The Importance of Blue Ocean for Startups
Blue ocean strategy is one of my key concepts that I have attached importance in business strategy since its starting question is “How can an organization become different in a competitive market?”
First, I decided to understand what is are blue & red oceans. Blue ocean is not a place that an entrepreneur dream and find. In order to understand the blue ocean, describing the red ocean can be the best first step. When we combine all definitions, the red ocean is a market that customers, providers, value systems (suppliers, manufacturers, distributors), and industry dynamics, so the rules of the game are determined and known by all other players. Blue ocean is a concept in which the market dynamics are not determined yet and that is “created” by an innovative player. But how?
“offering a new and original value curve”
How this value curve can be created?: There are 4 main actions in order to create a blue ocean value curve: Eliminate-Reduce-Raise-Create. The main logic behind this 4 actions framework is a dual advantage. The company has an opportunity to decrease costs by eliminating and reducing the level of some critical success factors while increasing differentiation by raising the level of several critical success factors and creating new ones.
Therefore, the blue ocean strategy indicates that companies need to focus on creating new markets, that serve free of competitors and higher profit pool opportunities, instead of targeting the red oceans in which players are stuck with existing rules of the game resulting in intense competition and constantly eroding profits.
What are the takeaways for startups from the blue ocean strategy?: Startups have difficulty in making inferences from most of the business theories because these concepts are designed for white shoe companies with a 1–2% annual growth. All dynamics, expectations, and structures are different. However, there are two main points in the blue ocean strategy that have important potential for contributing to the startups and their business strategy.
- Ventures are able to take rapid decisions and action, especially in the “create” dimension of the 4 actions framework since they have agile business structures and do not have everlasting bureaucratic processes, common in corporate companies. Thus, they can use the competitive advantage of the new value curve for a longer time.
- One of the biggest problems of startups is insufficient resources (finance, employees, existing customers, brand development, etc.) so it would be hurtful to get involved in potentially damaging competitive processes in a time frame with such limited resources. Creating a new value proposition with unique success factors, that take time to copy and will enable the company to differentiate itself from the intense competition environment, will lead to a healthier and faster growth of the enterprise.
In short, the competitive environment can cause sometimes devastating and sometimes injurious damage to any organization. It would be better for enterprises with a single lead to stay away from this bloody red ocean environment, especially in the early stages. The blue ocean strategy, which will trigger rapid growth, is one of the most practical and strong methods of avoiding competition.
