One of the most popular tools in my armament for innovation is the under-utilised Blue Ocean Strategy concept. Because the concept is also a book, most of the stuff you find on the internet only pushes more people to buy a copy rather than how to actually use the ideas encapsulated therein. So, because I reckon it’s one of the best tools there is, I’m gonna explain here how to actually use it in a very practical sense. First – you’ll need to look at this graph, taken from blog.delaranja.com. It highlights the Blue Ocean Strategy canvas of the Wii, PS3 and XBox.
This is the most useful tool from the BOS hymn-book. Use it in the following ways.
1) Map out the key factors of the industry you are trying to play in. You can do this via a number of methods, but PEST analysis is probably one of the best ways. Ask yourself, what are the table stakes in this industry? What are the norms for the industry as it currently stands? It always works best if you can ask an old hand in the industry to gain these.
2) Once you have figured out the key factors of the industry, place them on the ‘x axis’ of your blank strategy canvas.
3) Now, place the key competitors on your strategy canvas. If a competitor has a lot of one particular factor, place them quite high on the canvas (and visa-versa.) In the example above, both the PS3 and the XBox had high amounts of Storage, without having as much storage as a normal PC. Thus, the points have been placed mid-‘y-axis.’
4) Once you have mapped your main competitors on the canvas, you can see where the current competition is playing, and which parts of your business you can change to create a really unique value proposition.
In this case, Nintendo went through and created a game con-sol which was 1) lower in cost than the super expensive PS3/XBox 2) had more, simple, games that enabled the whole family to play and 3) have a simple interface which led to simple, unique game-play. You’ll notice that Nintendos Wii has blown PS3 and XBox out of the market. Why? And why haven’t the aforementioned game con-sols been able to take back their market share? Simple – because the Wii sold to people who never would have purchased a PS3/XBox anyways. They created a new market – a Blue Ocean – by simply refusing to play the game of intense, highly complex game play. And that, ultimately, is the strength of the BOS tool.
Why play in a red ocean, full of competition, price wars and continuous improvement when you can create a new, completely profitable blue ocean?You can use the Blue Ocean Strategy Canvas to achieve these same results. It’s a key tool, and helps immensely to play the game of intrapreneurship. Good luck! Flick me and email for a Word Template if you like.
The Squiggly Line 
Great post, Steve. Spotting a niche market has always been a known technique – this formulaic method takes it to a whole new level. Ie it’s not a great task to work backwards – considerig those two or three factors together could actually lead you to creative solution itself! Nice.
Thanks Glenn, it’s something that I continue to love because of it’s simplicity, and because it works! We’re all geniuses in hindsight, and so sometimes it can become ‘easy’ to see a niche when it has been filled. The BOS helps to find those opportunities when you need them, and then provide a strategy to fill it.
Love it!
thanks steve for the explanation. still having difficulty in defining my strategy canvas though. you can see from my web site that we service ad agencies. trying to create a blue ocean in CGI. any thoughts?
Hey Doug,
Great question. Try answering the following questions and see if they help.
1) How many hours work does each client get at Seventh Street (roughly)?
2) Do you use billable hour?
3) How much does your service cost? What is the average cost of similar types of services in the industry?
4) How long does it normally take to get a piece of work from brief-to-finished in the industry?
5) What is the standard work most clients are looking for?
6) Who are your clients? Government? SME? Corporate?
Remember, you’re trying to get a macro view of the way your industry works. Zoom out and ask yourself how the industry works. Once you have that, ask yourself:
1) What can we Reduce below the industry standard? In the Wii case above, Nintendo reduced the amount of CPU power below the industry standard.
2) What can we eliminate? Which of the factors that the industry takes for granted can we scrap?What doesn’t matter? In the Wii case above, Nintendo did away high-def graphics and storage capabilities.
3) What can we Raise? What are the factors of our offerin which we can raise above industry standards? In the Wii case, they raised the unique way people played the games, and blew away the market. People are still holding ‘controllers’ but they are using them in a totally unique way, beyond any other console allows.
4) What can we create? What can we create in our company which is currently not in the industry? Nintendo did this by creating the Mii…a personal based avatar which allows Wii players to vs each other, and communicate via the internet on the platform. Sure, some other games have done this (especially PC games such as World Of Warcraft etc) but none at the time had on a console. This added to the Wii offering, and helps make the very purchase of the console more viral.
Finally, ask yourself some other questions, such as:
1) Are there any other industries business models we could try? How do people a) sell roses b) sell videos c) sell funerals – and could you borrow any ideas from them?
2) How does nature do it? http://www.asknature.org
3) How else could I talk to about this?
I hope that helps! Comment back on how you go, I’d be keen to hear how you finish up.
Thanks muchly!!!
Steve