Editor's Note: Take a look at our featured best practice, Growth Strategy (41-slide PowerPoint presentation). The reality is: all businesses face the challenge of achieving sustainable Growth. They need viable Growth Strategies.
So, what is Growth Strategy?
It is the organization's high-level Corporate Strategy Plan that outlines everything the organization needs to do to achieve its goals for [read more]
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A multitude of industry sectors find themselves ensnared in relentless competition as organizations strive vigorously, frequently contending over identical attributes, all the while presenting comparable goods or services.
This fiercely competitive environment has clear and accepted boundaries with well-defined competitive rules. Companies strive to surpass their competitors and capture a larger portion of the product or service demand in this environment.
Opportunities for profits and growth diminish as the market space becomes increasingly congested.
Products either transform into commodities or find their niche, leading to fierce competition that turns the industry into a battleground. That is why such an environment is called “red oceans.”
A way for profitable and sustained growth is to distinguish the organization from the intense rivalry by establishing an unchallenged market arena—i.e., a “blue ocean.” Blue Ocean is a strategy that advocates fashioning novel markets and Value Propositions that render the competition inconsequential.
The PPT slide below captures the essence of the difference between a “blue ocean” and “red ocean.”
We can see that a Red Ocean Strategy focuses on competing within existing market boundaries where industries strive to outperform each other, leading to saturated markets with diminishing profits and growth. Conversely, Blue Ocean Strategy involves creating new, uncontested market spaces, emphasizing value innovation. In these markets, competition becomes irrelevant as companies deliver higher value to customers at lower costs, breaking the traditional cost-value trade-off.
Red Ocean Strategy development involves analyzing the competitive landscape, identifying rivals’ strengths and weaknesses, and establishing a unique market position to gain a sustainable competitive advantage.
Value Innovation lies at the core of Blue Ocean Strategy, for which uncontested markets are shaped. Value Innovation involves the concurrent pursuit of distinctiveness and cost efficiency. Companies provide significantly higher value to end customers at a lower cost, breaking the traditional cost-value trade-off.
The bedrock of the Blue Ocean Strategy is the 4 Actions Framework, which represents a potent instrument. The core assertion of the 4 Actions Framework is that creating a fresh market can yield greater benefits compared to competing against entrenched rivals in an established market.
The 4 actions that the framework takes into consideration when either improving an existing offering or creating a new one include:
- Raise
- Eliminate
- Reduce
- Create
Key to executing an efficacious 4 Actions Framework strategy is pinpointing the recurring challenges that the organization can uniquely alleviate. It is capable of evaluating the existing Value Proposition of a company while uncovering methods to formulate a fresh one that aligns with an alternative group of customers or requirements.
Let us go into a little more detail about some of the actions.
Raise
Questions regarding features that must be raised well above industry standards related to product, pricing, or service are answered in this action. The key question to be asked is, “Which factors warrant raising significantly beyond the industry’s typical standards?”
This question compels organizations to unveil and eradicate the trade-offs that buyers are compelled to accept, ensuring a higher level of quality, performance, or value that significantly surpasses the existing market norms. By doing so, companies can set themselves apart from the competition and offer superior offerings that attract more customers.
Eliminate
Areas of a company or industry that can be entirely abolished to decrease costs and help create a completely new market are explored in this action. The key question to ask here is, “What are the factors commonly overlooked by the industry that should be eliminated?”
The said query compels the business to contemplate the removal of elements that companies within the industry have traditionally competed upon. The emphasis should lie on attributes demanding substantial effort and investment, but yielding minor revenue or new customers. By eliminating these non-essential elements, companies can reduce costs and refocus their resources on more value-adding aspects, facilitating the creation of a new market space with less competition.
Reduce
This action looks at spheres of a business’s product or service that are not wholly essential, but are noteworthy in the industry and can be condensed without entirely eliminating them. The goal here is to identify which factors have been over-engineered or over-delivered according to industry standards, leading to unnecessary costs and complexity.
By strategically reducing these elements, businesses can streamline their offerings, lower operational costs, and improve efficiency while still meeting customer expectations. This approach helps to refine the value proposition and focus on what truly matters to customers.
Interested in learning more about the 4 Actions Framework? You can download an editable PowerPoint presentation on the 4 Actions Framework here on the Flevy documents marketplace.
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