Blue Ocean strategy

As the main goal of the project is to design a new and original way of practical implementation of cloud consulting services on the Russian market, we can address to the blue ocean strategy. Blue ocean strategy means the industries that are not in existence today, the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. It has great opportunities for both profitable and rapid growth. Competition is irrelevant for blue oceans, because the rules of the game are going to be set. Blue ocean is trying to describe the wider, deeper potential of market space that is not yet explored. (Kim, 2005)

Red oceans, in turns, represent all the industries that exist today – the market space that is known. Red oceans operates with defined and accepted industry boundaries and known competitive rules of the game. Here the goal of the companies is to outperform their competitors to grab and occupy a greater share of product or service demand. The more crowded market space, the less prospects for growth and profit are available. The competition increases becoming “cutthroat” and makes the ocean bloody; that is the origin of the term “Red Ocean”.

There are some examples of crowdsourcing platform in the world that are developing today. However, this term is quite new in respect to Russian market. This is not real Blue Ocean, because we see how this market works, what are the main activities of the top players. Anyway, there is an absence of any rules and definition of cloud consulting in Russia. It means that this new market demonstrates some elements of Blue Ocean.

Blue ocean strategy based on the idea of value innovation. Value innovation is created in the region where a company’s actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates. (Kim, 2005)

Figure 1. Value Innovation: The Cornerstone of Blue Ocean Strategy

In our example, the idea of creating cloud consulting platform is completely based on the idea of value innovation. On the one hand, it reduces the costs, especially the costs of client. It is very expensive or complicated to hire a consultant or employee to solve a small insignificant problem. With the idea of cloud consulting the company will have an access for quite cheap and fast process of solving these problems. On the other hand, it gives a great value for buyer. The client receives an easy access for solutions of the problems, making it main activities operates more smoothly.

Blue ocean strategy mentioned 6 important principles. These principles are divided into two groups: formulating and execution principles. Each principle aimed at reducing different types of risks that can be faced during the process of implementing blue ocean strategy. Formulation principles are: Reconstruct market boundaries, Focus on the big picture, not the numbers, Reach beyond existing demand and Get the strategic sequence right.

Authors of blue ocean strategy, Kim and Mauborgne, also mentioned some frameworks that helps the company understand which direction they have to do to.

The first one is strategy canvas. The strategy canvas helps us to understand where the competition currently exists, main factors of the industry, service or delivery and what customers can expect from the market today. In other words, it portrays current state of play in the known market space. It graphically shows to what extend players of the market focus on main competing factors and where they invest, defining the borders of the market. Here, we can understand the borders of current market of IT consulting.

To create a new buyer value and find a new market opportunities, we may address to four actions framework. There are four key questions to challenge an industry’s strategic logic and business model:

• Which of the factors that the industry takes for granted should be eliminated?

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

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

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

The existing system of providing IT consulting should eliminated, it does not work with small and very specific tasks. It may be too expensive or too complicated. The more flexible system is needed and here we have to raise flexibility of providing the service, which is the main problem now. The platform for crowdsourcing has to be created. However, it reduces the involvement of the company in the process of providing consulting services. Here, IT company will be more as an intermediary between the client and IT expert.

In addition, there are three tiers of noncustomers that can be transformed into customers. They differ due to differences in their relative distance from the market. The first tier of noncustomers is the closest customers to the market. They are, roughly speaking, on the edge of the market. Buyers, who make minimum purchases in the existing market due to necessity but who mentally are noncustomers of the industry, represent this group. In our case, it could be companies, who purchase IT consulting services currently but who find it expensive or too complicated. The second tier of noncustomers is represented by people who do not want to use the offerings of the industry. They are buyers who know what the industry is offering but who vote against this offerings. It could be companies, who employ their own IT specialists. The third tier of noncustomers is the farthest group of customers. These noncustomers are those who have never thought of your market’s offerings as an option. With the focus on the key commonalities between noncustomers and existing ones, companies understand how to attract them to their new market. Primarily, we want to focus on the first two groups of potential customers.

Date: 2015-12-18; view: 829