In today’s highly competitive environment, many organisations chase growth through incremental improvements or by fighting head-to-head in crowded markets. But lasting success often comes from creating new demand in untapped spaces. That’s the essence of Blue Ocean Strategy.
If you’re an entrepreneur looking to roll out the next big product or solution, or are involved with strategic development in your organisation, you may have already heard about Blue Ocean Strategy.
Strategy Professor at INSEAD, Professor Andrew Shipilov, shares more about the origin of Blue Ocean Strategy. He also provides valuable tips on how to evaluate if your idea qualifies as a Blue Ocean Strategy, as well as get you one step closer to coming up with the next game-changing idea.
What is innovation, and what are the different types of business innovation strategies that exist in today’s market?
Firstly, innovation is defined as a combination of novelty and usefulness. So, it is essentially a new combination of components that have not existed before, and which are useful for somebody.
There are many different kinds of innovations out there. One of these is what you would call a “sustaining innovation”. This is an innovation along the lines of incremental step-by-step improvements. You can think of this like incremental additions to a particular product or service.
Another type of innovation is “disruptive innovation”, which refers to a radical improvement that displaces something old. New entrants are somehow able to do stuff cheaper with superior quality, and over time, overtake the market leader and become the dominant design.
What kind of innovation does Blue Ocean Strategy fall under, and why is it an effective strategy?
Unlike the aforementioned innovations, Blue Ocean Strategy is a non-disruptive type of innovation that works by finding new, underserved markets.
In today’s highly competitive environment, many organisations chase growth through incremental improvements or by fighting head-to-head in crowded markets. But lasting success often comes from creating new demand in untapped spaces. That’s the essence of Blue Ocean Strategy.
It can help you distinguish between new market creation and established market disruption business ideas, as well as help you come up with new ideas as well as evaluate existing business ideas.
Can you share some examples of how disruptive innovation compares with a Blue Ocean type innovation?
Sure. Here are a couple of examples of innovations that have come from INSEAD’s alumni that I’m really proud of.
The first example of a disruptive creation is WISE, formerly known as TransferWise. The idea of the business is to send money internationally, which is a service that banks currently provide. But, instead of moving money across borders, WISE looks for other customers within the country that you want to send money to and moves money laterally instead.
So, for example, I’m in Singapore and I want to send money to Europe. When WISE got started, it would use existing funds from the accounts of other WISE customers who are already in Europe. Vice versa, if someone wants to send money to Singapore, they may then use money from my Singapore account to make the transfer. This allows the company to provide remittance services at a lower cost, thereby disrupting the market.
At the other end of the spectrum is a company called Prodigy Finance. They serve prospective students who want to embark on a business degree or post-graduate programme, but who may not qualify to take loans at traditional finance institutions. These students may come from non-wealthy families or countries, and as a result, may not be considered by banks as creditworthy. They have essentially become “non-customers,” which is a very important term within Blue Ocean Strategy.
So, the founders of Prodigy Finance identified this group of non-customers, who they felt would, in fact, make good clients. Because they would be getting a good degree, and would have good jobs, and would thus be able to pay back the money pretty quickly.
The funding of these loans come from the alumni of educational institutes such as INSEAD, who benefit from receiving a higher interest back on the loans as compared to just putting their money in the bank. Interestingly, unlike the loan recovery securisation approach of a typical bank, Prodigy Finance employs reputational standing in the community to positively enforce the returning of loans.
To me, this is a good example of a non-disruptive creation, because a new market has been created from a group of clients that previously no banks would touch.
How do I know if my idea qualifies as a Blue Ocean Strategy?
There are three simple points that you can use to checklist against. Let’s call them the three Laws of Blue Ocean. To qualify, your innovation needs to:
- Challenge the conventional wisdom in an industry
- Expand the market and attract non-customers
- Offer a new value proposition that did not exist before, while doing it at a lower cost
Are certain industries riper for non-disruptive creation than others, or is it pretty much industry agnostic?
The nearer you are to the end-customer, the easier it is to innovate – in terms of coming out with new value propositions, new markets, and new market spaces.
The customer need not be a consumer. It could also be a business. The closer you are to a specific business customer with a very clearly defined need, the easier it is to find blue ocean opportunities.
However, Blue Ocean Strategy is not just limited to for-profit companies or purposes. Because we teach about the process behind Blue Ocean, you can also use it as a way to teach and effect change within your organisation. Even people from the public sector can benefit from employing the Blue Ocean Strategy in their work.
How can I learn more about Blue Ocean Strategy?
You can join INSEAD’s 5-day Blue Ocean Strategy programme, where participants are provided with the tools to identify, improve, and present their ideas for critique.
Of course, while you can read about the Blue Ocean Strategy book for yourself, the purpose of our programme is to help you take what’s found within the book to get to the next level. We want to not only give you the tools but also the concepts that can help you keep refining and applying these tools. You can also read this article that describes the difference between disruption and Blue Ocean Strategy - Nondisruptive Creation: Rethinking Innovation and Growth.
The programme also covers new topics not found within the Blue Ocean books, such as how to build inter-personal and inter-organisational networks, how to use AI for executive decision making, and how to use Gen AI for solving creative challenges.
Finally, the programme will also train you to effectively communicate your Blue Ocean idea to others. We will provide tips on how you can best tell a story around your idea to attract the attention of the people you are targeting.
