The Future of the business is Digital, No Doubt about it. The question is about the readiness of the organization to transform inside-out and freshness of Business Model/Strategy based on market demand, the customer wants, and value proportionate in a way of future-proofing your business to an extent.
The success of Digital Journey depends on the Business model/strategy. Where do you want to swim – Blue Waves or Red Waves??
Red Ocean is considered to compete in existing market space, industry boundaries ins the spaces are known. As the market space gets crowded, profits and growth are reduced. Products become commodities, leading to a cutthroat or ‘bloody’ competition. Hence the term red oceans.
Blue Ocean denotes all the industries not in existence today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. A blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth.
How do we Shift from the Red Ocean to the Blue ocean?
- Step 1: Stop Competing Head to Head with a major player
- Step 2: Look for noncustomers, not customers
- Step 3: Understand the reason for not consuming the product/service
- Step 4: Run-Value innovation using ERRC Grid || Eliminate and reduce factors the industry has long competed on, raise and create factors the industry has never offered by pursuing differentiation and low cost
- Step 5: Make the competition irrelevant and create a new demand
How to drive value innovation through ERRC Grid in a product/service:
The aim of this model is to avoid battling competition head-on, instead opting for finding the disruption customers are clamoring for and is yet to be created by the industry. This is great as a workshop exercise in break-out groups during annual planning cycles. Or this framework could be used in the early days of establishing a start-up. Even pricing strategy could benefit from an ERRC approach.
Value Innovation is the synchronous pursuit of differentiation and low cost, creating a leap in value for both buyers and the companies. The concept of Value Innovation is developed by W. Chan Kim and Renée Mauborgne and is the cornerstone of the Blue Ocean market-creating strategy.
- Cost Savings are made by eliminating & Reducing the factors an industry competes on
- Buyer value is lifted by raising & creating elements the industry has never offered.
Application Examples of Blue Ocean Strategy :
- Apple users can download legal and high-quality music at a reasonable price from iTunes making traditional sources of distribution of music irrelevant. Earlier compact disks or CDs were used as a traditional medium to distribute and listen to music. Apple was successful in capturing the growing demand for music users on the go. All the available Apple products have iTunes for users to download music.
- Barefoot Wines – Barefoot is honored to be the most awarded wine brand in the world for its innovative approach to winemaking and diverse collection of delicious, refreshing wines that are constantly making new friends around the globe. They chose to make wine easier and less pretentious, targeting drinkers who didn’t take their wine so seriously instead of fighting for highbrow sommelier approval.
Conclusion: Cloud and the Internet of Things (IoT) are emerging as major digital drivers across industries with massive implications on business models, workflow management, systems, and people. Companies must fundamentally rethink their approach to value creation and customer-centric offerings for lasting success instead of copying random frameworks that were available in the market.
Digital transformation can go hand-in-hand with the blue ocean strategy that can transform your company’s value proposition, technology strategy, and operational process model. Technically, the digital transformation would be a component or a necessity of achieving a broader blue ocean strategy.