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SkillsBlue Ocean Strategy

Blue Ocean Strategy

Marketing & growth

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Updated 10-16 06:21

About this skill

Blue Ocean Strategy

Systematic application of Blue Ocean Strategy frameworks: Strategy Canvas, ERRC Grid, Six Paths, Buyer Utility Map, and Non-Customer Analysis to identify value innovation opportunities.

Required Inputs

Input Description Required?
Industry / market The current competitive arena Yes
Focal company The company seeking blue ocean opportunity Yes
Key competitors (3-5) Major players in the current market Yes
Current value proposition What the focal company offers today Yes
Customer segments Current and potential buyers Yes
Industry competitive factors What the industry competes on (5-8 factors) Yes
Pain points / frustrations Known customer complaints and unmet needs Recommended
Industry assumptions "The way things are done" beliefs Recommended
Adjacent industries Related markets to explore Recommended

Execution Steps

Step 1: Map the Current Strategy Canvas

The Strategy Canvas is the diagnostic and action framework. It captures the current state of play.

  1. Identify competitive factors (5-8 factors the industry competes on):

    • These are the factors companies invest in and market around
    • Include both product/service attributes and delivery factors
    • Examples: price, features, quality, speed, customization, brand, service level, channel convenience

  2. Rate each competitor on each factor (1-5 scale):

    Competitive Factor Industry Avg Comp 1 Comp 2 Comp 3 Focal Co.
    [Factor 1: e.g., Price] [X] [X] [X] [X] [X]
    [Factor 2: e.g., Product range] [X] [X] [X] [X] [X]
    [Factor 3: e.g., Quality] [X] [X] [X] [X] [X]
    [Factor 4: e.g., Service level] [X] [X] [X] [X] [X]
    [Factor 5: e.g., Technology] [X] [X] [X] [X] [X]
    [Factor 6: e.g., Brand prestige] [X] [X] [X] [X] [X]
    [Factor 7: e.g., Convenience] [X] [X] [X] [X] [X]

  3. Plot the value curves: Visualize each player's profile across factors. If all curves look similar, the industry is a red ocean.

Rating  Factor1  Factor2  Factor3  Factor4  Factor5  Factor6  Factor7
  5  │                                                    ○
  4  │    ●──────●                          ●──────●──────●
  3  │    ○──────○──────○──────○──────○──────○
  2  │                   ●──────●──────●
  1  │
     └─────────────────────────────────────────────────────────

     ● = Focal company    ○ = Industry average

Diagnostic questions:

  • Are all value curves converging? (Red ocean signal)
  • Is the focal company's curve identical to competitors? (No differentiation)
  • Which factors show the biggest gap between investment and customer value?

Step 2: Apply the Six Paths Framework

Systematically explore six directions for creating new market space:

Path Question Application
Path 1: Alternative industries What alternative industries do customers choose between? What makes them switch? Look beyond direct competitors to different industries solving the same problem
Path 2: Strategic groups What strategic groups exist within the industry? Why do customers trade up or down? Identify the factors that cause customers to choose between groups
Path 3: Buyer chain Who is the buyer? User? Purchaser? Influencer? Can you shift to a different buyer? Redefine who you target in the decision chain
Path 4: Complementary offerings What happens before, during, and after your product is used? What are the pain points? Extend value to adjacent needs
Path 5: Functional-emotional appeal Does your industry compete on function or emotion? Can you switch? If functional: add emotional value. If emotional: strip to functional
Path 6: Trends over time What trends are reshaping the industry? How will they change buyer value? Get ahead of irreversible trends that are forming now

For each path, document:

  • Current industry assumption
  • Alternative framing
  • Potential value innovation opportunity
  • Feasibility assessment (1-5)
  • Impact potential (1-5)

Step 3: Build the ERRC Grid

The Eliminate-Reduce-Raise-Create (ERRC) grid is the action framework:

Action Factors Rationale Cost Impact Value Impact
ELIMINATE — Which factors that the industry takes for granted should be eliminated? [Factor(s)] [Why this can be removed without losing core value] -$[X] savings [Neutral / slight negative]
ELIMINATE [Factor(s)] [Rationale] -$[X] [Impact]
REDUCE — Which factors should be reduced well below the industry standard? [Factor(s)] [Why over-investment exists today] -$[X] savings [Minimal loss]
REDUCE [Factor(s)] [Rationale] -$[X] [Impact]
RAISE — Which factors should be raised well above the industry standard? [Factor(s)] [Why this creates disproportionate value] +$[X] cost [Significant gain]
RAISE [Factor(s)] [Rationale] +$[X] [Impact]
CREATE — Which factors should be created that the industry has never offered? [Factor(s)] [What unmet need this addresses] +$[X] cost [Breakthrough value]
CREATE [Factor(s)] [Rationale] +$[X] [Impact]

Net cost impact of ERRC: $[X] (should be cost-neutral or cost-reducing) Net value impact of ERRC: [Substantial value increase through new factors]

Key test: Does the ERRC grid simultaneously pursue differentiation AND low cost? If it only does one, it is not value innovation — it is conventional strategy.

Step 4: Draw the Target Strategy Canvas

Plot the new value curve alongside the current industry:

Competitive Factor Industry Avg (Current) Focal Co. (Current) Focal Co. (Blue Ocean Target) Change
[Factor 1 — Eliminated] [X] [X] 0 Eliminate
[Factor 2 — Reduced] [X] [X] [Lower] Reduce
[Factor 3 — Same] [X] [X] [Same] Maintain
[Factor 4 — Raised] [X] [X] [Higher] Raise
[Factor 5 — Raised] [X] [X] [Higher] Raise
[NEW Factor 6 — Created] 0 0 [High] Create
[NEW Factor 7 — Created] 0 0 [High] Create

Value curve divergence test: The new curve must visually diverge from all existing curves. If it doesn't, you're still in the red ocean.

Step 5: Buyer Utility Map

Map where the industry currently focuses and where new utility opportunities exist:

Purchase Delivery Use Supplements Maintenance Disposal
Customer productivity [Current/Opportunity/Blank] [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B]
Simplicity [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B]
Convenience [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B]
Risk reduction [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B]
Fun and image [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B]
Environmental friendliness [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B] [C/O/B]

Key: C = Current industry focus | O = Opportunity (underserved) | B = Blank (no one addresses)

Priority opportunities: Focus on cells marked "B" (blank) and "O" (opportunity) — these are the spaces where the industry is blind.

Step 6: Three Tiers of Non-Customers

Identify growth beyond current customers:

Tier Definition Size Estimate Why They Don't Buy Today What Would Convert Them
Tier 1: Soon-to-be non-customers Sitting on the edge of the market, ready to leave [N] [Reason — usually the industry's pain points that are barely tolerated] [Specific value innovation needed]
Tier 2: Refusing non-customers Consciously chose against the industry [N] [Reason — the industry's offering doesn't fit their needs/values] [Fundamental offering change needed]
Tier 3: Unexplored non-customers Never considered the industry as an option [N] [Reason — assumed the industry was not for them] [Category redefinition needed]

Total non-customer opportunity: [N] (compare to current market of [N] customers)

Conversion strategy per tier:

  1. Tier 1: [Specific actions to retain/attract edge customers]
  2. Tier 2: [What the industry must stop doing to win refusers]
  3. Tier 3: [How to redefine the category for unexplored non-customers]

Step 7: Value Innovation Opportunity Scoring

Score each identified opportunity:

Opportunity Buyer Utility Feasibility Cost Impact Revenue Potential Competitive Response Risk Total Score
[Opportunity 1] [1-5] [1-5] [1-5] [1-5] [1-5] [X]/25
[Opportunity 2] [1-5] [1-5] [1-5] [1-5] [1-5] [X]/25
[Opportunity 3] [1-5] [1-5] [1-5] [1-5] [1-5] [X]/25
[Opportunity 4] [1-5] [1-5] [1-5] [1-5] [1-5] [X]/25

Scoring guide:

  • Buyer Utility: 5 = solves major pain or creates breakthrough utility
  • Feasibility: 5 = achievable with current capabilities within 12 months
  • Cost Impact: 5 = reduces total cost structure significantly
  • Revenue Potential: 5 = large addressable non-customer population
  • Competitive Response Risk: 5 = extremely difficult for incumbents to copy (counter-positioned)

Output Template

Blue Ocean Strategy: [Company] in [Industry]

Date: [Date] | Prepared for: [Client/Project]

1. Current Strategy Canvas

(Include rated competitive factors table and value curve visualization from Step 1)

Red ocean diagnosis: [Summary of where the industry is converging and competing on the same factors]

2. Six Paths Exploration

Path Current Assumption Blue Ocean Opportunity Feasibility (1-5) Impact (1-5)
Alternative industries [Assumption] [Opportunity] [X] [X]
Strategic groups [Assumption] [Opportunity] [X] [X]
Buyer chain [Assumption] [Opportunity] [X] [X]
Complementary offerings [Assumption] [Opportunity] [X] [X]
Functional-emotional [Assumption] [Opportunity] [X] [X]
Trends [Assumption] [Opportunity] [X] [X]

Most promising path(s): [Path X] because [rationale]

3. ERRC Grid

(Include full ERRC grid from Step 3 with cost and value impact)

Value innovation test: Does this simultaneously achieve differentiation AND lower cost? [Yes/No — explain]

4. Target Strategy Canvas

(Include target vs. current competitive factor comparison table from Step 4)

Key divergence from industry: [Summary of how the new value curve differs]

5. Buyer Utility Map

(Include 6x6 utility map from Step 5)

Top 3 utility opportunities: [List the blank/opportunity cells with highest potential]

6. Non-Customer Analysis

(Include three tiers table from Step 6)

Total addressable non-customer opportunity: [X] — [Y]x current market size

7. Value Innovation Opportunity Matrix

(Include scored opportunity matrix from Step 7)

Recommended priority: [Opportunity X] — score [X]/25

8. Strategic Roadmap

Phase Timeline Actions Investment Expected Outcome
Quick wins 0-3 months [ERRC quick actions] $[X] [Outcome]
Core shift 3-12 months [Major value curve changes] $[X] [Outcome]
New market creation 12-24 months [Non-customer conversion] $[X] [Outcome]

Quality Checks

  • Strategy canvas includes 5-8 competitive factors that the industry actually competes on
  • Value curves are rated with evidence, not guesses (customer data, market research, or expert assessment)
  • All six paths from the Six Paths Framework are explored with specific opportunities
  • ERRC grid has at least 2 entries in each quadrant (Eliminate, Reduce, Raise, Create)
  • ERRC simultaneously achieves differentiation AND cost reduction (value innovation test)
  • Target value curve visibly diverges from current industry curves
  • Buyer utility map identifies specific cells that are blank (no industry attention)
  • Non-customer analysis quantifies the size of each tier, not just labels them
  • Non-customer conversion strategies are specific to each tier's reason for non-consumption
  • Value innovation opportunities are scored on feasibility, not just attractiveness
  • Competitive response risk is assessed (can incumbents easily copy this?)
  • Strategic roadmap is phased and actionable, not just a wish list
  • Analysis avoids the "Red Ocean Traps": competing on existing factors or only doing RAISE without ELIMINATE/REDUCE