In our last blog on the series of increasing your profits we discussed increasing your prices. We briefly mentioned Blue Ocean Strategy as an avenue to increasing prices to your customers or clients.
So what is “Blue Ocean Strategy” and how does it enable you to increase your prices? In most industries businesses all compete in the same space for the same clients or customers. This is an overcrowded market and is termed “red-ocean”, as this competition leads to blood in the water. All you are doing is competing with other businesses in a shrinking profit pool battling other competitors.
Blue Ocean is about a business, your business, creating new untapped market space that no other business is competing in, ripe for growth and meeting unmet client needs.
Blue Ocean is based around four (4) critical principles:
- How to create uncontested market space by reconstructing market boundaries;
- Focusing on the big picture;
- Reaching beyond existing demand and supply in new market spaces; and
- Getting the strategic sequence right
This all sounds complicated, but in essence can be distilled down to “blue oceans denote al the industries not in existence today, the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid”.
So how can a blue ocean strategy lead or enable you to increase prices? Well the corner stone of blue ocean strategy is “value innovation” which is the pursuit of differentiation and low cost. This creates value for your buyers, your business and your employees, opening up new and uncontested market space. The aim is not to compete with other businesses but to make them irrelevant. When your competitors are irrelevant you have the opportunity to increase your prices.
Blue Ocean is but one option for your business to consider when it comes to differentiation along with many other business models such as lean start up, six sigma, red blue black and so on.
For any questions on Blue Ocean and how it may apply to your business or to discuss other options on how to differentiate your business, please get in touch.
Steve Wilson on behalf The Diligent Group