You are a fresh entrepreneur, you have tons of ideas, you are highly determined, and thirsty for success. You are completely new to the business world, and you have one big problem – you do not have the sufficient know-how to optimise costs in your business so that you can make not just revenue, but lots of profit. You attended talks and seminars from experienced bosses and you constantly hear them talking about the Blue Ocean Strategy, but none of them tend to explain it in detail – it is nothing but a foggy idea to you. You know it by name, but you do not know its background, its principles. What confuses you more is when successful bosses always tell you that you are stuck in a RED OCEAN, you need to swim out of the bloody competition! I have zero clue what you are talking about, how am I supposed to relate it to me?!
Ever since the day you received the comment from those bosses, you started doing your own research on both the Blue Ocean Strategy and Red Ocean Strategy. Wow. There definitely is a lot of information regarding it all over the internet. You start understanding how these theories are meant to help bosses like you, tackle the issue of competition in the market. However, your findings are all merely theoretical information, which is much easier said than done in reality! You are very keen on knowing how to apply it. You are certain that this is the answer you have been searching for to help your business resolve its issue with money. There must be a step-by-step model for this, right?
So, in what area does the Blue Ocean Strategy that is being all hyped up by successful bosses tackle? Yes, the central idea is to increase revenue, to make money for your business. But how? Is it by reducing costs? Or, to sell more products? Perhaps, selling different products compared to other people? Which one of these helps businesses generate more money? Is one effort enough to solve your whole problem? If you were to ask a professional, for instance, a CFO, the answer is NO.
You have to use a set of formulas involving the four basic mathematical operations: addition (+), deduction (-), multiplication (x), and division (÷). How could you tackle this? We’ll look further into that soon.
Xena is the owner of a physiotherapy centre. She not only provides physiotherapy services like every other physiotherapy centre, Xena even gives talks and provides training to physiotherapists. She has been in the industry doing the same thing for many years, and she reckons it was time for her to start building her business. She wanted to be more than just a physiotherapy professional. With her capabilities, it was a waste if she did not build her empire with her own brand.
The term ‘Blue Ocean Strategy’ is not something uncommon to Xena. She read books, she understood the concept of it, but she had one problem: she did not know how to apply it into her business. She believes that just like a doctor who needs a doctor, a coach who needs a coach, and a consultant who needs another consultant, Xena needed someone to help her out with her plan in expanding her business. With her determination to make her dreams into reality burning strong, Xena decided to appoint a CFO to help her out; and this CFO wasn’t just any CFO, he was one who uses the Blue Ocean Strategy extensively to transform businesses from nothing to something spectacular.
If you are reading this, there are chances that the Blue Ocean Strategy is something absolutely foreign to you. You may or may not have heard of its name before. Do not worry about that as I will simplify things for your knowledge, this is why I am here for you!
1. Building a Business Model Canvas (BMC)
The Business Model Canvas (BMC) is a 9 block sheet used for you to see your money clearly. Not only could it be used for your internal decision-making purposes, but the BMC is also a useful tool for you to attract investors by showing them where the money will go, and how money will be made.
2. Plotting a Competitive Chart
A competitive chart is a visual representation that gives you a clearer sight of your position among competitors in the market space. For beginners, a non-complex chart is good enough for your analysis purposes. The horizontal axis represents score values of 1 to 5; whereas the vertical axis will represent the value type numbers. Once you have done this, you should be well prepared for the next step.
Questions are asked at this point to help you have a clearer idea on what components of your business should be eliminated, reduced, raised, and created.
4. Mapping across Value & Cost into BMC to innovate
If you are still unsure whether your business has the elements relevant to execute the Blue Ocean Strategy, you can conduct a SWOT analysis beforehand to understand your business’ gain points and pain points better. This is a very useful tool which I have elaborated on future blog “Having an Analytic View of Your Profit with SWOT” for your better comprehension.
Finally, back to Xena. The CFO has helped her create her own Blue Ocean Strategy. From that, Xena decided to eliminate technology and administration tasks from her business, and decided to share it with her partners instead. By this, she should share the costs of KA and KR. In addition to that, Xena created mobile applications for her business by working with companies in the technology industry. A backend product is offered through subscriptions. With this, she managed to reduce the number of physical outlets. She has even raised the standards of her business by selling reasonable packages for senior citizens. With that, Xena has actually executed the Blue Ocean Strategy using all four methods. Now swimming happily in the blue ocean, Xena has successfully achieved her dreams of building an empire for her business.