The Blue Ocean way of thinking is based on concept of value innovation, which implies that the company offers a value jump to the customers. This provides the company with a competitive advantage placing them in the blue ocean. Value innovation is defined as a strategic form of logic, which strongly emphasises value and innovation.
The theory emphasises that it is important to maintain a balance between the two parameters, as value innovation requires that the company prioritises innovation on an equal footing with the product utility, price and cost positions. A focus on value over innovation can make the company prone to focusing solely on the value of the product. Contrary to this, a sole focus on innovation can entail the company being forced to price the product too highly compared to the customers' subjective assessment of the product value. www.activeglobe.com
Value innovation opposes the classic way of thinking which dictates that you must make a strategic choice between differentiation and low cost. Below, it is seen how the two strategy approaches are combined into one unit. Through this combination, a value jump is obtained for the customers and the company. Value innovation is a way for the company to gain a strategic foothold in the blue ocean.
Value innovation breaks away from the familiar trade-off between the creation of added value through differentiation and a focus on minimising costs. Hereby, the theory combines a differentiation strategy with a cost leader strategy. See www.activeglobe.com
Case: Cirque du Soleil
Cirque du Soleil is a well-known example of Blue Ocean Strategy in practice and the application of value innovation as a business strategy. Cirque du Soleil found its way into the blue ocean at a time when the circus market suffered an economic crisis.
Within a few years, the company created one of Canada's largest export successes by creating and maintaining a new demand. In the development of this demand, the focus was on customers' expectations, and how these differed from the conditions in the classic circus. The circus market was largely dominated by performances that took place in a cold tent, where guests got sawdust in their hair. While the number of visitors dropped, the costs increased, as the different arenas competed on star performers and large exotic animals.
Cirque du Soleil managed to make competition irrelevant by creating an original combination of circus and street performance, and a new market was created by merging modern theater with classic circus. Cirque du Soleil created a demand among children and adults and made circus a whole new and different experience. Secondly, the concept saved the company the high cost associated with large and exotic animals as well as recognised star performers. Expand your network by following PROBANA at Linkedin www.linkedin.com/company/probana-management