Blue Ocean Strategy in the new reality



Since the COVID lockdown started over a year ago I have seen many restaurants in my neighborhood go through transformations - many became available in the top three delivery service: Ubereats, Doordash and Skipthedishes while the rest transformed to support pick up service and patio dining. However, among all of them, one of my favorite Indian restaurants impressed me the most. 


The restaurant initially became available via the delivery services just after the lockdown in early 2020. I first ordered from the restaurant via Ubereats. In the delivery the restaurant included a pamphlet encouraging me to order from them directly on their website with an initial enticing offer. I ordered immediately after a few days from their website. I was guided to create an account and subscribe to their newsletter in the process. 


The delivery for the order was on time and the food as always was delicious and of high quality. In a few days I received a questionnaire to provide feedback on the order which I duly obliged as I wanted to encourage them for their amazing service and quality of food. Soon I started receiving personalized newsletters from the restaurant with exciting new menu items, recommendations and even surveys for future dishes I would like to see in their menu. 


Soon I found myself ordering food from them every other week, always trying the new items in their menu and thus becoming a loyal customer. I also noticed that they always added an additional item, sometimes a small appetizer or a dessert in my order to show appreciation of my loyalty. This further impressed me and when it came for me to choose a delivery from an Indian restaurant I knew intuitively which one to pick. 


It quickly dawned on me that my favorite Indian restaurant intentionally, or unintentionally, was applying the Blue Ocean Strategy to create its own market space. In this article I’ll describe the Blue Ocean Strategy along with its three (3) core concepts: 

  1. The concept of value innovation which is the cornerstone of Blue Ocean Strategy 

  2. The four action framework which can be used to discover the value innovation

  3. The popular strategy canvas which can be used to understand the current state and the future prospect 


Blue Ocean Strategy 

The Blue Ocean Strategy is a set framework and analytical tools developed by W. Chan Kim and Renée Mauborgne to enable organizations to pursue and capture uncontested market space. They coined the terms red ocean and blue ocean


Red Ocean represents the known market space, e.g. the market in which all the Indian restaurants in my neighborhood operate. They all serve similar menu items and compete with each other for the customers. The Red Ocean has cutthroat competition which can turn the ocean bloody “red” and hence the “red” ocean.  


Blue Ocean on the other hand represents the new market space where there is no competition. E.g. the market in which my favorite Indian restaurant is operating, they created their own reliable delivery service, ecommerce platform for placing orders, newsletters to engage customers and minimized their menu to keep it fresh and relevant. By operating in uncontested market space my favorite restaurant is able to drive value for both customers and themselves. This is reflected in the fact that since my first order I haven’t received a single discount offer however I still continue to order from them because of the value or quality and service they provide. This is referred to value innovation by the authors of the strategy. 


Value innovation 

Value innovation is identified as the cornerstone of the Blue Ocean Strategy. For me, this is a mindset shift where it’s essential to anchor innovation with value for buyers and the organization. In the restaurant example the restaurant innovated how they operate however the innovation was focused to increase the value for the customer by providing great service, great quality food and engagement. This allowed the restaurant to differentiate in a competitive market and gain loyal, returning customers. The authors developed the Four Action Framework to identify the competing factors to drive customer value by posing four key questions. 


Four Actions Framework

Action

Question

Restaurant example

Eliminate

Which factors that the industry has long competed on should be eliminated?

Menu items, daily specials

Raise

Which factors should be raised well above the industry’s standard?

Customer engagement, customer satisfaction

Create

Which factors should be created that the industry has never offered?

Fresh menu, capture actionable customer feedback, surveys to create new menu items, reliable owned delivery service 

Reduce

Which factors should be reduced well below the industry’s standard?

Reliance on third party delivery services, offers

The diagram outlines an example of how the restaurant can apply the Four Actions Framework to identify the competing factors to drive customer value. 


Eliminate

Raise

Non popular items from the menu

Daily specials

Customer engagement

Customer satisfaction

Reduce

Create

Reliance on third party delivery service

Offers

Surveys to create new menu items

Fresh menu

Ability to capture customer feedback

Reliable delivery service



The competing factors identified in the Four Actions Framework can be used to plot the Strategy Canvas.


Strategy canvas

The Strategy Canvas is developed by the authors to use as an action framework and diagnostic tool to understand the current state of the market and to identify future prospects where the organization can create value innovation. 


The horizontal axis represents the competing factors for the market while the vertical axis represents the level of value received by the custom across the competing factors. 


The diagram below displays the Strategy Canvas for the restaurant example. As you can see in the example below how my favorite Indian restaurant differentiates itself from the competition while still driving customer value. 


Strategy canvas of my favorite Indian restaurant



In conclusion, the Blue Ocean Strategy is applied by many organizations like Cirque du Soleil, Apple and Netflix to create new market space without any competition and thus continue to drive profitability while still creating differentiation. However given the pandemic and persistent lockdown this has become more important for many organizations going through transformation to survive and thrive in the new normal.


Please refer to https://www.blueoceanstrategy.com to learn more about Blue Ocean Strategy and the analytical tools and frameworks provided by W. Chan Kim and Renée Mauborgne to further explore the possibilities of the Blue Ocean. 

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