Based on the case study, PetWellClinic: Shifting from a Red to a Blue Ocean, written by Chan Kim, Renée Mauborgne, and Michael Olenick, Executive Fellow at the INSEAD Blue Ocean Strategy Institute. 

Red Ocean of Veterinary Practice

Veterinary visits are a dreaded affair, for both the pets and their owners. The entire ordeal involves setting appointments well in advance, leaving work to fetch the animal, stressful waits, tense pet interactions, and a labyrinth of procedures carried out by overworked vets juggling both medical duties and sales pitches for clinic-exclusive items.

At the end, pet owners are slapped with a hefty bill, and they’re not the only ones feeling the pinch. Vets, like Dr. Sam Meisler who’s been in the game since the ’80s, are also struggling with the grueling demands of the job and the financial strain that comes with it.

Contrary to public belief, vets work long hours but often struggle financially in a field where they spend an inordinate amount of time worried about selling services rather than caring for sick animals.

The 2008 recession only made things worse, leaving our Dr. Sam juggling two failing clinics and a mounting wave of unhappiness. Clearly, the system’s broken – it’s high time for a change.

Veterinary practice isn’t all tail-wags and purrs. Vets have it rough – they graduate from their grueling eight-year programs (4 years of undergraduate + 4 years of postgraduate programs) buried under massive student debts and dive headfirst into an unpredictable, high-pressure profession.

They often barely scrape by financially, stuck between their duty to care for animals and the pressing need to keep the lights on and their staff paid. To add insult to injury, vets, like Dr. Sam Meisler, are slammed with criticism when they can’t offer free care and are often victims of cyberbullying.

And the real gut-punch? They face the traumatic task of euthanizing animals sometimes due to owners’ financial constraints, leading to an alarming rate of suicide among veterinarians.

The Need to Challenge the Status Quo

Dr. Sam, a vet with a head for business, found himself neck-deep in an industry that was more cutthroat competition than healing animals. After wrestling with the harsh reality of veterinary practices – places where healthcare often took a backseat to selling an array of services and products – he was tired, broke, and depressed. He realized this wasn’t what the vast majority of vets spend years of their lives training for.

Vet clinics, whether a sole practitioner or multi-vet practice, were all pushing the same questionable services, from unnecessary vaccines to potentially harmful procedures.

Both are full-service and, for each type, every clinic of the same type is virtually identical. Customers walk in the front door on two legs with a reasonable expectation the health of a four-legged furry friends will be the first concern of vets. Instead, the two-legged types often encounter stressed out vets juggling multiple patients. Vets pop in for brief exams and sometimes sell a variety of questionably necessary products and services like vaccinations for extremely rare diseases, excessive tests, and expensive procedures that arguably aren’t especially helpful and may even endanger pets.

The result? Overworked vets, frustrated pet owners, and animals caught in the crossfire. Hit hard by this grim reality, Dr. Sam knew a change was in order.

Introducing PetWellClinic: A Walk-In Clinic that Reshaped the Industry

While in business school, Dr Sam read Blue Ocean Strategy book and decided to put its principles into action in veterinary practice.

Inspired by value innovation, the idea of simultaneously delivering high value at low cost, Dr. Sam theorized that a clinic that eliminated and reduced many of the traditional veterinary services could offer more value to vets, pets, and pet owners.

Simultaneously, costs could be reduced providing the needed funds to raise and create other factors enabling a leap in value to break out of the red ocean vet clinic industry. The PetWellClinic was born.

PetWellClinic is a no-appointment, walk-in veterinary clinic that focuses on routine care like vaccines, check-ups, and medication. His clinic stripped away costly and unnecessary services, with no surgery, dental cleaning, or in-patient facilities.

Gone were the distracting phone calls and secretive pricing; replaced by open floor plans, transparent fees, and highly-focused pet care.

Dr. Sam applied blue ocean strategy systematically and created a new market space that has catapulted him to unprecedented success  

He financed the pilot clinic from the earnings of his traditional clinics, ensuring minimal financial and brand risk. He opened the doors of his pet-friendly, value-oriented vet clinic in 2010, reinventing the traditional veterinary service model, promising better results for pet owners, animals, and veterinarians alike.

The Results of the Blue Ocean Move

Dr. Sam’s innovative PetWellClinic, a fresh take on the veterinary service model, didn’t take long to catch on. Pets and pet parents both left healthier and happier than at his traditional clinics, leading to growing popularity. Despite some early struggles, including a partner who didn’t fully grasp the blue ocean model and the constraints of splitting his time with his traditional clinic, PetWellClinic began to thrive.

From a single clinic to a 140+ franchises 

From its humble beginnings in 2010 with a single clinic open only Saturdays, the brand has grown exponentially. After buying out his partner in 2015, and expanding operating hours, by 2022 Dr. Sam had 145 PetWellClinic franchises sold across 11 states, with 16 operational and the rest in various stages of development, solidifying PetWellClinic as a revolutionary force in the industry.

Check Out the Case Study

If you’re an educator interested in teaching blue ocean strategy to your students, check out this exciting case study, which comes with a teaching note to guide classroom discussion and lecture slides, and first-hand video interviews.

PetWellClinic

Shifting from a Red to a Blue Ocean

Author(s): KIM, W. Chan, MAUBORGNE, Renée, OLENICK, Michael

We are happy to announce that the 8th edition of the International Blue Ocean Awards just concluded on April 13th.

The annual Blue Ocean Awards recognize and support startups and SMEs striving to create blue oceans.

For the first time ever, the International Blue Ocean Award ceremony was hosted at the INSEAD Blue Ocean Strategy Institute, co-directed by Professors Chan Kim and Renée Mauborgne, the creators of the blue ocean theory.

INSEAD’s Dean of Innovation, Peter Zemsky, kicked off the event with INSEAD’s Dean of Research, Lily Fang, speaking on the positive impact the research and theory of Blue Ocean have had on the business world and the winners.

Peter Zemsky, INSEAD Dean of Innovation; Lily Fang, INSEAD’s Dean of Research

Alban Eral, the founder of the Awards, reports that more than 90% of Blue Ocean Award winners are financed within six months of receiving the award. The valuations of winning companies typically increase tenfold within three years of their victory, with some seeing valuation increases of up to 40 times.

Alban Eral, the Founder of the Blue Ocean Awards; The INSEAD Blue Ocean Strategy Institute Team

Founding and International Expansion of the Awards

The Blue Ocean Awards were founded in 2014 by entrepreneur Alban Eral in partnership with the French Ministry for the Economy and HEC Paris business school. The mission of the awards has gained the support of a wide range of sponsoring corporations from Michelin to Aesio Mutuelle, Veolia, Groupe SEB, Saint-Gobain and Dassault Systemes among others. Forbes France is also the media partner. 

The competition is open to all start-ups and SMEs seeking to showcase their innovative blue ocean companies.

Since its founding in France, the competition has expanded to South Africa and this year to India and Senegal.

The first-ever Indian Blue Ocean Awards, were held in March 2023 in Chennai, India as part of Umagine Chennai 2023, a Technology, Entrepreneurship & Skills Summit organized by the Government of Tamil Nadu that attracted over 18,000 attendees. The Awards were led by George Eapen, the International Director of the Blue Ocean Awards & BlueCity.

Senegal also hosted its first edition of the Blue Ocean Awards in December 2022 at the D-HUB in Dakar with the endorsement of the French Embassy in Senegal and the Delegation for Rapid Entrepreneurship of Women and Youth.

Blue Ocean Cities

The success of the Awards coupled with the struggling need of cities to attract talent and investments and become desirable places to both live and work, has also inspired a new initiative.

BlueCity

Beyond the international expansion of the Awards, Alban Eral and Blue Ocean Awards are now in the process of speaking to cities in diverse countries to apply the theory and approach of blue ocean to make a blue ocean shift in cities. 

BlueCity started 3 years ago with 300 students from the real estate school of France then in 2021 with the main cities of South Africa such as Johannesburg, Pretoria with the support of the UNISA (University of South Africa), TIA (Technology Innovation Agency) and the French Embassy in South Africa. All the South African projects presented during the ceremony are from the 8 projects delivered by this first edition of the program in South Africa, the second edition will be launched this summer.

At the ceremony, the Mayor of Fontainebleau announced the launch of a BlueCity for his city.

This Year’s Event

This year’s Blue Ocean Awards brought together not only Blue Ocean winners from each participating country but also dignitaries and representatives from France, South Africa, Senegal, and India.

The 2023 Global Award ceremony held at INSEAD announced the winners of the French Blue Ocean Awards and recognized the National Blue Ocean Award winners and finalists from South Africa, Senegal, and India.

The 2023 Winners by Country

Winners of the French Blue Ocean Awards

MEET IN CLASS – MENTOR AWARD

Meet in Class, a company providing low-cost support classes in mini-groups won the Baby category of the Blue Ocean Awards five years ago. Today, the company has grown significantly and founder Youssef Zakaria received the Mentor Award. The award was presented by the Mayor of Fontainebleau and Femmes Business Angels, who recognized the progress and achievements of Meet in Class and offered to invest in their current fundraising round.

Youssef Zakaria, founder of Meet in Class (center) receiving the Mentor Award from Julien GONDARD, Mayor of Fontainebleau, and Johannah Gay from Femmes Business Angels.

TOOPI ORGANICS  – LEGEND AWARD

Toopi Organics, a sustainable agriculture company, won the Baby Award in 2019 for their innovative approach of converting human urine into organic fertilizers. They have now received the Mentor Award and are set for rapid expansion, with plans to open 30 factories worldwide. The company’s commitment to a greener future is further emphasized by their upcoming fundraising announcement of 20 million euros.

Michael Roes (Center), President of Toopi Organics, before receiving his Mentor Award from Claude-Sébastien Lerbourg (Left) from Saint-Gobain and George Eapen (Right), from the Blue Ocean Awards.

Winners & finalists of the 1st Blue Ocean Awards India

aHope – SOCIETAL WINNER

aHope aims to help India’s small farmers, artisans, and weavers achieve sustainable prosperity by creating a virtual cooperative ecosystem that provides fair access to capital and financing options. The livelihood to business (L2B) model includes a virtual cooperative, redefined creditworthiness, and value chain financing to address the issue of farmers’ indebtedness and financial struggles. They strive to foster vibrant village economies and honor every farmer who has lost their life due to debt.

AMBARAM– BABY AWARD

Ambaram is an eco-friendly company that offers a B2B platform for the fashion industry to reduce waste and improve efficiency. Their software-as-a-service solution allows designers and manufacturers to manage design assets, collaborate with teams, and build sustainable relationships with suppliers. They are committed to environmental responsibility and aim to make the fashion industry more sustainable through innovation and collaboration.

Kalyani Kunche, Ambaram Founder

napID – FINALIST

napID is a cyber security company that offers a patented security system to prevent data breaches and fraudulent transactions by keeping user IDs and payment credentials in sleep mode 24/7. Their zero-factor authenticator, endorsed by the Reserve Bank of India, eliminates the need for passwords and significantly reduces fraud. Their solution is designed to help businesses and banks prevent hacking attacks involving lost or stolen credentials.

Kuloth Vijayarangam & Sowjanya Tiriveedhi, napID co-Founders

Winners & finalists of the 1st Blue Ocean Awards Senegal

AFRICAN PUZZLE WORKS – BABY AWARD

African Puzzle Works is a personal assistant app using voice notes, images, and videos to help workers with literacy challenges. It’s beneficial for small businesses, craftsmen, tailors, shoemakers, and anyone who wants to boost productivity and efficiency.

ART-PESOUNG – SOCIETAL AWARD WINNER

Art Pesoung sells eco-friendly toilets that use compressed earth bricks and non-drainable pits to capture methane gas for biogas generation in rural areas. The toilets also have a Menstrual Hygiene Management booth and offer payment via mobile money. They provide affordable and sustainable sanitation that is accessible and convenient for everyone.

Joséphine Tine, ART Pesoung Founder

LOGIDOO– MENTOR AWARD

With the e-commerce market in Africa expected to reach $75 billion by 2025, logistics are critical for success in the industry. Logidoo offers a mutualized logistics solution for e-commerce businesses in Africa, helping them manage logistics and delivery traceability through a network of service providers. This helps businesses adapt to cost and time constraints while focusing on core competencies and growing more efficiently.

Tamsir Ousmane Traore, Logidoo CEO

NAWALI GROUP– MENTOR AWARD

NAWALI GROUP helps people safely acquire real estate in Africa, including traditional and eco-friendly constructions, as well as secured lands in Senegal, Mali, Mauritania, Gambia, and Ivory Coast. They offer a risk-free solution without intermediaries or interest fees, especially beneficial for African diasporas, investors, expatriates, and those hesitant to invest due to a lack of knowledge or past scams.

Aïta Magassa, Nawali Group Founder

Finalists of the 2nd Blue Ocean Awards South Africa

ANN-CONNECT- FINALIST

ANN-CONNECT is a South African technology company that provides network solutions for remote areas, specializing in addressing connectivity issues caused by load shedding and blackouts. Their solutions help students in townships access exams and video interviews, even when connectivity is lost, ensuring they never miss critical opportunities. The company helps individuals stay connected even when the connection is lost.

Bonginkosi Mabaso, Ann-Connect Founder

POWER CYCLE-FINALIST

POWER CYCLE is an eco-friendly company that transforms recycled plastic into locally made bicycles that generate power on the go. Their bicycles are perfect for those who prioritize sustainability and need constant access to electricity, such as students in rural areas who suffer from load-shedding. The bicycles offer a unique value proposition, as they enable riders to produce energy from their rides, reducing their carbon footprint and providing a win-win for the environment and users.

Nkamogeleng & Thabang Bogopa, Power Cycle co-Founders

E-TOKEN-FINALIST

E-TOKEN provides affordable, redeemable energy sustainability credits to individuals and organizations struggling with expensive energy costs. Their solution helps customers achieve their sustainable goals, regardless of their current energy tariff structure. E-TOKEN is particularly useful for residential households on prepaid tariffs, commercial buildings on three-phase tariffs, and municipalities seeking to reduce load-shedding.

Bami Oni, E-Token Founder

PARENTS EDUCATION-FINALIST

PARENTS EDUCATION (UMBALABALA) addresses illiteracy and poor academic performance among learners by involving parents in the learning process through household reinforcement environments. Their program is accessible to all households, including digitally marginalized individuals, grandparents, and technophobes. The program improves learners’ literacy rates and academic performance through effective, accelerated, integrated, and explorative family education.

Mbuso Ngcongo, Parents Education (Umbalabala) Founder

Congratulations to all the winners of the 8th edition of the International Blue Ocean Awards.

If you’re an innovative blue ocean company, enter the Blue Ocean Awards next year. Applications are open to all countries.

Are you interested in bringing the Blue Ocean Awards to your country? Get in touch with Blue Ocean Awards.

After the publication of our books Blue Ocean Strategy and Blue Ocean Shift, a question repeatedly popped up from practitioners, academics, and consultants working in the field of innovation:

How does blue ocean strategy differ from creative destruction, disruption, or disruptive innovation?

To address that question, we reexamined our blue ocean data from the innovation angle and found that although a few cases, such as Novo Nordisk’s insulin pen, largely displaced the existing offerings in their own industries, most blue oceans in our data were created not within existing industry boundaries but across them.

Cirque du Soleil, for instance, created a new market space across the existing boundaries of circus and theater. Although it pulled a degree of share from both, generating a measure of disruption, it did not significantly displace either.

Chan Kim & Renée Mauborgne, authors of Beyond Disruption

However, our examination also revealed something else that greatly intrigued us. Among the cases that had been added to our original database over time, a few had triggered no disruption or displacement. That piqued our curiosity. Did those cases represent a few unconnected anomalies, or were they the tip of an iceberg, examples of a new kind of innovation? If the latter, why had it been largely overlooked in the literature on innovation and growth? What were its implications for business and society, now and in the future? And was there a process or an approach by which we could conceive and realize this new kind of innovation in a systematic way?

To answer those questions we collected historical and current cases of nondisruptive creation across the for-profit, nonprofit, and public sectors. As we did, we built a growing new database on nondisruptive creation and the managerial actions involved in it.

Our research showed that nondisruptive creation is a concept distinct from both disruption and blue ocean strategy, with a correspondingly distinct impact on growth.

Whereas disruption generates new markets within existing industry boundaries, resulting in a high level of disruptive growth, and blue ocean strategy creates new markets across existing industry boundaries, producing a mix of disruptive and nondisruptive growth, nondisruptive creation generates new markets outside existing industry boundaries and yields mostly nondisruptive growth.

Our book Beyond Disruption details the historical evolution of our journey and offers the answers we found to the questions we asked.

Learn more about the book.

Written by Chan Kim and Renée Mauborgne, with Mi Ji, Senior Executive Fellow at the INSEAD Blue Ocean Strategy Institute.

For the past three decades, the business mantra has been “customer first”. Yet focusing on retaining and expanding an existing customer base often results in finer segmentation and the greater tailoring of offerings to better meet customer preferences, which will likely lead companies into too-small target markets of an existing industry.

The blue ocean strategist’s mantra is “noncustomers first”. By looking to noncustomers and building on powerful commonalities in what they value, companies can reach beyond existing demand to unlock a new mass of buyers.

However, few organisations have a sound grasp of who their noncustomers are or why they remain just that – noncustomers. When we asked managers about noncustomers, some of them thought these were simply customers of their direct competitors. Others assumed that they had no noncustomers as they were supplying all immediate downstream players in their business field. Although these managers were indeed talking about noncustomers, their mindsets continued to be confined to the narrow frame of their existing industry. By our definition, noncustomers are buyers who don’t buy into your industry, and they normally represent a much bigger population than your existing industry’s customers.

Understanding the three tiers of noncustomers

Consider the customer relationship management (CRM) software industry. For years, CRM software vendors had focused on selling software licenses to business clients. The software was then installed, configured and customised on the premises. This required significant internal expertise and external professional support and involved a long purchase and implementation process that could last for 18 to 24 months, as well as high start-up costs and maintenance expenses.

[F]ew organisations have a sound grasp of who their noncustomers are or why they remain just that – noncustomers.

The total cost of ownership of CRM software for 200 users over a five-year period could amount to more than US$4 million. All the vendors in the industry focused on a limited number of large business clients that traditionally used the software and had the financial resources to pay for the licenses and services. But a noncustomer analysis shows that they were ignoring the huge latent demand in the industry.

There are three tiers of noncustomers. First-tier noncustomers are all the soon-to-be noncustomers of your industry. They patronise your industry not because they want to but because they have to. They use current market offerings minimally to get by, while searching for or simply waiting for something better.

The Three Tiers of Noncustomers

In the case of the CRM software industry, these were a portion of the existing customers. This group consisted mainly of large companies and some medium-sized companies who were disgruntled about the lengthy and difficult purchase and deployment process, complex-to-use applications and low price-performance ratio. In the absence of alternative offerings, they had to put up with the existing products.

Second-tier noncustomers are refusing noncustomers. They are people or organisations that have consciously thought about using your industry’s offering but then reject it, either because another industry’s offering better meets their needs or because yours is beyond their means, in which case their needs are dealt with by another industry or ignored. In the CRM software industry case, most medium-sized businesses found the cost of purchasing and implementing CRM solutions prohibitive despite their need to manage customer relations and sales prospects. CRM systems’ reputation for being complex, difficult to implement, having high system requirements and poor usability further drove these companies away, making them the refusing noncustomers of the industry.

Third-tier noncustomers are the furthest away from an industry’s existing customers. Commonly, these unexplored noncustomers have never been thought of as potential customers, nor targeted by any of the industry’s players, because their needs and the business opportunities associated with them have always been assumed to belong to other industries. In the CRM software industry, these were small businesses and entrepreneurs. They normally used other means to manage their customers and sales, such as manually recording and tracking account activities and contact information using Excel spreadsheets or other database applications. Existing players in the CRM industry never thought of them as potential customers.

Case study trailer for Salesforce: Creating a Blue Ocean in the B2B Space

By looking to these noncustomers and exploring their “pain points”, Salesforce, Inc., a San Francisco-based high-tech company, created a cloud-based CRM offering. Upon subscription, customers could access and use CRM applications anywhere from any device that had an internet connection. There was no need to purchase a software license or to deploy and maintain the software on the client side. The applications were simple and easy to use, providing only core features that met the needs of businesses of any size. The cost for accessing the CRM applications online and securely managing, sharing and using sales information was just US$65 per month per user.

Within four years, Salesforce grew from a start-up with just 10 employees and a modest investment of US$2 million into the world’s largest-hosted CRM service provider.

Salesforce’s CRM offering was not only appealing to small and medium-sized companies that had been denied access to advanced CRM solutions due to a lack of resources and infrastructure. They also proved attractive to large companies as the solution lowered their cost structure and minimised their time spent on lower-value activities, thus allowing them to concentrate their resources on activities with a greater impact on their business.

Within four years, Salesforce grew from a start-up with just 10 employees and a modest investment of US$2 million into the world’s largest-hosted CRM service provider. The CRM market has been growing at a double-digit rate, the fastest growth among all software markets. Businesses that use cloud-based CRM solutions have swelled from 12 percent to over 87 percent in 10 years. Now, over 91 percent of organisations with more than 10 employees in their workforce use a customer relationship management system. With its blue ocean move, Salesforce tapped into the latent demand of noncustomers and created a new and fast-growing market space of on-demand CRM solutions. In doing so, it expanded the CRM industry, where it has sustained market leadership by a big margin.

Why Tata Nano failed to create a blue ocean despite its stunning debut

Similarly, the Indian automobile industry in the 2000s also presented a huge blue ocean opportunity. While the passenger car market was crowded with automakers from around the world, it was a tiny market considering India’s huge population. The two-wheeler (scooter) market was five times as big. And 90 percent of Indian families did not even own a scooter and relied on public transport for their daily mobility needs. Despite their aspiration for better social image and status, buying a passenger car was just not an option for most Indian families given the prohibitive price; an entry-level car could cost five times as much as a scooter. Moreover, car dealerships and repair shops were only really available in big cities, making it difficult for people living in smaller cities and towns to access them. Automakers, while competing fiercely in the passenger car market, missed the potential mass market of Indian buyers seeking a decent means of personal transportation.

Here, the first-tier noncustomers were those who purchased existing passenger cars but remained dissatisfied and waited for something better. In contrast, the second-tier and third-tier noncustomers were two-wheeler buyers and the 90 percent of Indian families who did not even own a scooter, respectively.

Nano mostly reached existing car owners in big cities who were looking to buy the Tata Nano as a second car for its cheap price.

By observing what these noncustomers valued, the Indian auto manufacturer Tata Motors identified a path for blue ocean creation: The Tata Nano, unveiled in 2008, presented a safe, fuel-efficient, low-pollution and all-weather form of transport at the price of a scooter for the mass population of India. What’s more, the company had a plan to distribute the Nano through the Tata Group’s retail networks, partner banks and post offices instead of through dealerships in big cities, thereby easily reaching two-wheeler riders in smaller cities and towns. These individuals longed for an upgrade of their socioeconomic status but were reluctant to walk into the daunting and luxurious car showrooms.

Case study trailer for Tata Nano’s Execution Failure

The Nano received rock-star greetings at its commercial launch event in 2009. As there were only 1,000 cars on display across India, most people had to place an order without having even seen, let alone test driven, the Nano. Within two weeks, the Tata Nano official website received 20 million hits. Order applications reached 200,000 – the biggest sales uptake in the history of the global automobile industry.

However, after the stunning launch event, the company – which was busy dealing with logistical and political challenges surrounding the Nano’s production plant – abandoned the plan of creating the new distribution and repair networks it had promised to noncustomers and decided to use the existing networks to save time and resources. As a result, the Nano mostly reached existing car owners in big cities who were looking to buy the Tata Nano as a second car for its cheap price. As the Tata Nano’s reputation downgraded from the “people’s car” to the “cheapest car” to the “poor man’s car”, two-wheeler owners were turned off as the Nano was no longer a symbol of upward social mobility.

Lessons for business leaders

While the Tata Nano, initially guided by noncustomer insights, was heading towards a blue ocean, it ended up regressing into the red ocean of the existing passenger car market as a cost leader fighting over limited demand with other car makers. In contrast, it was through understanding noncustomers and delivering what they valued that Salesforce unlocked huge latent demand and created a market of previously inconceivable scale.

Do you know who your noncustomers are and what it takes to deliver what they value? Or have you been so focused on your industry’s existing customers that you cannot see beyond this narrow frame? How will you go about reframing such a mindset to create and capture expanding growth opportunities? It is time to delineate your three tiers of noncustomers and build on the powerful commonalities in what they value.

Edited by: Rachel Eva Lim

First published in INSEAD Knowledge, November 30 2022

Check out the Case Studies

If you’re an educator interested in teaching blue ocean strategy to your students, check out these exciting case studies, which come with teaching notes to guide classroom discussion.

Blue ocean pedagogical materials, used in over 2,800 universities and in almost every country in the world, go beyond the standard case-based method. Our multimedia cases and interactive exercises are designed to help you build a deeper​ understanding of key blue ocean strategy concepts, developed by world-renowned professors Chan Kim and Renée Mauborgne.

Read next:

Written by Chan Kim and Renée Mauborgne, with Mi Ji, Senior Executive Fellow at the INSEAD Blue Ocean Strategy Institute 

As the Covid-19 pandemic continues to evolve, managers around the world are bracing for new challenges ahead. Many of them wonder whether the strategic approaches that proved to be successful in the past will still apply to changed business realities in a post-pandemic world.

Indeed, many changes are likely to occur – supply chain restructuring, altered customer preferences, changed government regulations, to name a few.

But one fundamental reality will endure and intensify. In the immediate aftermath of the pandemic, companies will face a heightened degree of competition as customer demand is depressed due to a reduction of income, persistent unemployment, and looming uncertainties.

While everyone desires a V-shaped economic rebound, it will be difficult for companies to overcome the current financial distress once they are locked into a hopeless game of dividing a shrinking pie.

More than ever, firms need to create blue oceans of new demand in order to generate revenue, profit, and new growth. It is far more urgent for managers to think like a blue ocean strategist. It is high time that we review the key elements of a blue ocean strategist’s mindset.

Ask yourself the following questions and consider how each guiding principle can help you see opportunities where before only constraints were visible.

1. Do you take industry conditions as given? Or do you reshape them in your favor?

The conventional way for executives to develop strategy is to begin by analyzing the environment: Is the industry growing or shrinking?

Is the competition strong or not? Most strategies are built on such assessments. In other words, structure shapes strategy.

However, blue ocean strategists do not take industry practices as a given. What they recognize, and what most of us forget, is that while industry conditions exist, individual firms created them in the first place. Industry boundaries are not fixed.

Take the example of Andre Rieu, a Dutch violinist and conductor who created an uncontested and expanding market space of classical music for the masses in an industry marked by shrinking demand, rising cost, and financial losses.

Was classical music a dying industry given its aging customer base? What could an orchestra do in this environment other than hire more superstar conductors and guest soloists to win a greater customer share, or implement huge cuts to save money at the expense of artistic quality?

Rieu did neither.

Instead, he looked to the vast population of music-loving people who were daunted by the rituals of orchestral concerts and the complexities of classical music.

His concerts not only interspersed familiar classical pieces with themes from movies, musicals, and pop songs of Elvis Presley, Celine Dion and the like, but also brought in elements such as special lighting, balloons and dove launches, fireworks, and even figure skating, creating an epic experience and a feast for emotions and senses.

Instead of letting existing industry conditions shape his strategy, Rieu reshaped them, thereby creating a new market space and building a multimillion-dollar business with a mass following in the midst of a red ocean.

This is the perspective that you need in our world of mounting challenges. The pandemic has had a shock effect on economies and businesses and is bound to trigger more changes and disruptions in many industries.

Will you go down as a victim of change and disruption?

Or are you going to rise above the challenges and reshape the business environment in your favor?

A blue ocean perspective can be a decisive factor here as it frees you from the shared industry logic that could dramatically restrict your creative thinking and understanding of what is possible and profitable

2. Do you try to beat the competition? Or do you make the competition irrelevant?

Most organizations are stuck in the trap of competition. Having accepted their industry structure as a given, executives benchmark rivals and focus on outperforming them to achieve a competitive advantage.

The irony is that the more you focus on benchmarking and outpacing the competition, the more your strategy will look like your competitors. 

Indeed, every winning company has a competitive advantage. The problem is that when managers are urged to secure a competitive advantage, they automatically look to the competition and end up defining the strategy based on the competition.

Stop looking at what industries are competing on and start looking at what most buyers really value.

A blue ocean strategist, instead, focuses on how to make the competition irrelevant. Rieu didn’t benchmark or imitate other orchestras by holding concerts in expensive venues and hiring world-class soloists and conductors, nor did he adopt a complex and elitist musical repertoire.

Instead, his concerts were held in stadiums and city squares, playing the music that was most familiar to average listeners and performing only the bits of classical pieces that speak to the heart, his musicians often dancing, swaying, and clapping along with the audience.

All these defied industry best practices that conventional orchestras competed on. But in so doing Rieu appealed to a much broader audience who simply wanted to relax and enjoy the music they loved.

In this regard, the pandemic, by changing people’s working habits and lifestyles, has put many products and services to the test.

What are the factors that you and your industry thought were important but don’t seem to matter so much to your customers in terms of serving their essential needs?

What are the factors that they fundamentally value and don’t want to compromise on even during this difficult time?

Are these temporary shifts under extreme conditions or do they provide insight into reconfiguring your offerings in a post-pandemic world?

Think through these questions and ask yourself, “What would it take to win over the mass of buyers, even with no marketing?”

You want to create an offering so compelling that anyone who sees or tries it can’t help but rave about it. Stop looking at what industries are competing on and start looking at what most buyers really value.

3. Do you focus on creating and capturing new demand? Or do you focus on fighting over existing customers?

Customer satisfaction and understanding customer needs are a priority for any organization. Most organizations regularly monitor customer satisfaction scores through surveys, for example.

This can lead to finer segmentation and greater customization to meet customers’ specialized needs.

But by holding on to a predetermined definition of who their customers are, companies are often blind to the wider potential of new demand outside their industry that they could tap into.

In many industries, existing customers are just a drop in the bucket, compared with all the noncustomers who can be reached through market-creating strategies. Consider Rieu again.

While other orchestras focused on devoted classical music lovers – the educated few – he looked to the industry’s noncustomers – the mass population of music lovers who were either intimidated or turned off by the heaviness and solemnity of conventional classical concerts.

In a time of sluggish and contracting demand in many industries, fighting for a bigger share of existing customers does not often lead to profitable growth. You need to expand the pie.

Again, the pandemic may have exposed and amplified some of the pain points previously assumed by your industry. It is up to you to find creative ways to address them to unlock and attract the mass of noncustomers.

4. Do you simultaneously pursue differentiation and low cost? Or do you make a value-cost trade-off?

A blue ocean strategist doesn’t choose between pursuing differentiation and low cost. If you truly have a blue ocean mindset, you do both.

To offer buyers a quantum leap in value and break the value-cost trade-off, blue ocean strategists focus as much on what to eliminate and reduce as they do on what to raise and create.

Rieu drastically lowered costs by eliminating superstar soloist performances, reducing the size of the orchestra and the complexity of the repertoire, and using large open-air venues in lieu of expensive theatres.

On the other hand, he achieved differentiation by using more familiar tunes, encouraging audience participation, and creating a visual and festive grandeur.

The result: Rieu and his orchestra stayed on the Billboard Top 25 Tours list for nearly two decades, alongside the likes of Bruce Springsteen and Justin Bieber. His CDs and DVDs sold more than 40 million copies versus 10,000 copies for a more traditional top classical music CD

Breaking the value-cost trade-off is particularly important in a post-pandemic world where people, faced with economic uncertainties and living on a tighter budget, tend to be more cautious about their spending and yet more conscious of a product or service’s fundamental value and appeal.

Only those offerings that are both differentiated and low-cost have the best chance to stand out and open up latent demand, thereby helping restore market confidence and contributing to a speedy economic recovery.

Each of the above questions to reframe your thinking is further detailed in Blue Ocean Shift. We hope you feel encouraged to start shifting your perspective and seeing new opportunities where you thought there were none.

First published in INSEAD Knowledge

Excerpts from Chan Kim & Renée Mauborgne’s Blue Ocean Strategy (2015) 

Once a company has developed a blue ocean strategy with a profitable business model, it must execute it. The challenge of execution exists, of course, for any strategy.
Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans.

But compared with red ocean strategy, blue ocean strategy represents a significant departure from the status quo. It hinges on a shift from convergence to divergence in value curves at lower costs. That raises the execution bar.

Four key organizational hurdles to strategy execution

Managers face four organizational hurdles to strategy execution. One is cognitive: waking employees up to the need for a strategic shift. Red oceans may not be the paths to future profitable growth, but they feel comfortable to people and may have even served an organization well until now, so why rock the boat?

The second hurdle is limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. But resources are being cut, and not raised, in many organizations today.

Third is motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo? That will take years, and managers don’t have that kind of time.

The final hurdle is politics. How to overcome opposition from individuals with powerful vested interests who fear a loss of position or statute as a result of the strategic shift?

To overcome these hurdles, companies must abandon perceived wisdom in effecting change.

Conventional wisdom asserts that the greater the change, the greater the resources and time you will need to bring about results.

Instead, you need to flip conventional wisdom on its head in a way that allows you to overcome these four hurdles fast and at low cost while winning employees’ backing in executing a break from the status quo.

Let’s look at each of these hurdles in more depth and assess ways to overcome them.

1. Break Through the Cognitive Hurdle

In many turnarounds and corporate transformations, the hardest battle is simply to make people aware of the need for a strategic shift and to agree on its causes. Most CEOs will try to make the case for change simply by pointing to the numbers and insisting that the company set and achieve better results.

But as we all know, figures can be manipulated. Insisting on stretch goals encourages abuse in the budgetary process. This, in turn, creates hostility and suspicion between the various parts of an organization. Even when the numbers are not manipulated, they can mislead.

1. Ensure employees come face-to-face with the worst operational problems. Don’t let top brass, middle brass, or any brass hypothesize about reality. Numbers are disputable and uninspiring, but coming face-to-face with poor performance is shocking and inescapable, but actionable.

2. Get your managers to listen to their most disgruntled customers firsthand. Don’t rely on market surveys. To what extent does your top team actively observe the market firsthand and meet with your most disgruntled customers to hear their concerns? There is no substitute for meeting and listening to dissatisfied customers directly.

2. Jump the Resource Hurdle

After people in an organization accept the need for a strategic shift and more or less agree on the contours of the new strategy, most leaders are faced with the stark reality of limited resources. Do they have the money to spend on the necessary changes? Acquiring more resources is often a long, politically charged process. So how do you get an organization to execute a strategic shift with fewer resources?

Instead of focusing on getting more resources, concentrate on multiplying the value of the resources you have. When it comes to scarce resources, there are three factors of disproportionate influence that you can leverage to dramatically free resources, on the one hand, and multiply the value of resources, on the other. These are hot spots, cold spots, and horse-trading.

Hot spots, cold spots, and horse-trading

Hot spots are activities that have low resource input but high potential performance gains. In contrast, cold spots are activities that have high resource input but low-performance impact. In every organization, hot spots and cold spots typically abound. Horse trading involves trading your unit’s excess resources in one area for another unit’s excess resources to fill remaining resource gaps. By learning to use their current resources right, companies often find they can tip the resource hurdle outright.

What actions consume your greatest resources but have scant performance impact? Conversely, what activities have the greatest performance impact but are resource-starved? When the questions are framed in this way, you can rapidly gain insight into freeing up low-return resources and redirecting them to high-impact areas. In this way, both lower costs and higher value are simultaneously pursued and achieved.

3. Jump the Motivational Hurdle

To successfully execute blue ocean strategy, you must alert employees to the need for a strategic shift and identify how it can be achieved with limited resources. For a new strategy to become a movement, people must not only recognize what needs to be done, but they must also act on that insight in a sustained and meaningful way.

How can you motivate the mass of employees fast and at low cost? When most business leaders want to break from the status quo and transform their organizations, they issue grand strategic visions and turn to massive top-down mobilization initiatives. They act on the assumption that to create massive reactions, proportionate massive actions are required. But this is often a cumbersome, expensive, and time-consuming process, given the wide variety of motivational needs in most large companies. And overarching strategic visions often inspire lip service instead of the intended action.

Is there another way? Instead of diffusing change efforts widely, follow a reverse course and seek massive concentration. Focus on three factors of disproportionate influence in motivating employees: kingpins, fishbowl management, and atomization.

Zoom in on kingpins

Kingpins are the key influencers in the organization. These are people inside the organization who are natural leaders, who are well respected and persuasive, or who have an ability to unlock or block access to key resources. As with kingpins in bowling, when you hit them straight on, all the other pins come toppling down. This frees an organization from tackling everyone, and yet in the end everyone is touched and changed. And because in most organizations there are a relatively small number of key influencers, who tend to share common problems and concerns, it is relatively easy to identify and motivate them.

Apply fishbowl management

At the heart of motivating the kingpins in a sustained and meaningful way is to shine a spotlight on their actions in a repeated and highly visible way. This is what we refer to as fishbowl management, where kingpins’ actions and inaction are made as transparent to others as are fish in a bowl of water. By placing kingpins in a fish- bowl in this way you greatly raise the stakes of inaction. Light is shined on who is lagging behind, and a fair stage is set for rapid change agents to shine. For fishbowl management to work it must be based on transparency, inclusion, and fair process.

Atomize to get the organization to change itself

Atomization relates to the framing of the strategic challenge. Unless people believe that the strategic challenge is attainable, the change is not likely to succeed. Instead, break it into bite-size atoms that employees at different levels can relate to. Rather than issue grand strategic visions, atomize the issue to make it actionable to all levels of your organization.

4. Knock Over the Political Hurdle

Youth and skill will win out every time over age and treachery. True or false? False. Even the best and brightest are regularly eaten alive by politics, intrigue, and plotting. Organizational politics is an inescapable reality of corporate and public life. Even if an organization has reached the tipping point of execution, there exist powerful vested interests that will resist the impending changes. The more likely change becomes, the more fiercely and vocally these negative influencers—both internal and external—will fight to protect their positions, and their resistance can seriously damage and even derail the strategy execution process.

To overcome these political forces, focus on three disproportionate influence factors: leveraging angels, silencing devils, and getting a consigliere on your top management team. Angels are those who have the most to gain from the strategic shift. Devils are those who have the most to lose from it. And a consigliere is a politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you.

Leverage your angels and silence your devils

To knock down the political hurdles, you should also ask yourself two sets of questions:

• Who are my devils? Who will fight me? Who will lose the most by the future blue ocean strategy?
• Who are my angels? Who will naturally align with me? Who will gain the most by the strategic shift?

Don’t fight alone. Get the higher and wider voice to fight with you. Identify your detractors and supporters – forget the middle – and strive to create a win-win outcome for both. But move quickly. Isolate your detractors by building a broader coalition with your angels before a battle begins. In this way, you will discourage the war before it has a chance to start or gain steam.

Do you have a consigliere – a highly respected insider – in your top management team, or only a CFO and other functional heads? Do you know who will fight you and who will align with the new strategy? Have you built coalitions with natural allies to encircle dissidents? Do you have your consigliere remove the biggest land mines so that you don’t have to focus on changing those who cannot and will not change?

Overcoming organizational hurdles a key to successful strategy execution

It is never easy to execute a strategic shift and doing it fast with limited resources is even more difficult. However, by consciously addressing the four organizational hurdles to strategy execution and focusing on factors of disproportionate influence, you too can knock them over to actualize a strategic shift. Don’t follow conventional wisdom. Not every challenge requires proportionate action. Focus on acts of disproportionate influence. This is a critical leadership component for making blue ocean strategy happen by aligning employees’ actions with the new strategy.

To learn more about overcoming key organizational hurdles to strategy execution with examples, read the Blue Ocean Strategy book.

Read next:

Written by Chan Kim and Renée Mauborgne, with Mi Ji, Senior Executive Fellow at the INSEAD Blue Ocean Strategy Institute 

The impact of the Covid-19 pandemic has been significant on business and the economy. The crisis has badly battered some companies and presented opportunities to others. In either case, managers across the globe have scrambled to adapt to a changed world.

In fact, the pandemic crisis, by forcing changes upon us, may be a blessing in disguise as it has pushed us out of the comfort zone and challenged many of our long-held assumptions. We once thought face-to-face meetings and interactions were imperative to closing serious business deals. But during the pandemic, even important international treaties were negotiated and concluded via video conference.

Art lovers used to think the best way to appreciate a piece of art like the Mona Lisa was to see it at the Louvre, even though many of them ended up only seeing the back of heads of the visitors in front of them. Now they find that with a virtual reality app on their smartphones they can enjoy the painting and examine its details from different angles in an unprecedentedly intimate way. 

It is time for managers to systematically rethink industry logic and existing practices to prepare for a powerful comeback in the post-pandemic world.

But how do you determine whether your makeshift models or practices will outlast the pandemic and set the trend for the future, or whether they are just sub-optimal solutions that customers will discard once the crisis is over?

Which elements of your crisis-time business solutions can be retained and built into your future offerings?

Will the pleasant surprises you have created for your customers during the pandemic be economically viable in the long run? 

During lockdown, for example, botanical gardens in some countries began to admit visitors based on time-slot reservations to control the flow of people and maintain social distancing. Many customers loved this new system, as it enabled them to not only avoid the line at the entrance, but also enjoy the gardens without a crowd around them.

Can this insight help managers at these attractions rethink their post-pandemic services? In the crisis-stricken hospitality industry, some hotels have offered their guestrooms for office use to local clients in need of quiet, comfortable and private workspace free of domestic distractions. Will this line of business continue to thrive in the post-pandemic era? What will be the cost impact and buyer value implications?

It is time for managers to systematically rethink industry logic and existing practices to prepare for a powerful comeback in the post-pandemic world. A key blue ocean tool that can help is the Four Actions Framework. Built on four key questions, the framework supports managers in challenging an industry’s strategic logic and business model to arrive at blue ocean moves that break the trade-off between value and cost.

The Four Actions Framework

Consider the questions:

1. Which factors that the industry takes for granted should be eliminated?

2. Which factors should be reduced well below the industry’s standard?

3. Which factors should be raised well above the industry’s standard?

4. Which factors that the industry has never offered should be created?

The first two questions prompt managers to find ways to drop their cost structure.

The “eliminate” question forces them to consider disregarding factors that the industry has long believed central to competition. Even though these factors no longer add value, or even decrease it, they are rarely questioned because of long-held industry practice.

Because these factors buttress an organization’s cost structure for little to no gain, substantial cost savings can be made by eliminating them.

The “reduce” question pushes managers to determine whether products or services have been overdesigned in the race to match and beat the competition. Here, organizations over-serve customers, increasing their cost structure for no gain. By reducing these factors, costs can be further decreased.

While many businesses have struggled during Covid, others have thrived and expanded.

The third and fourth questions drive managers to create a leap in buyer value. The “raise” question inspires them to eradicate the compromises customers are forced to make, which are usually caused by an industry’s failure to see that consumers want more of some elements than the standard offering provides.

Finally, the “create” question challenges managers to offer entirely new kinds of value for buyers and to create new demand by converting non-customers into customers. Asking these four questions may help companies get to the fundamentals of what they need most in the post-pandemic world – offerings that are both differentiated and low cost.

While many businesses have struggled during Covid, others have thrived and expanded. At first glance, it appears that some of them have been in the right place at the right time – either their industries face countercyclical demand growth, or they ride technology waves such as digitalization and virtualization with perfect timing. Using the Four Actions Framework to analyse their business moves, however, often reveals a much deeper insight.

Zwift – virtual biking for Covid and beyond

Take the example of Zwift, an online training app first launched in California in 2014 that allows fitness enthusiasts to ride their bicycles on specialized stationary trainers while navigating through virtual worlds. During the pandemic, cycling events around the world were cancelled and demand for virtual cycling service and equipment surged. As the market leader in virtual cycling and sports, Zwift enjoyed tremendous growth; the number of its users doubled within 12 months.

Zwift combines serious training and racing with the fun of video games

With a smart trainer that connects to a bike and measures power output, Zwift users can cycle right from their living rooms, which eliminates the need for traveling and gathering for group training and the constraints imposed by weather or road conditions.

Dedicated training time and equipment requirements are substantially reduced, lowering the cost and bar for participation.

Cycling at home is by no means boring and lonely, as Zwift has created a variety of life-like virtual worlds for riders to explore alongside thousands of other online players, which range from the imaginary Watopia to virtual versions of both the English and French countryside and the Tour de France course, all at a low monthly subscription fee.

Through the smart-bike trainer, each rider’s physical output is converted to a moving avatar on a computer screen, and cyclists experience resistance as they scale simulated mountains or feel the draft of other riders, just like in the real world. By getting people from around the world to come together for group rides, races, and events, Zwift raises the social connectivity of the sport.

While the pandemic catalyzed Zwift’s growth and expansion, the platform’s popularity suggests a more enduring appeal. It combines serious training and racing with the fun of video games and social media, allowing the mass population of amateur cyclists to access and experience the sport easily and at a low cost. Zwift’s charms may be independent of the pandemic effect. But the crisis has tested it under the most extreme conditions and, in a sense, advertised it to a broader user population.

Zwift is not about online cycling per se. What sets it apart is a value proposition that creates an unprecedented experience at low cost for a broad base of users. Here the internet and virtual technologies are used as means to deliver this value proposition.

During the pandemic many companies have resorted to online solutions and heavily invested in digitalization. Now as the world begins to reopen, managers need to consider: Does your digital solution offer breakthroughs in value to your customers, like what Zwift does for its customers?

Or does it merely try to replicate what a traditional offline business has to offer?

In the latter case, do you stand a chance when facing intensified competition from both online and offline players in the post-crisis world?

What do you need to eliminate, reduce, raise and create to arrive at differentiated value and break away from the competition?

Capitalizing upon crisis

On the other hand, managers of businesses with heavy physical assets need to understand that increasing online presence and digital capabilities, while necessary and important, may not be sufficient ingredients for a winning post-pandemic strategy.

Faced with a transformed world and mounting competition from the digital side, their businesses will most likely stand apart, not by imitating what the internet pioneers did, but by going beyond what online solutions can ever offer. 

Think about what your customers miss the most during the pandemic. Is it the smell or touch that can only be appreciated in person? Or is it the eye contact or tacit body communication that isn’t possible on Zoom?

How can you take the Four Actions to recombine the best of the digital and physical worlds to create differentiated value at a low cost for your customers?

Managers today have an advantage, as the pandemic has provided a unique opportunity to note the factors that customers won’t give up even during a very difficult time, those that companies can do without, and the elements that contribute unprecedented value.

Opportunities are reserved for those who are prepared. Use the Four Actions Framework now to create your blue ocean in the post-pandemic world!

More examples and detailed discussion of how this framework applies to real business situations can be found in Blue Ocean Shift.

Read next:

Why You Should Eliminate and Reduce to Find New Blue Oceans

Four Actions Framework and Eliminate-Reduce-Raise-Create Grid (Examples + Template)

Excerpts from Chan Kim & Renée Mauborgne’s Blue Ocean Strategy (2015) and Blue Ocean Shift (2017).

The four actions framework and the eliminate-reduce-raise-create (ERRC) grid are two analytical tools of blue ocean strategy to help you simultaneously pursue differentiation and low cost to achieve value innovation. In this blog, we’ll look at how the four actions framework and the ERRC grid work together, examine some examples, and provide you with a template you can use to start creating your blue ocean. Let’s dive in.

Four Actions Framework: an analytical tool to break the value-cost trade-off

The four actions framework is a blue ocean strategy analytical tool used to reconstruct buyer value elements in crafting a new value curve or strategic profile. The tool is developed by Chan Kim and Renée Mauborgne in their bestselling books Blue Ocean Strategy and Blue Ocean Shift.

See the four actions framework definition on the blue ocean tools page.

The four actions framework is built on four key questions that will help you challenge an industry’s strategic logic and business model to arrive at blue ocean moves that break the trade-off between differentiation and low cost.

Read next: Why Lowering Costs and Increasing Value Doesn’t Need to Be a Trade-Off

ELIMINATE: Which factors that the industry takes for granted should be eliminated?

This question forces you to consider eliminating factors that companies in your industry have long competed on. Often those factors are taken for granted even though they no longer have value or may even detract from value. Sometimes there is a fundamental change in what buyers value, but companies that are focused on benchmarking one another do not act on, or even perceive the change.

REDUCE: Which factors should be reduced well below the industry’s standard?

The second question pushes you to determine whether products or services have been overdesigned in the race to match and beat the competition. Here, organizations overserve customers, increasing their cost structure for no gain.

RAISE: Which factors should be raised well above the industry’s standard?

The third question pushes you to uncover and eliminate the compromises buyers are forced to make. These compromises are usually caused by an industry’s failure to see what buyers want more of some factors than the standard offering provides. But because the standard is the standard, no one thinks to challenge it.

CREATE: Which factors that the industry has never offered should be created?

The fourth question helps you to discover entirely new sources of value for buyers and to create new demand by converting once noncustomers into customers.

It is by pursuing the first two questions (of eliminating and reducing) that you gain insight into how to drop your cost structure vis-a-vis competitors.

The last two questions (of raising and creating) provide you with insight into how to lift buyer value and create new demand.

Collectively these four questions of the four actions framework allow you to systematically explore how you can reconstruct buyer value elements across alternative industries to offer buyers an entirely new experience, while simultaneously keeping your cost structure low.

ERRC GRID

To ensure that you pursue differentiation and low cost simultaneously, Chan Kim and Renée Mauborgne created the eliminate-reduce-raise-create (ERRC) grid, which complements the four actions framework.

The ERRC grid pushes you not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve.

Read the ERRC grid definition.

Read next: The Rising Importance of Value Innovation for Creating New Growth

The Four Actions Framework and Eliminate-Reduce-Raise-Create (ERRC) Grid Examples

Let’s look at two examples of how the four actions framework and ERRC grid work together to create a new value curve.

[yellow tail] – the classic example of blue ocean strategy

In the case of the U.S. wine industry, by thinking in terms of these four actions vis-a-vis the current industry logic and looking across alternatives and noncustomers, Casella Wines created [yellow tail], a wine whose strategic profile broke from the competition and created a blue ocean.

Read next: Customers First? How About Noncustomers First?

Instead of offering wine as wine, Casella created a social drink accessible to everyone: beer drinkers, cocktail drinkers, and other drinkers of nonwine beverages.

By looking at the alternatives of beer and ready-to-drink cocktails and thinking in terms of noncustomers, Casella Wines applied the Four Actions Framework and created three new factors in the US wine industry – easy drinking, easy to select, and fun and adventure – and eliminated or reduced the traditional factors of complexity and aging.

THE ERRC GRID OF [YELLOW TAIL]

Casella Wines found that the mass of Americans rejected wine because its complicated taste was difficult to appreciate. Beer and ready-to-drink cocktails, for example, were much sweeter and easier to drink. Accordingly, [yellow tail] was a completely new combination of wine characteristics that produced an uncomplicated wine structure that was instantly appealing to the mass of alcohol drinkers.

By dramatically reducing the range of wine characteristics, [yellow tail] simplified a wine choice many consumers had traditionally seen as overwhelming and intimidating: bottles looked the same, labels were complicated with enological terminology and the range of choices was so extensive salesclerks had a hard time making recommendations.

In contrast, [yellow tail] produced only two wines at the start: Chardonnay and Shiraz. It removed all technical jargon from the bottles and created instead a striking, simple and nontraditional label. The simplicity of just two wines — a red and a white — helped streamline Casella Wines’ business model; it reduced stock-keeping units’ maximized stock turnover and lowered investment in the company’s warehouse inventory.

En route, Casella Wines was able to reconstruct buyer-value elements to offer an entirely new experience, while simultaneously keeping cost structures low, making the existing rules of competition irrelevant. [yellow tail] acted on the four actions framework to break away from its competition.

Check out [yellow tail]’s strategy canvas.

CitizenM – a blue ocean shift in an overcrowded industry

Now let’s look at the recent example in the hospitality industry.

“If there ever were a red ocean,” observes Michael Levie, co-founder of CitizenM Hotels, “the hotel industry would be it. It’s redder than red.”

The hotel industry competes on essentially the same set of factors, just more or less of them.

Despite all the factors the hotel industry competes on, it turned out that only three factors stood out as decisive in determining why frequent travelers traded up to five-star hotels over three stars: the feeling of luxury and beauty they experience; its more luxurious sleeping environment; and their prime location. As for those who choose a three-star hotel over a five-star, price jumped out as the most common factor, followed by one other: five-star hotels often felt too formal and pretentious.

Look at the ERRC grid example of citizenM hotels:

THE ERRC GRID OF CITIZENM

By gaining these insights, Chadha and Levie, co-founder and CEO of citizenM, identified which factors to eliminate, reduce, raise and create. For example, the customers of neither five-star nor three-star hotels saw the front desk, concierge service, bellhops, or doormen as bringing them much-added value. CitizenM saw these as factors they could eliminate.

Next, since the “mobile citizens” they were targeting aren’t the type of customer that spends much time in their room, they realised they could reduce room size – and cost – as this also meant more rooms per square foot of real estate space. And instead, to maintain a high level of comfort and luxury, they raised the quality of the sleeping environment with extra-large king beds, fine linens, good sound insulation, fluffy towels and amazing showers.

Finally, through these market insights, Chadha and Levie discovered that there were new kinds of value that they could create. They eliminated the front desk, replacing it with self-check-in kiosks allowing guests to check in with no lines. And in case help was needed, front desk staff were replaced with multi-tasking ‘ambassadors’ who could help with anything from giving directions to shaking a cocktail.

Check out the strategy canvas of citizenM hotels to see how its value curve diverges from the competition.

CitizenM created the new market space of affordable luxury hotels. CitizenM hotels earn the highest guest rankings in the hospitality industry. Yet, they’re priced to be affordable to three-start customers. The result is an average occupancy rate of 90 percent across its hotels – a whooping 80 percent higher than the industry average. As for costs, its total costs per room are roughly 40 percent lower than the average four-star hotel’s while its cost of staff is a staggering 50 percent lower than the industry’s.

When you apply the four actions framework to the strategy canvas of your industry, you get a revealing new look at old perceived truths. Look at what Apple’s iPhone eliminated, reduced, raised, and created to arrive at a new value curve on the strategy canvas that is clearly differentiated from the competition.

Or how Medellin, Colombia’s second-largest city, applied the four actions framework and acted on it for the Metrocable, the world’s first urban cable car system dedicated to public transport, at half the cost of a comparable railway system. It offered the people of Medellin a leap in value through differentiation and low cost.

Let’s shift our focus to applying the four actions framework and the ERRC grid to your scenario. The ERRC Grid template will come handy.

The ERRC Grid Template

The ERRC Grid template will help you to develop concrete and actionable blue ocean strategic options that break away from the competition and pursue both differentiation and low cost to value innovate. You should complete the ERRC grid for each path explored of the Six Paths Framework.

How to create the ERRC Grid in Blue Ocean Studio

If you prefer to work online, use Blue Ocean Studio, an interactive and collaborative platform where you can work with the ERRC grid online, directly inputing insights gained from the six paths exploration exercise. You can invite your team to collaborate with you in real time.

Blue Ocean Studio makes it easy to work with the suite of blue ocean strategy tools and frameworks through a systematic process.

Check out Blue Ocean Studio™.

Read other blogs discussing the four actions framework and the eliminate-reduce-raise-create (ERRC) grid and learn how various organizations achieved differentiation and low cost to set themselves apart from the competition.

Why You Should Eliminate and Reduce to Find New Blue Oceans

Gogoro Electric Scooter: the Tesla of Electric Motorcycles?

How Go-Jek Is Creating a Blue Ocean in One of The World’s Most Congested Cities

How the ‘World’s Bravest Orchestra’ Found Harmony Amid Conflict: The National Youth Orchestra of Iraq