Outperform 99% of your competition - BLUE OCEAN STRATEGY

regardless of what business you're in or what job you are doing you're always competing with others if you want to dominate the market and outperform 99 of your competitors then the book called The Blue Ocean strategy is exactly what you need I have personally read this book two times and will definitely read it a few more times in the future if you are an entrepreneur then this is the type of book you need to study like a school textbook not just read and forget about it in this video I'm going to share the key ideas from the book with you so let's get started imagine you're about to dive your diving instructor meets you and gives you two options you can either dive into a vast and pristine ocean where the water is Crystal Blue and there is an abundance of marine life and there are not many other divers around which means you can move around easily or you can dive into an ocean where the water isn't clear and the surrounding is crowded with many other divers who are trying to experience the same things as you are you can still experience a few nice things but you have to be quicker than the other divers which would you choose obviously the first option right starting a business is like diving and most entrepreneurs unfortunately choose the second option according to this book The Market is divided into two oceans a blue ocean and a red ocean the blue ocean is exactly like the first option there is no competition the rules of the game haven't been set yet and there's a lot of opportunity for profitable growth on the other hand the red ocean is crowded with many businesses all competing for the same customers and resources in the red ocean the rules of the game are known and companies try to outperform each other to grab as much of the existing demand as possible but as the market becomes more crowded profits and growth get smaller and smaller products become generic and the competition is so intense that water turns red with the blood of competitors and creates the red ocean today it's becoming harder and harder for companies to be profitable they are fighting over the same limited customers and resources if you've noticed products are becoming more and more similar to each other for example people used to be very loyal to Brands like tide for laundry detergent or Colgate for toothpaste but now if some other brand is on sale they might switch to that instead it's getting harder and harder to stand out from the crowd a study was conducted to see the impact of creating blue oceans versus competing in red ones the study analyzed 108 companies and their new business launches out of the 108 companies studied in the research 86 of them were simply improving their existing product within the existing Market space these launches brought 39 percent of total profits the remaining 14 of the companies focused on creating a blue ocean they came up with new and Innovative products the market had never seen before these companies generated an impressive 61 percent of total profits this data clearly shows that creating a blue ocean can lead to better profits and growth now let's see what the Blue Ocean strategy is exactly and how you can apply it the Cornerstone of the Blue Ocean strategy is something called value innovation which basically means providing higher value to your customers at a lower cost I can almost hear you saying how can a company provide higher value to the customer while reducing its cost doesn't higher value mean higher costs the answer is no value innovation is a new way of thinking which provides higher value at a lower cost let me explain it with an example the wine market is one of the most competitive markets in the USA But despite that the Australian wine company called Casella wines became the number one wine thanks to value innovation Casella Wine's first analyzed the market by using a blue ocean tool called strategy canvas the strategy canvas is a simple framework that helps you to understand two important things about the market what your competition is offering to the customers and what value customers are getting for their money the strategy canvas is like the screenshot of the market you are freezing everybody and taking a picture the information about the competition and their offerings is captured in the horizontal axis and the information about the value the customers receive is captured on the vertical axis for example in the case of price a higher score indicates a higher value to the customer premium wines all have the same conventional strategy which is to offer a high price and high quality across all factors budget wines on the other hand have a low price and low quality across all factors after analyzing the market costella wines used the second and most important blue ocean tool called four actions the four actions framework poses four key questions to develop a Blue Ocean strategy eliminate reduce raise create number one eliminate which factors that the industry takes for granted should be eliminated number two reduce which factors should be reduced well below the industry's standard three raise which factors should be raised well above the industry's standard four create which factors that the industry has never offered should be created the purpose of the first two questions is to reduce costs if you remember a few minutes ago we were discussing how is it possible to increase the value while reducing the costs well this is where the cost savings comes from reducing the cost is half of the job you still need to create new value and that is where questions number three and number four come in raise and create now back to our example here is how Casella wines applied the four actions framework to create a blue ocean eliminate they eliminated all the factors the wine industry had long competed on such as complexity and aging with the need for aging eliminated they also eliminated costs on Oak barrels and Storage reduce they dramatically reduced the range of wines offered creating only two white chardonnay and a red Shiraz the Simplicity of offering only two wines reduced the costs further plus it made the wine selection process easier for non-wine drinkers raise they removed all technical jargon from the bottles and created a simple and non-traditional label they also raised their prices above the budget wines but below the premium wines create they mainly focused on non-customers of wine such as beer and cocktail Drinkers and found out that many of them rejected one because of its complicated taste and difficulty to select using this information they created a wine called yellowtail that is easy to drink easy to select and fun the wine promised to jump from the glass like a kangaroo the result is that yellowtail appeared to a broad group of alcoholic beverage consumers in just two years yellowtail emerged as the fastest growing brand in history of both the Australian and the U.S wine Industries it became the number one imported wine into the United States surpassing the wines of France and Italy what's more yellowtail didn't just steal sails from competitors it grew the market the wine brought non-wine drinkers into the wine market novice wine drinkers started to drink wine more frequently budget wine drinkers moved up and drinkers of more expensive wines moved down to become consumers of Yellowtail the main idea of the Blue Ocean strategy is to create a new market by breaking away from the competition in other words making the competition irrelevant but where do you actually look to find ideas for creating a blue ocean here are six practical tips that can help you to identify blue ocean opportunities the authors call this six path framework path number one look across functional or emotional appeal to buyers every industry companies compete based on two bases of appeal functional or emotional functional appeal means offering a product or service based on its usefulness and price while emotional appeal means offering a product or service based on feelings for example coffee is a functional product but Starbucks turned it into an emotional product by creating a unique experience around it Starbucks isn't just a place where you get coffee it's also a place where you can relax and forget about your problems get some work done or meet your friends quite opposite to Starbucks a Japanese barber shop called Quick Beauty created a blue ocean by Shifting the industry from an emotional one to a highly functional one in Japan the time it takes to get a man's haircut hovers around one hour why a long process of activities is undertaken to make the hair cutting experience a ritual numerous hot towels are applied shoulders are rubbed and massaged customers are served tea and coffee and the barber follows a ritual in cutting hair including special hair and skin treatments such as blow drying and shaving the result is that the actual time spent cutting hair is a fraction of the total time moreover these actions create a long cue for other potential customers QB house changed all that it recognized that many people especially working professionals don't wish to waste an hour on a haircut QB house Stripped Away the emotional service elements of hot towels shoulder rubs and teen coffee and reduced special hair treatments to focus mainly on basic Cuts QB house also eliminated the traditional time-consuming wash and dry practice by creating the air wash system so to summarize tip number one if your industry competes on functionality and see how you can make it emotional if the opposite is true and everybody competes On Emotion then see how you can make your product functional path number two look across alternate Industries a company doesn't just compete with other companies in their own industry but also with companies in other industries that offer similar products or Services different products or Services can be substitutes for each other because they provide the same function or utility but come in various forms there are opportunities for companies to innovate and offer Something New by looking beyond their own industry and considering alternatives for example to sort out your personal finances you can use Financial software hire an accountant download an app or use pen and paper the software the accountant the pen and paper and the financial app are largely substitutes for each other they have different forms but serve the same function helping people manage their financial affairs another interesting example you probably know that Ford Model T was the first mass-produced affordable car that revolutionized the car industry this was all possible because Henry Ford used an assembly line production system where one worker did only one single task Henry Ford got the idea of the assembly line production from visiting a slaughterhouse and grain factories in other words he looked at alternative Industries to create a blue ocean opportunity when people make purchasing decisions they often think about their options unconsciously they consider what they want and how they can achieve it however when companies sell products or Services they don't always think about how their customers are making trade-offs across different Industries a company called netjets observed that business Travelers in the airline industry had two choices they could fly on a commercial airline or the company could purchase its own aircraft companies choose commercial airlines because it's cheaper buying your own aircraft and maintaining it is quite expensive on the other hand buying your private aircraft provides benefits such as cutting total travel time avoiding busy airports and allowing Executives to arrive more energized and productive netjets created a new way of air traveling called fractional jet ownership this means customers don't buy a whole private jet but only a small part of it this makes it a lot cheaper than buying a whole jet plus you don't have to change planes or wait in line at the airport it only takes a few minutes to go from your car to take off you can complete trips much faster and arrive at your destination energized and fresh the final result is that buyers get the convenience of a private jet at the price of commercial airline travel netjets created a new market by combining the best parts of private jets and commercial airlines and eliminating everything else this made them a multi-billion dollar company and they are still the biggest in the business so tip number two is to look at industries that are alternative to yours especially focus on the key factors that cause customers to switch from your industry to another industry path number three look across complementary product and service offerings for example in the movie theater industry the ease and cost of getting a babysitter and parking the car affects the perceived value of going to the movies by offering a babysitting service a movie theater could tap into this hidden value and create a blue ocean by considering the entire customer experience including what happens before during and after the use of a product you can uncover New Opportunities despite its importance to British culture the British tea kettle industry had been struggling to make a profit until Philips Electronics came along and turned the red ocean blue Phillips realized that the problem people had with brewing tea wasn't with the tea kettle itself but with the water used to make the tea the tap water had a mineral called lime scale that built up in the kettle as it boiled and then ended up in the tea people had to use a spoon to scoop out the lime scale before drinking their tea the tea kettle industry didn't think this was their problem but Phillips saw an opportunity to create a new product that solved this issue and made the tea kettle more valuable to buyers this helped Philips create a new market space in the tea kettle industry so tip number three to discover a blue ocean opportunity is to look at the entire customer experience and analyze what happens before during and after they use your product path number four look across strategy groups within the same industry a strategy group is a group of companies within an industry that pursue a similar strategy for example online shoe stores versus physical shoe stores they both serve the same need choose another example the luxury car market versus the economy car market both fall within the same overall industry automobiles but they pursue very different strategies for serving the same need and because of that they don't see each other as competition thinking that luxury car buyers wouldn't be interested in economic cars and vice versa but the truth is that customers can trade up and buy more expensive options or trade down and buy cheaper options you only need to understand the factors that determine customers decisions to trade up or down for example people who buy expensive cars are interested in luxury on the other hand people who buy economic cars are concerned about the price the Blue Ocean strategy would be to produce a car that is a luxury but the price is not so much higher than the economic car price this way the economic car buyers can trade up and luxury car buyers can trade down this is exactly what Toyota did with its Lexus offering the quality of high-end cars such as Mercedes and BMW at economy car prices by doing that Lexus captured customers from both segments not just that it also Drew many new customers to the market so tip number four for creating a blue ocean is to combine the most attractive factors of different groups within your industry path number five look across the chain of buyers creating a blue ocean can also be achieved by looking across the chain of buyers in the industry there are often multiple groups involved in the buying decision including purchasers users and influencers for example the pharmaceutical industry primarily targets influencers such as doctors while the clothing industry targets users by gaining new insights into how to redesign the product to appeal to different buyers companies can create a blue ocean Market Novo Nordisk a Danish insulin producer wanted to create a blue ocean in the insulin industry the industry had always focused on doctors as the key influencers in insulin purchasing decisions however Novo Nordisk saw an opportunity to create a blue ocean by Shifting the industry's focus from doctors to patients themselves they found that insulin supplied to diabetes patients presented significant challenges in administering patients had to handle syringes needles and insulin and administer doses according to their needs which was complex and unpleasant this led Novo Nordisk to develop the novopen the first user-friendly insulin delivery solution that looked like a pen the pen contained an insulin cartridge that allowed the patient to easily carry roughly a week's worth of insulin the pen had an integrated click mechanism making it possible for even blind patients to control the dosing and administer insulin patients could take the pen with them and inject insulin with ease and convenience without the embarrassing complexity of syringes and needles this Innovative insulin delivery system shifted the industry landscape and transformed Novo Nordisk from an insulin producer to a Diabetes Care company today almost 30 years after its initial blue ocean strategic move Novo Nordisk Remains the global leader in Diabetes Care and around 70 percent of its total turnover comes from this offering path number six look across time all Industries are subject to external trends that affect their business over time for example think of the rapid rays of the internet or the global movement toward protecting the environment by looking at these Trends in your industry you can find Blue Ocean opportunities for example as Netflix saw internet Broadband explode it realized that fast and real-time streaming of movies would soon be able to take off this Insight inspired Netflix to create a blue ocean for itself so can you identify the trends that have a high probability of impacting the industry you are in how will they change your industry using this information can provide higher value to your customers and create a blue ocean for yourself this is it for this video hope it was useful if you are an entrepreneur who is always busy feels burnt out and doesn't see results despite the hard work then check out the video you see on your screen it's the summary of a book called who not how this book will save you so much time and increase your income thanks for watching

Channel: LITTLE BIT BETTER

Views: 408,588

Keywords:

Id: A3DpSdKsnic

Length: 19min 56sec (1196 seconds)

Published: Sat Aug 19 2023