Blue Ocean Theory of Innovation: Explaining Historical Development of Organisational Service

This report explores the Blue Ocean Theory of Innovation and its application in explaining the historical development of organisational service. It focuses on Deliveroo as a case study and discusses how the company used this theory to create new demand and expand its market. The report also highlights the benefits and limitations of the theory.

Managing
Innovation

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Description of innovation theory.................................................................................................1
Application of innovation theory for explaining historical development of organisational
service..........................................................................................................................................5
Application of theory for recommending possible future development pathways of
organisational service..................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Innovation is defined as deliberately implementation of imagination, information together
with initiatives for deriving different values from available resources and involves processes to
generate new ideas along with converting them into functional products. It is viewed as applying
better solutions which gave capabilities to meet unarticulated demand, new requirements and
emerging market choices (Biemans, 2018). It takes place through provisions related to more
effective products, business models, services, technologies etc. innovation creates bigger
opportunities along with are necessary for success, survival and growth of enterprise. For
realising leaders, it is crucial for leaders to be collaborative as well as open minded. For any
business, innovation is crucial as innovating something means introducing new addition to
improved merchandise, processes and methods with the hope of improving productivity, building
brand values, increasing turnover, reducing costs and establishing new relationships. Moreover,
innovation can be done through launching new technologies, working practices and process for
giving more consistent product quality. In this report, chosen innovation theory is Blue Ocean
Theory of Innovation. The theory is simultaneous pursuit of low cost as well as differentiation
for opening in new market space as well as creating new demand. The theory is executed across
industries and businesses. It captures new demand and make competition irrelevant through
applying better solutions in exiting products that meets new requirements, current needs and
unarticulated choices.
MAIN BODY
Description of innovation theory
Innovation theory is defined to the framework which explains the ways in which
advancements gain traction along with over time spread within particular situation. In an
organisation, innovation is managed by superiors through appropriate framework of innovation
management (Blue Ocean theory of innovation, 2015). The theory comprises of market creating
innovation. In modern world, the theory is adopted by various companies such as Ocado, halo
Fresh, Yellow tail, Cirque du Soleil, iTunes, Backroads etc for having more success, enhanced
profits along with fewer risks in blue ocean market. Deliveroo follows Blue Ocean Inn ovation
theory that generates uncontested market space, emphasis on larger picture and getting strategic
sequenct accurate for innovation of services in online food industry. The company time to time
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innovates its services through adding mew methods or elements in the working that meets needs
of customers for timely delivery and many more. Following are some innovation theories
through which the entity can use for innovation aspects:
Blue Ocean theory of innovation
The theory is based on the principle of value innovation. It was propounded by W. Chan
Kim along with Renée Mauborgne. The theory majorly deals with competition within market
space which are unrecognised with instates customer preferences and are required to realise and
further developed (Agnihotri, 2016). The theory revolves around finding for company wherein
few businesses operate and have limited pricing pressure. The aim of the innovation theory is for
creating something innovative which makes competition irrelevant for business. It offers
systematic together with reproducible processes in context to innovation to both either new or
established organisation. Its frameworks are designed as per visualisation for not only building
effective collective wisdom of firm but to properly implement easy communication. The key
principles of Blue Ocean theory of innovation are as follows:
 Reaching beyond current demand: Blue ocean theory assists organisations to reach
beyond the demand of market and customers in present state so that products gains
recognition in dynamic business environment. The principle assist managers of Deliveroo
to work hard and offer services that are beyond current demand. The entity emphasis on
the ways to gain potential further customers which are not existing buying from market
for some of the reasons. This also suggests in emphasising on understanding which keeps
potential buyers out of industry and work to make strong position in the large growth
sector.
 Reconstructing market boundaries: Blue ocean theory reconstruct market boundaries
for a business in order to perform outstanding activities by adding something new in
methods or processes of business. The principle suggest that organisations are required to
look towards what the market is performing, competing and devising strategy which are
vastly distinct that others. The principle helps Deliveroo to use aspects such as eliminate,
reduce, create and raise framework for developing effective strategy which will generate
uncontested market space and reconstructing market boundaries.
 Emphasis on big picture: Blue Ocean theory has principle of focusing towards big
picture despite of numbers. It helps in attaining set targets with huge values and
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acceptance of support from customers and top management of business (Ramli, Ahmad
and Harith, 2016).
 Getting strategic sequence right: Blue Ocean theory also have principle of getting
strategic sequence correct so that firm are able to achieve the unarticulated needs and
existing market needs promptly. The principle of Blue Ocean Theory of innovation
recommends Deliveroo to focus on understanding about wants of customers, current
marketing provides and what are wants from existing marketing. With this principle, the
company is able to focus on innovation which will be successful in market.
Tools of Blue Ocean innovation theory: There are two tools of the innovation theory that
are as follows:
 Strategy canvas: It is central diagnostic along with action framework to build
compelling blue ocean tactic for business. It has two axis, one of horizontal axis and the
other is vertical axis. In horizontal axis, range of factors are captured which company
competes on along with invests in. In contrary, vertical axis captures level of offering
which buyers receives from key competing factors. It has been identified that the tool
serves various purposes (van Someren and van Someren-Wang, 2017). The key purpose
is to capture existing state of plat within known market space. It allows organisational
managers to understand the things on which the competition is investing in current
scenario and the factors on which competition is based on. The other purpose is for
propelling businesses to action through reorienting emphasis from competitors to options
along with from potential customers to prospective people in market. ERRC grid: It is the tool which helps businesses in identifying new opportunities along
with products of services to offer in market. It also involves business model of company
to differentiate itself among rivals in market. ERRC Grid facilitates identification of
several elements on which an entity must work for making competition irrelevant. The
elements are as follows:
Eliminate: It covers the factors which a sector has long completed on. However,
population takes it for granted as well as must be eliminated as they do not adds vaues for
longer time (Ojasalo and Ojasalo, 2018).
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Reduce: Factors which must be reduces below standards set by industry as they come
with additional or higher costs. They also do provide little profit addition to competitive
advantages.
Raise: Dimensions which must be raised that are above industrial standards addition to
add values for current customers are under the element.
Create: Factors which have potentials to attract new customers as well as never being
offered by others must be created for making competition irrelevant between companies
in industry.
Process of the theory: Kim along with Mauborgne have articulated strategic sequence or
steps for creating commercially viable idea of Blue Ocean (Koontz, Weihrich and Cannice,
2020). When Deliveroo entered in online food delivery market, it solved delivery of food related
problems of consumers through addressing their demands for fresh and tasty food at their
doorstep. Organisation’ Blue ocean strategy created an entirely different way of making food
available for people which allowed various guardians to stay tension free for food and students to
buy variants of dishes at affordable rates. Deliveroo has dominated the market space and is
largely driving growth of the pertaining sector through Blue Ocean theory of innovation. In order
to manage innovation with Blue Ocean theory, an organisation has to adopt following processes
or steps in sequentially manner:
 Analysing buyer utility: It is first stage of the theory in which organisational managers
have to think that whether they offer unlocking exceptional utility or is there any
compelling reason available with mass population to purchase the innovative offering. In
this stage, marketing team of Deliveroo analyses utility of buyers and accordingly plans
to innovate offerings for prospective and potential customers.
 Setting and offering price: Once buyer utility is identified then the next is for devising
and offering prices of innovative products or services that can attract mass atraggted
population in order to have compelling ability for paying to the offerings. If buyers have
no compelling utility then they won’t buy the offering of company nor the offering can
create irresistible buzz in market. In this stage, main working performed by Deliveroo are
to set price for innovate service and offering it in the market that distinguish it from other
online food delivering businesses.
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 Cost: The first two process addresses revenue aspects of organisational business model.
With this, managers of business ensure to create leap within net purchaser value. In order
to secure revenue side. It is important to assess third process that is cost. The process
involved in business model ensures to build leap in values in profit forms. In this, price of
offering is deducted from production cost and the main question arises that whether an
organisation can innovate offerings at target costs as well as still generate healthy profit
margin. The stage insist Deliveroo to generate leap in net buying value and calculating
cost involved in production to distribution of innovation.
 Addressing adoption hurdles: It is last step in Blue Ocean theory in which adoption
hurdles are addresses properly (Anthony, 2017). In this, manager of form identifies
adoption hurdles that are rolling in innovative ideas and addresses them effectively.
Construction of blue ocean theory is complete when the business achieve success in
addressing adoption hurdles which ensures successful actualisation of the innovative
idea. Herein, Deliveroo marketers addresses adoption hurdles and ensure that other
process are also performed in well sequential and proper manner.
Evaluation of theory: There are certain benefits and limitations of the Blue Ocean theory of
innovation. By using the theory, companies experiences various benefits and limitations that are
as follows:
Benefits:
 The theory majorly focuses towards strategic planning then helps the business in devising
strategies for innovation in effective manner.
 It assist businesses such as Ocado and iTunes to move from impediments of rivalry in
current market along with cost structure to migrate towards improvements in constructive
values. It explains about the ways to break free from traditional techniques and towards
making attempts for profitability and making demand through analysis.
 Value innovation is key of Blue Ocean Innovation Theory which helps organisations in
agreement of innovation with cost positions, price addition to utility. This creates new
demand as well as values for targeted population and helps in expanding growth
potentials (Attri, 2018).
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 Creating ideas with blue ocean theory is effective means with non zero sum having high
payoff possibilities. By using Blue ocean theory of innovation, halo Fresh, Yellow tail,
Backroads etc create unique ideas that results in higher possibilities for success.
 Commodities or innovative ideas devised through bleu ocean theory do not make
consumer base selecting among value and affordability as it is immediate pursual for low
cost theorem to that of differentiation.
Limitations:
 It is complex to come with futuristic ideas along with recognising colossal as well as
untapped markets through the theory.
 Producing new market becomes difficult with blue ocean theory as an entity have to be
clear together with smart for identifying its customer base addition to the methods for
imparting education for new processes, solutions and ideas. Entities like Halo Fresh,
Yellow tail, iTunes etc are required to be more clear and informed about obstacles,
workforce etc that all organisations may face complexities in identifying appropriate
customer base (Gassmann, Frankenberger and Csik, 2016).
 The theory also requires huge persistent trust, preparation, faith and patience level which
is extremely not available with business while looking towards beginning indicators to
confirm the innovative facts.
Application of innovation theory for explaining historical development of organisational service
Organisational background: Deliveroo is established by William Shu in the year 2013 at
London UK. It is one of popular food delivery entity that operates in more than 200 cities in
United Kingdom, Spain, Italy, The Netherlands, United Arab Emirates, Kuwait, France etc. it
works with biggest chain restaurants along with huge independent restaurants. Its target market is
household consumers who have no time for cooking meals and prefers to eat delicious meals.
The mission statement of Deliveroo is to bring best local restaurants direct at the doorstep of
people and transforming the manner in which they eat. The entity is specialised in delivering
ready to eat meals with healthy options available on its app (Deliveroo, 2020). As per the statics,
it is analysed that Deliveroo is currently delivering around 60 million meals per year to around
2.8 million households. It has seen revenue growth of more than 650% year of year. Through
observing organisational growth and expansion in market, it is seen that the entity has used Blue
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Ocean Theory of Innovation properly. The Company has taken itself away from red ocean of
popular restaurants as well as generated new demands within targeted population for delivering
dishes for their breakfast, lunch and dinner at their houses. The business model that Deliveroo
has adopted is simple as well as distinct from traditional start-ups. The main business models that
are used by Deliveroo in many countries includes advertising business model which revolves
around devising content which people prefers to watch and further display ads on viewers screen,
concierge business model wherein it takes its existing services and adds custom element in
transaction which makes its sales unique for customers. With advertising business model,
Deliveroo company satisfies its customer groups and also combines workings with
crowdsourcing in which the company gets its content for online food delivery services for free
and attract large targets. Moreover, the entity makes money with the business model through
charging percentage fee for each sales which is facilitated by its platform. that are From its
establishment till date, the entity has executed huge innovations in its practices, activities etc. the
latest business model of Deliveroo is as follows:
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Key Partners
 Grab,
South east
Asian ride
hailing
company
 Norwich
City
Football
Club
Key activities
 Delivery
service
 Maintain
ing
platform
Value
proposition
 Accessi
bility
 Conven
ience
 Risk
reducti
on
 Status
of
brand
 Price
Customer
relationships
 Self
service
 Automat
ed nature
Key resources
 Proprieta
ry
software
platform
 Human
resources
 Financial
resources
Customer
segments
 Restaura
nts
 Consume
rs
Channels
 Website
 Social
media
pages
Cost structure
 Recycling packaging
 Bulk delivering
 Market expenses
 Other drivers
Revenue streams
 Commission charged from
restaurants for each order.
 Usage fees
 Meal kit
 Advertising
The above business canvas model is Deliveroo is self created and is based on its
innovations done in business operations and many more since its establishment.
Historical development: Since 2013, Deliveroo has attained huge success in devising and
implementing new services as per customer needs. Earlier, the company was only delivering
ready to eat food in cities of UK but with development on services and passage of time, it has
achieved huge success to offer fast addition to reliable delivery that customers can track from
their phone (Morgan and Woodriff, 2019). One of service which the company has innovated is
Deliveroo Plus which is subscription service that offers customers of the company unlimited
free delivery. The company have done various changes in its packaging, prices and services.
From its historical duration, the company have quality assured packaging, stress free services,
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guaranteed and best prices. In the year 2019, number of employees working with the entity were
5699 that is huge from the number of employees it has on historical times. Deliveroo has taken
itself out of Red Ocean of large stores as well as well-liked restaurants and produced a new
demand of delivering multiple number of dishes or food items among its customers. All this is
possible through application of Blue Ocean Theory of innovation. Furthermore, it is also
assessed that application of Blue Ocean Theory have allowed Deliveroo to gain positive
feedbacks from customers and receive various beneficiaries in competitive market. With the
innovation, the company delivers free food for the orders that are above £10, 24*7 services and 7
day free trial test that have enhanced its customer base and made it most popular online food
delivery company. With application of the innovation theory, the start up has become large sized
company which has increased its profit proportion in huge numbers (Kodama, 2018).
Strategy canvas of Deliveroo:
In the year 2013, Deliveroo entered in online food delivery market, it has recognised a
niche market of families of United Kingdom that have limited time for cooking and also have
urges to taste different types of dishes. By recognising the needs of customers for healthy meals
timely delivery and integration of customers and restaurant, it is depicted that all this are done
through strategy canvas which enabled it to stand out of rivals (Schober, 2019). The historical
strategy canvas of Deliveroo is as follows:
Figure 1: Self created, 2020
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The mentioned strategy canvas is of Deliveroo when it entered in the industry that is in
the year 2013. From the canvas strategy it is analysed that the competing factors or elements in
food delivery industry includes high customisation cost, lower nutritional value in foods of fast
food chains. In contrary, while delivering food, the companies charge high delivery cost and also
uses plastic material in packaging dishes. After some time of establishment, Deliveroo has
reduced its prices as well as started using recycled materials which implies positively on it.
ERRC grid of Deliveroo
Deliveroo has recognised and designed its own target market that is consumers preferring
tasty and delicious food of different restaurant. Implementation of Blue Ocean Theory has
innovation has helped the company in making relevant changes in its ERRC Grid as per
changing market trends and choices of customers (Ngao, 2019). The ERRC grid of Deliveroo in
the year 2013 is as follows:
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Figure 2 Self Created, 2020
(Source: Self Created, 2020)
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Application of theory for recommending possible future development pathways of organisational
service
Deliveroo is the business that has gained huge recognition and success in the international
market in limited duration. One of effective service offered by the company is Deliveroo Plus
which is a subscription service that customers use to get free delivery of meals. As per the
research, it has been identified that the company is working on some plans or pathways for
future. One of its plan is for making its own food along with replacing riders and chefs with
Robots (Future plan of Deliveroo, 2018). Managers of Deliveroo have laid out the pathways for
doubling profit margins and reducing costs. It is its redical plan for overhauling business model
with making own food along with automation. The main objectives of the plan includes automate
delivery, creating own food offerings and personalised for customers, doubling profit margins,
reducing food costs for customers and automating food production. This future pathway will give
the entity competitive advantage over rivals as there are various companies including Home
Chef, Plated, Hello Fresh, Gusto etc that offers similar facilities to customers. At present,
Deliveroo is facing intense competition from the players in online food delivery industry because
of the fact that the industry has limited entry barriers that makes things easy for new entrant or
exiting firm to encounter competition degree in market.
With implementation of Blue Ocean theory of innovation, managers of Deliveroo are able to
make higher profits as the theory assist in making efforts within irrelevant competition through
innovating its services with superior features. In case with Deliveroo Plus, following are some of
possible recommendations or other suggested plans of future pathway to the entity for
developing the subscription service:
 Automation in making and delivery food: Deliveroo managers are recommended to use
robotics addition to artificial intelligence within its operations along with costs ion
kitchen with replacing orders for ferry dishes at doors of population. With this
recommendation, the entity will have potentials for getting significantly bigger volumes
along with becoming profitable. It is estimated to cost for making food under the brand
name coming down to £ .73 per meal addition to reducing delivery cost to company by
£1 per order. Through Blue Ocean innovation Theory, Deliveroo will be able to eliminate
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red ocean elements and implement usage of robotics and AI in its operations to make and
deliver food to large customers.
 Healthy food for children: It is also recommended to Deliveroo managers that they can
add health food dishes for menu of children as it will enhance demand for delivery of the
dishes in great manner. It will not only benefit the company in increasing the demand
among children but will also attract parents who have offices and no time for preparing
lunch for their children. With implementation of the recommendation, the company can
boost its practices and recognition for future in irrelevant competition (Critchlow, 2019).
With application of Blue Ocean Theory of innovation in the proposed business idea,
Deliveroo will be able to stand in intense competition. ERRC grid will provide effective
direction to reduce, create, eliminate and raise its practice in accordance with pertaining
conditions and irrelevant competition.
The strategy canvas after application of Blue ocean theory of innovation on organisational
future plan that is to make its own food along with replacing riders and chefs with Robots is as
follows:
Figure 3: Self Created. 2020
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(Source: Self Created. 2020)
On the basis of above strategy canvas, for being innovative, following ERRC grid is
recommended to Deliveroo:
Figure 4 Self Created. 2020
(Source: Self Created. 2020)
The above mentioned ERRC grid shows the development of Deliveroo in the industry that
motivate it to keep innovating its workings, programmes etc as per changing market situations.
Through the implementation of Blue Ocean theory of Innovation, the entity has attained huge
growth. It is most preferred company whose customers uses its service that is Deliveroo Plus in
huge manner and proportion. It also provides its customers with huge facilities that has made it
huge popular in international market (Hunter, 2019.).
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CONCLUSION
The above discussion concludes that innovation plays significant aspect in business growth
and expansion. It is not only represented by new methods or ideas but also through procedures to
uncover unique manners for completing things. It involves modifying business models together
with adapting changes for accomplishing success in designing, manufacturing, delivering
products in better manner. it is concerned with introducing or launching something different in
market. Blue Ocean Theory of Innovation is effective innovation theory which is simultaneous
pursuit of differentiation addition to low cost for opening with new ideas and creating demand in
market. Principles of the theory are reaching ahead of current demand, reconstructing market
boundaries, emphasis on big picture and getting strategic sequence right. Strategy canvas
addition to ERRC grid is essential tools of the theory. Key procedure of the theory involves
analysing buyer utility, setting and offering price, cost and addressing adoption hurdles.
Implementation of the theory benefits the entity in making modifications in business canvas
model and new value curve.
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REFERENCES
Books and Journals
Agnihotri, A., 2016. Extending boundaries of blue ocean strategy. Journal of Strategic
Marketing. 24 (6). pp.519-528.
Anthony, S. D., 2017. The little black book of innovation, with a new preface: how it works, how
to do it. Harvard Business Review Press.
Attri, V. N., 2018. The blue economy and the theory of paradigm shifts. The blue economy
handbook of the Indian ocean region. Africa Institute of South Africa, Pretoria, pp.15-
37.
Biemans, W., 2018. Managing innovation within networks (Vol. 7). Routledge.
Critchlow, H., 2019. The Science of Fate: The New Science of Who We Are-And How to Shape
our Best Future. Hachette UK.
Gassmann, O., Frankenberger, K. and Csik, M., 2016. Innovation Strategy: From new Products
to Business Model Innovation. In Business Innovation: Das St. Galler Modell (pp. 81-
104). Springer Gabler, Wiesbaden.
Hunter, W., 2019. Undocumented nationals: between statelessness and citizenship. Cambridge
University Press.
Kodama, M., 2018. Sustainable growth through strategic innovation: Driving congruence in
capabilities. Edward Elgar Publishing.
Koontz, H., Weihrich, H. and Cannice, M. V., 2020. Essentials of Management-An International,
Innovation and Leadership Perspective|. McGraw-Hill Education.
Morgan, G. and Woodriff, J., 2019. Herding cats: Co-work, creativity and precarity in inner
Sydney. In Creative Hubs in Question (pp. 29-50). Palgrave Macmillan, Cham.
Ngao, E. E., 2019. A Comparison of strategy used in ride hailing services: case study Uber Dar
es Salaam, Tanzania and Go-Jek Bandung, Indonesia (Master's thesis, Program
Magister Manajemen Fakultas Ekonomi Universitas Katolik Parahyangan).
Ojasalo, J. and Ojasalo, K., 2018. Lean service innovation. Service Science, 10 (1), pp.25-39.
Ramli, A. S., Ahmad, J. B. and Harith, N. M., 2016. Blue ocean strategy in Malaysian public
sector: An analysis of the four action framework. Advanced Science Letters. 22 (5-6).
pp.1702-1706.
Schober, A. ed., 2019. Popularisation and Populism in the Visual Arts: Attraction Images.
Routledge.
van Someren, T. C. and van Someren-Wang, S., 2017. The Instrument: Strategic Innovation as a
New Foundation for Russian Innovation System. In Strategic Innovation in Russia (pp.
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Blue Ocean theory of innovation. 2015. [Online]. Available through: <
https://theelsesite.wordpress.com/2015/07/12/blue-ocean-strategy/>
Deliveroo. 2020. [Online]. Available through: <https://deliveroo.co.uk/>
Future plan of Deliveroo. 2018. [Online]. Available through:
<https://london.eater.com/2018/3/29/17175482/deliveroo-future-plans-robots-profits-
investors>
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