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LearnFoundations of Innovation
Module 14•Unit 4 of 6•11 min

Latent Needs & Blue Oceans

When you satisfy a latent need with a distinct value opportunity, you often create what Kim and Mauborgne call a blue ocean - a new, uncontested market space, rather than a bloody "red ocean" where rivals fight over the same customers on the same terms. Understanding this link is how you turn deep customer insight into strategic advantage.

Definition

Latent need -

a real need people have but do not yet recognise or express, often revealed only through observation.

Definition

Blue ocean -

a new, uncontested market space created by delivering value on a dimension existing rivals do not compete on.

Red ocean

  • • Compete in existing market space
  • • Beat rivals on known attributes
  • • Fight over existing demand
  • • Attribute enhancement, shrinking margins

Blue ocean

  • • Create new, uncontested market space
  • • Make the competition irrelevant
  • • Create and capture new demand
  • • Distinct value, room to grow

Value innovation: the blue-ocean engine

Blue oceans are opened through value innovation - simultaneously raising the value to customers and lowering cost, by rethinking which factors an industry competes on. The classic tool is to ask four questions of your industry’s taken-for-granted factors:

Eliminate

Which factors the industry takes for granted should be removed entirely?

Reduce

Which factors should be reduced well below the industry standard?

Raise

Which factors should be raised well above the industry standard?

Create

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

Cirque du Soleil opened a blue ocean by eliminating costly animal acts and star performers, reducing traditional circus thrills, while raising artistic production and creating a theatrical, adult, story-driven experience. It stopped competing with circuses and created a new category serving a latent need for sophisticated live entertainment.
Discuss

Apply the four questions to your industry. What factor could you eliminate that everyone assumes is essential, and what could you create that no one offers?

Try this at work this week
Draw the Eliminate-Reduce-Raise-Create grid for your offering. Force at least one entry in every box. The Eliminate and Create boxes are where blue oceans usually begin.

Sources

  1. Kim, W.C. & Mauborgne, R., Blue Ocean Strategy, 2005.
  2. Kim, W.C. & Mauborgne, R., "Blue Ocean Strategy", Harvard Business Review, 2004.
  3. Global Innovation Institute (GInI), Foundations of Innovation body of knowledge.
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Enhancement vs. Distinct Value
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