The red ocean is where you and your competition currently compete to solve consumers’ problems. The pink ocean is the space where you do not currently have offerings, but your competitors compete with each other. The blue ocean is the space where your competencies allow you to solve consumers’ problems that your competition either cannot solve or is not currently addressing.Finding blue oceans provide you the consumer needs that were previously ignored, unknown, or unmet.

Blue Ocean strategy in diagram

Communication

<img alt="" src="http://blogs-images.forbes.com/files/2014/10/kurtcarlson_avatar_1414530205-62x62.jpeg" width="64" height="64"><div>I look at how consumers make decisions</div>In their 2005 best-selling book Blue Ocean Strategy&nbsp;W. Chan Kim and Renée Mauborgne explicate two types of market growth strategies: red ocean strategy and blue ocean strategy. Unlike other classification approaches, that subdivide growth strategies on the basis of which tactic is to be used (e.g., pricing, promotion, distribution, product) or what part of the landscape is to be influenced (competition, company, consumers, government), Kim and Mouborgne’s classification categorizes strategies on the basis of overlap between consumer needs, competitor offerings, and the brands’ competencies.The Venn diagram below gives a pictorial representation of this classification strategy. The upper left circle represents problems for which consumers need solutions, the upper right circle is the set of offerings available in the market that are supplied by your competitors, and the bottom circle is your capabilities (which includes your current offerings and those you could offer with minimal R&amp;D).<img alt="CPS Venn Diagram" src="https://thumbor.forbes.com/thumbor/711x400/https://blogs-images.forbes.com/kurtcarlson/files/2016/01/CPS-Venn-Diagram2.jpg?width=960" width="668" height="185">The area shaded in red represents red ocean, which is the space where you and your competition currently compete to solve consumers’ problems. The pink shaded area, or pink ocean, is the space where you do not currently have offerings, but your competitors compete with each to solve some subset of consumers’ problems. The blue area, representing what Kim and Mouborgne refer to as blue ocean, is the space where your competencies allow you to solve consumers’ problems that your competition either cannot solve or is not currently addressing.Accordingly, a red ocean strategy, which tends to be the more traditional approach, involves pursing markets that are occupied by competitors—think: shark-infested, bloody waters. In red ocean markets it is clear what problems consumers will pay to have solved. In these waters, the key is to outdo the competition and gain as much market share as possible.&nbsp; In contrast, blue oceans are free of competition. Here, success depends on your ability to find the blue ocean and create appropriate offerings or solutions, not how to outdo the competition in the space. As Kim and Mauborgne state, “Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by&nbsp;creating uncontested market space that makes the competition irrelevant. Instead of dividing up existing – and often shrinking – demand and benchmarking competition, blue ocean strategy is about growing demand and breaking away from the competition.”By finding blue oceans, firms can pursue high payoff possibilities by addressing consumer needs that were previously ignored, unknown, or unmet. Rather than just improving on existing solutions to problems, businesses create new solutions and product categories.Of course, the key to implementing a successful blue ocean strategy hinges on finding the spaces in the ocean that are blue. And this is where the <a href="http://www.forbes.com/sites/kurtcarlson/2014/12/18/the-consumer-problem-survey/" data-ga-track="InternalLink:http://www.forbes.com/sites/kurtcarlson/2014/12/18/the-consumer-problem-survey/" aria-label="Consumer Problem Survey (CPS)" dir="ltr">Consumer Problem Survey (CPS)</a> comes in. 
 On a monthly basis, we track 267 common consumer problems. In doing so, we are able to identify the problems for which consumers struggle to find a solution in the marketplace. These solution gaps are potential blue oceans.&nbsp; For example, the graph below show the proportion of consumers who believe that solutions exist for a subset of our intermediate problem categories.Notice that the problems consumers see as most solvable are those relating to hygiene, hair, and diet. If you are in these markets, with solutions that have value propositions aimed at solving these problems, you are likely in a red ocean.On the other end of the spectrum are the problem sub-categories where consumers report persistent problems for which no appealing market solution exists for them. Despite many consumers experiencing problems in these areas, few believe that solutions exist in the marketplace. These are blue oceans, and it is here where innovations are mostly to be met by consumers with open arms and by competitors with indifference. Brands and businesses that can solve problems in these categories will do well for themselves.Companies like Uber and Lyft have moved into such waters for local transportation problems. As the CPS predicts, these companies have been tremendously successful due to a lack of competition for the consumers who, until now, have had no viable solution in the space for them. By making transportation easier, quicker, and more accessible, Uber and Lyft offered solutions to problems that public transportation official and taxi companies did not realize were previously unsolved.Additionally, it is worth noting that even in the most red of red oceans, there are consumers who are not yet aware of a solution for their problems. In fact, the bars do not reach 100% for any of these problem sub-categories, suggesting that even in the most saturated markets, consumers are still seeking innovations that will solve their currently unsolved problems. In short, there appears to be opportunity everywhere, but some opportunities are much bluer than others. The good news is that by measuring and tracking consumers’ problems (as the CPS does), it is possible to identify where the bluest opportunities lie.If we agree with Jesse Torres as he stated in his 2014 Entrepreneur&nbsp;article titled, “<a href="http://www.entrepreneur.com/article/239819" rel="nofollow noopener" data-ga-track="ExternalLink:http://www.entrepreneur.com/article/239819" aria-label="For a Winning Product Launch: Address Genuine Customer Needs" dir="ltr">For a Winning Product Launch: Address Genuine Customer Needs</a>,” that the crucial elements of a successful product include: (1) solving a problem to make consumers better off, (2) identifying problems not being addressed, (3) offering a unique solution, and (4) focusing on the most significant, unsolved problems consumers have, then new product development efforts should begin with a careful exploration of consumers’ problems. Our work with the CPS suggests that indeed it is possible to track consumers’ problems to the blue oceans of the market place.<div dir="ltr"><a href="https://account.forbes.com/?utm_source=amp-article" rel="noopener noreferrer" dir="ltr">Get the best of Forbes</a>&nbsp;to your inbox with the latest insights from experts across the globe.</div>

In their 2005 best-selling book Blue Ocean Strategy W. Chan Kim and Renée Mauborgne explicate two types of market growth strategies: red ocean strategy and blue ocean strategy. Unlike other classification approaches, that subdivide growth strategies on the basis of which tactic is to be used (e.g., pricing, promotion, distribution, product) [...]

Innovation

In their 2005 best-selling book Blue Ocean Strategy  W. Chan Kim and Renée Mauborgne explicate two types of market growth strategies: red ocean strategy and blue ocean strategy. Unlike other classification approaches, that subdivide growth strategies on the basis of which tactic is to be used (e.g., pricing, promotion, distribution, product) or what part of the landscape is to be influenced (competition, company, consumers, government), Kim and Mouborgne’s classification categorizes strategies on the basis of overlap between consumer needs, competitor offerings, and the brands’ competencies.

The Venn diagram below gives a pictorial representation of this classification strategy. The upper left circle represents problems for which consumers need solutions, the upper right circle is the set of offerings available in the market that are supplied by your competitors, and the bottom circle is your capabilities (which includes your current offerings and those you could offer with minimal R&amp;D).

The area shaded in red represents red ocean, which is the space where you and your competition currently compete to solve consumers’ problems. The pink shaded area, or pink ocean, is the space where you do not currently have offerings, but your competitors compete with each to solve some subset of consumers’ problems. The blue area, representing what Kim and Mouborgne refer to as blue ocean, is the space where your competencies allow you to solve consumers’ problems that your competition either cannot solve or is not currently addressing.

Accordingly, a red ocean strategy, which tends to be the more traditional approach, involves pursing markets that are occupied by competitors—think: shark-infested, bloody waters. In red ocean markets it is clear what problems consumers will pay to have solved. In these waters, the key is to outdo the competition and gain as much market share as possible.  In contrast, blue oceans are free of competition. Here, success depends on your ability to find the blue ocean and create appropriate offerings or solutions, not how to outdo the competition in the space. As Kim and Mauborgne state, “Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant. Instead of dividing up existing – and often shrinking – demand and benchmarking competition, blue ocean strategy is about growing demand and breaking away from the competition.”

By finding blue oceans, firms can pursue high payoff possibilities by addressing consumer needs that were previously ignored, unknown, or unmet. Rather than just improving on existing solutions to problems, businesses create new solutions and product categories.

Of course, the key to implementing a successful blue ocean strategy hinges on finding the spaces in the ocean that are blue. And this is where the <a aria-label="Consumer Problem Survey (CPS)" data-ga-track="InternalLink:http://www.forbes.com/sites/kurtcarlson/2014/12/18/the-consumer-problem-survey/" dir="ltr" href="http://www.forbes.com/sites/kurtcarlson/2014/12/18/the-consumer-problem-survey/">Consumer Problem Survey (CPS) </a>comes in.

On a monthly basis, we track 267 common consumer problems. In doing so, we are able to identify the problems for which consumers struggle to find a solution in the marketplace. These solution gaps are potential blue oceans.  For example, the graph below show the proportion of consumers who believe that solutions exist for a subset of our intermediate problem categories.

Notice that the problems consumers see as most solvable are those relating to hygiene, hair, and diet. If you are in these markets, with solutions that have value propositions aimed at solving these problems, you are likely in a red ocean.

On the other end of the spectrum are the problem sub-categories where consumers report persistent problems for which no appealing market solution exists for them. Despite many consumers experiencing problems in these areas, few believe that solutions exist in the marketplace. These are blue oceans, and it is here where innovations are mostly to be met by consumers with open arms and by competitors with indifference. Brands and businesses that can solve problems in these categories will do well for themselves.

Companies like Uber and Lyft have moved into such waters for local transportation problems. As the CPS predicts, these companies have been tremendously successful due to a lack of competition for the consumers who, until now, have had no viable solution in the space for them. By making transportation easier, quicker, and more accessible, Uber and Lyft offered solutions to problems that public transportation official and taxi companies did not realize were previously unsolved.

Additionally, it is worth noting that even in the most red of red oceans, there are consumers who are not yet aware of a solution for their problems. In fact, the bars do not reach 100% for any of these problem sub-categories, suggesting that even in the most saturated markets, consumers are still seeking innovations that will solve their currently unsolved problems. In short, there appears to be opportunity everywhere, but some opportunities are much bluer than others. The good news is that by measuring and tracking consumers’ problems (as the CPS does), it is possible to identify where the bluest opportunities lie.

If we agree with Jesse Torres as he stated in his 2014 Entrepreneur  article titled, “<a aria-label="For a Winning Product Launch: Address Genuine Customer Needs" data-ga-track="ExternalLink:http://www.entrepreneur.com/article/239819" dir="ltr" href="http://www.entrepreneur.com/article/239819" rel="nofollow noopener">For a Winning Product Launch: Address Genuine Customer Needs </a>, ” that the crucial elements of a successful product include: (1) solving a problem to make consumers better off, (2) identifying problems not being addressed, (3) offering a unique solution, and (4) focusing on the most significant, unsolved problems consumers have, then new product development efforts should begin with a careful exploration of consumers’ problems. Our work with the CPS suggests that indeed it is possible to track consumers’ problems to the blue oceans of the market place.

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Using Consumer Problems To Find Blue Oceans

Blue Ocean strategy in diagram

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Using Consumer Problems To Find Blue Oceans

Blue Ocean strategy in diagram

IDEAS ABOUT

MORE LIKE THIS

8 tips on setting the right price for your tech service

6 Different Pricing Strategies: Which Is Right for Your Business?

How to stand out in a crowded marketplace

It's time to

READ

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A PRO!

Bite-sized knowledge
to upgrade
your career