Is your company in a red or blue ocean?

Count the your number of times you answer
’yes’ to the following questions:

1. Is your company facing
heightened competition
from domestic and
international rivals?
2. Do your sales people
increasingly argue they
need to offer deeper and
deeper price discounts to
make sales?
3. Are you finding your
need to advertise more to
get noticed in the
marketplace, yet the impact
of these efforts keeps
falling?

4. Is your company focused
more on cost cutting,
quality control, and brand
management at the expense
of growth, innovation, and
brand creation?
5. Do you blame your slow
growth on your market?
6. Do you see outsourcing
to low cost companies or
countries as a principal
prerequisite to regain
competitiveness?

7. Are mergers and
acquisitions the principal
means your company sees
to grow?
8. Is it easier to get funding
for efforts to follow your
competitor than it is to get
funding for breaking away
from competition?
9. Is commoditization of
offerings a frequent worry
of your company?
10. List your key
competitive factors and
then those of your
competitors. Are they
highly similar?

If you answered ’yes’ to 6-10 out of those
questions, you are in a red ocean.

If you answered ’yes’ to 1-5 out of those
questions, you are in a blue ocean.

Red Ocean Blue Ocean
Compete in existing markets Create a new market

Red Ocean Blue Ocean
Compete in existing markets Create a new market
Beat the competition Avoid the competition

Red Ocean Blue Ocean
Compete in existing markets Create a new market
Beat the competition Avoid the competition
Exploit existing demands Explore new demands

Red Ocean Blue Ocean
Compete in existing markets Create a new market
Beat the competition Avoid the competition
Exploit existing demands Explore new demands
Customer value or low cost Customer value and
low cost

Red Ocean Blue Ocean
Compete in existing markets Create a new market
Beat the competition Avoid the competition
Exploit existing demands Explore new demands
Customer value or low cost Customer value and
low cost
Differentiation or low cost Differentiation and low
cost

Sounds like yet another management fad, doesn’t it?

The
question
remains:
What should
we do on
Monday?

The Strategy Canvas will help us to find new
markets and thereby avoid competition.

Start with mapping up the different performance
parameters that matter in your industry.

For example: in the camera industry you’ll find price,
image quality, design, compatibility, weight etc.

Try to make an (unbiased) plot of how your
company performs along your key
dimensions. And also try to plot where your
competitors have positioned themselves.

You will end up with something like this.
10
9
8
7
6
Our products
5 Competitor 1
Competitor 2
4
3
2
1
0
Price Factor Factor Factor Factor Factor Factor
2 3 4 5 6 7

Now you have a pretty good idea about what the
competitive climate looks like…

If your line intersects with those of your
competitors to a large extent - you are in
a red ocean. Eat or be eaten.

Now it’s time to find a way out of that place…

… This is done with the ERIC framework…

ERIC stands for Eliminate, Reduce,
Increase and Create.

Basically, you eliminate some performance
dimensions, reduce others, increase some and who
knows, maybe create some new ones as well.
10
9
8
7
6
Our products
5 Competitor 1
Competitor 2
4
3
2
1
0
Price Factor Factor Factor Factor Factor Factor
2 3 4 5 6 7

By doing so, you do not try to compete with others,
you look for ways of avoid competition.

You change the value proposition, and by doing so,
you will be able to find new customers, who are not
served yet by the industry.

And thus, you’ll find a blue ocean.

Show us a better example than this one!

We’ll take a
look at the
radio
industry…

Analogue radios were big and beautiful…

”At the
dearest
place in
Your
Home….”

’If You want good sound -
Ask for Radiola’

’The best sound quality!’

sound’
ts g ood
o wn for i
’Kn

So, the established Radio companies focused
on sound, sound and sound…

Transistor radios, on the other hand, had very
different performance dimensions.

They were smaller, cheaper, had a worse
sound quality and were portable.

Now let’s compare them by
using the strategy canvas.

10
9
8
7
6
Analogue radios
5
Transistor radios
4
3
2
1
0
Price Design Sound Size Portability
quality
This is my (unbiased) interpretation.

Now you have to find some customers…

What about young people, who can’t afford a
nice, big and clumsy furniture radio?

They’d love to bring the
radio along to the beach.

Home transistor
No wires
Big loudspeaker
Cheap to use
Quality
An ideal, portable, ’second radio’
and for your summer house

What about a radio to have in the car?

A ’travel radio’?

Sony, Grundig and Luxor among others targeted
non-consumers and created a huge market!

While the analogue companies were trapped
in a red ocean, focusing on sound.

Some estimates suggest that there are 7 billion
transistor radios in use today.

This kind of opportunities can be identified when
trying to avoid competition, instead of fighting it.

Good luck on Monday!

Sources
W. Chan Kim and Renée Mauborgne,
Blue Ocean Strategy, 2005.
Lecture by Bengt Järrehult at Chalmers
2009-02-19

Image attributions
Crocodile photos by Thomas Hordern.
Radio and landscape images taken by
Christian Sandström

Christian Sandström is a
PhD student at Chalmers
University of Technology in
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
www.christiansandstrom.org
christian.sandstrom at chalmers.se