This canvas helps you identify commercially compelling Blue Oceans by reconstructing market boundaries. Six key areas where we look beyond current boundaries to find free market space
Applying the six paths framework as you commence strategy formulation will help you expand your thinking and question your assumptions about your products/services and your industry. Each of the paths represents an area, or trap, around which we generally place our assumptions. Assumptions that keep us trapped in bloody red oceans for competitor strategy
Most organizations tend to look only within their specific industry and customer base when developing strategy – a practice that is not likely to lead to breakthroughs. A more productive approach is to Look Across Alternative Industries. The Six Paths Framework challenge the six fundamental assumptions underlying many companies’ strategies. It is only when we question our “regular” assumptions that we start the process of innovative thinking.. There is nothing revolutionary about the information you are bringing to this process – all the data will be familiar - the 6 paths framework simply allows you to view familiar data from a new perspective. To break free of the red ocean, look at your organization and its products/services and processes across the following six paths.
Path 1 – Industry
One of the primary limitations we place on our organisations is making the assumption that our products/services compete in a defined and unchanging industry. Which means we have a very narrow view of the environment in which our company competes. Try to find the alternative industries to your industry where your customers commonly seek substitutes or alternatives to your offerings. In order to understand this path let us first understand difference between a substitute and alternative:
- Substitutes are products or services that have different forms but offer the same functionality or core utility. For example, to sort out your business finance you can use a financial package like Exact Online, hire an accountant or simply create your own spreadsheet. Different forms, same core utility
- Alternatives are products or services that have different functions and forms but the same purpose. For example, theaters (visual entertainment) versus restaurants(conversational en gastronomical pleasure). Different in form, but people go to theaters and restaurants for the same purpose: to enjoy an evening out.
By focusing on the key factors that lead buyers to trade across alternative industries and by eliminating or reducing everything else, you can create a blue ocean of new market space.
Take the case of pro-biotic drink Yakult. It competes with health drinks, juice brands, at the same time it competes with pharma industry. However, both health drinks producers & pharma brands don’t consider Yakult as their competition. Thus Yakult has created a blue ocean for itself across industries.
The temptation for an airline is to assume that they operate in the airline industry and limit their strategic view accordingly. And that’s what most airlines did. Until Ryanair looked across industries to see they actually worked in the transportation industry. Realising that many travellers chose car, trains or buses as an alternative to the comparatively expensive airlines they created a low cost, no frills airline with regular departures, popular destinations using regional airports that created an alternative to the car, train and bus – not just other airlines.
Path 2 – Look across strategic groups within industry
Strategic groups within Industries are group of organizations within an industry that pursue a similar strategy. Strategic groups are usually built on two dimensions, price and performance. Thus by looking across strategic groups, an organization has to find why do buyers trade up for the higher group, and why do they trade down for the lower one?
Example: Toyota carved out a new blue ocean by creating the Lexus, with the quality of the high-end Mercedes, BMW and Audi at a price closer to the lower-end mid-class cars.
Path 3 – Look across the Chain of Buyers
There are a chain of buyers who are directly or indirectly involved in the buying decision; look across this chain.
- Purchasers who pay for the product or service
- Actual users who use the products or service
- Influencers who have a role to play in decisions
Through identifying a new market group within the chain of buyers a product and/or its marketing can be repositioned to attract a whole new group of buyers.
Example: Exact Software shifted focus from IT Managers (which the industry focussed on) to the actual end users when developing their online financial systems.
Path 4 – Look across Complementary Services and Offerings
What are the other products and services that are required to use your product or service? For example, if a movie theatre wishes to attract couples, babysitting will often be required as part of a night out. A car requires a mechanic and petrol. An airline trip requires a car, bus, taxi to and from the airport. A sales person can add additional value by offering consultative services.
What are the services and offerings required throughout the buyer experience cycle. What can you create, combine or eliminate from your product/service to bring a leap of value.
Path 5 – Look across Functional/Emotional Appeal for Buyers
Products and service often provide either a functional or emotional appeal. When the buyer appeal is reversed from one to the other blue oceans are often found.
One of the great examples was Swatch who many years ago revolutionized the affordable watch industry by turning a functional instrument into a fashionable, desirable watch that was inexpensive to purchase. André Rieu adds pleasure and emotion into his concerts and Apple integrated beautiful design and functionality into all its products and services.
Path 6 – Look across Time / Trends
All industries respond to trends at the point they are making an impact. The create reactive strategies, which allow them to adapt to a changing environment.
One of the greatest brands to look across time again and again has been apple. Years ago the industry thought apple had gone mad when they removed the floppy disc from the iMac because Apple anticipated the CD and USB would replace the floppy disk. Shapeways anticipates on 3d printing by offering services enabling everyone to bring their ideas to life . Google, SalesForce et al changed the ICT industry by adding cloud-based services. Drukwerkdeal.nl started acting as an internet-based broker in the (traditional) printing industry.
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The Six Paths Framework is a core strategic tool used in Blue Ocean Strategy. It was created by Prof. W. Chan Kim and Prof. Renee Mauborgne.
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