetics, skin care, perfume, and personal care products. The founder of Avon, David H. McConnell, was a progressive pioneer, an impressive visionary, a courageous game-changer, and above all, a champion of women.9
Initially, he was engaged in selling books and was in the blue ocean. After noticing that he was beginning to drown in the red ocean due to increased competition, in order to attract customers, he began to put small bottles of perfume with the orders.
In 1886, the first product sold was a rose extract perfume from the California Perfume Company. McConnell soon realized that floral scents were more interesting to readers than romance novels. The perfumes became the first product of the Avon company.
In 1971, Avon began selling jewelry. Therefore, Avon smoothly and fragrantly moved into the Clear Ocean.
- Nintendo
Japanese company Nintendo specializes in creating video games and gaming systems.
In 1889, Fusajiro Yamauchi, the founder of Nintendo, began producing Japanese hand-drawn Hanafuda playing cards, which quickly gained popularity in Kyoto.
In 1953, Nintendo Playing Card Co. Ltd. became the first in Japan to establish mass production of plastic playing cards.
The company began selling cards featuring Walt Disney characters, opening up a new market for children's playing cards, and thus was a proud member of the Blue Ocean. However, after competition was created by other companies adopting Nintendo’s idea, the company found itself in the Red Ocean.
In 1970, the company began selling the Beam Gun series, which used optoelectronics, introducing electronic technology into the toy industry for the first time in Japan.
This is how Nintendo became an inhabitant of the Clear Ocean. Yet, their progress does not end there to this day.
In collaboration with Mitsubishi Electric, Nintendo developed a gaming system using an Electronic Video Recorder (EVR) for Japan.
In 1997, the company developed home-use videogames in cooperation with Mitsubishi Electric: the "TV Game 15" and "TV Game 6".
Nintendo artist Shigeru Miyamoto created the game Donkey Kong, the hero of which was a carpenter originally called Jumpman. In honor of Jumpman's resemblance to Nintendo’s office landlord, Mario Segale, Jumpman was later renamed "Mario".10
Super Mario Bros. is listed in the Guinness Book of Records as the best-selling game in history.
Conclusion
The company that once was in the Blue Ocean resisting remaining in the Red Ocean, having proven its innovation, constantly generating and implementing new ideas, products, or services that create value for its consumers proudly finds itself in the Clear Ocean and continues to delight and surprise us, its customers. The Clear Ocean is a new direction. It is a new stage, a new life, a continuation of business.
References
[1] https://www.blueoceanstrategy.com/authors/
[2] https://www.blueoceanstrategy.com/authors/renee-mauborgne
[3] https://www.thestrategyinstitute.org/insights/understanding-the-red-ocean-vs-blue-ocean-strategies
[4] https://www.blueoceanstrategy.com/tools/red-ocean-vs-blue-ocean-strategy/
[5] https://hbr.org/2004/10/blue-ocean-strategy
[6] https://www.youtube.com/watch?v=JQnS1ZqQBOU&t=2824s
[7] https://www.shell.com/who-we-are/our-history/our-company-history.html
[8] https://www.britannica.com/money/Samsung-Electronics
[9] https://www.avonworldwide.com/about-us/our-story
[10] https://www.nintendo.com/en-gb/Hardware/Nintendo-History/Nintendo-History-625945.html
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This article was written by Jamil Shirinov in July 2024 and is copyright©. Unauthorized publication and/or use of the article is prohibited. All rights are reserved.