Managing Innovation: Blue Ocean Strategy and its Application

This article discusses the concept of innovation and its significance in organizations. It focuses on the blue ocean strategy, which is a strategic approach that helps organizations gain a competitive advantage by focusing on uncontested markets. The article explores the definition, principles, and processes of blue ocean strategy, as well as its application in real-world organizations. It also evaluates the benefits and limitations of this innovation theory.

MANAGING
INNOVATION

TABLE OF CONTENTS
INTRODUCTION...............................................................................................................................3
MAINBODY........................................................................................................................................3
Definition, principles and processes of blue ocean strategy...............................................................3
Processes of blue ocean strategy.....................................................................................................5
Application of Blue Ocean Strategy..................................................................................................9
Historical development of Vodafone...............................................................................................14
Recommendation.............................................................................................................................14
CONCLUSION..................................................................................................................................15

INTRODUCTION
Innovation can be defined as the procedure of transforming an idea or creativity into
goods or services which gives values to customer or for which they pay. In simple word
designing, development and implementation of new products or services by keeping aim to
enhance efficiency and competitive advantage. Innovation plays essential role in organization
because helps business to penetrate market faster and offers an efficient connection for
developing market that can lead to high opportunities in business market. Thus, innovation
also help company to generate sustainable economic growth and prosperity. It supports to
business to achieve high growth by meeting their objectives over the period. Innovation is
classified into two types incremental and radical where incremental innovation refers as the
development in an current products or services. On the other hand, radical innovation can be
defined as the procedure in which finds out properly new way to do something. Blue ocean
strategy is considered as an innovation theory which is used by Bloomberg organization to
promote innovation. This report includes significance of innovation theory. Evaluation of
innovation theory covers in it.
MAINBODY
Definition, principles and processes of blue ocean strategy
Blue Ocean Strategy can be defined as the strategic organization approach which is
based on the principles that organizations use to take competitive advantage by focusing on
uncontested markets. These markets known as blue oceans which helps organization to
promote their ideas in global market. This strategy gives values to innovation. In simple
words, a market where there has very less competition and no pressure on pricing. this theory
can be implemented across the organization and it is not limited only for a business (Lauer,
2019). A blue ocean strategy helps business to enjoy in uncontested market where there is no
competition and doesn’t have any price war among businesses. It helps organization to
become potential for generation higher profit rather than irrelevant competition. It is also
known as market identification strategy. Generally blue ocean strategy is quite different from
red ocean strategy because red ocean strategy supports business to compete within existing
market space as well makes the value cost trade off. Red ocean strategy helps business to
differentiate their activities from competitors. On the other hand, blue ocean strategy designs
and captures new demand. Apart from this, it creates uncontested market space and helps to
break the value cost trade off. Red ocean strategy helps to beat competition by introducing

new product or services while blue ocean strategy makes the competition irrelevant. There
are eight principles of blue ocean strategy such as:
Grounded in data
It is main principle of blue ocean strategy which is based on a decades of long study
less than 150 strategic moves are taken by more than 30 industries over the 100 years.
Industries includes hotel, cinema, airlines, retails, energy, computers, broadcasting and
manufacturing to automobile and steel etc. uses blue ocean strategy. According to the
principle this strategy is not only helps to become winning player but also makes them
limiting successful competitors.by following this principle most of the successful business
player doesn’t caught in red ocean. This principle can apply for non profit organization, profit
and public sector.
Pursue Differentiation and low cost
It is second principle which helps business to follow differentiation and low cost. it is
strategic approach which guides organization to determine what customer commonly value
around the boundaries of competition and how can promote across the market boundaries
(Orlov and Chubarkina, 2017). Thus, business easy to meet both differentiation and low cost
and also supports to organize a leap in values for customer and the organization.
Creates uncontested market space
This strategy doesn’t have goal to beat competition. It has goal to make competition
useless by redesigning organization boundaries (Aithal, 2016). It also known as convectional
strategic approach which drives organizations to define their business. It helps company to
innovate product or service which automatically differentiate brand profile from other
competitors. It supports organization to understand new demand within new and uncontested
market as result generates high profitable growth.
Empowers company through tools and framework
This strategy provides systematic techniques and models which helps organization to
stay away from competition and organize blue ocean of open market space. Blue ocean
strategy provides various frameworks such as strategy canvas, four action framework and six
paths etc. these frameworks helps organization to create values of innovation. Even it offers a

roadmap and critical visual direction which is applied by organization for pursuing value
innovation and designing open market space.
Maximizes opportunities while minimizing risk
This strategy is opportunities enhancing and risk minimizing strategy which helps
company to be in blue ocean while minimizing red ocean risk. In simple word, it leads values
of innovation instead of competition risk statement (Bernat, 2018). This strategy is based on
four question which allows organization understand effectiveness of innovation values. First
question is this there should be a compelling reason so people buy organizations offering.
Second question interprets that organization’s offering price is optimized a not which attracts
large number of target customers so that they become compel to pay for this offering. Third
question is that can organization produce strategic price for that product or services which
can generate higher profit while selling this offering. Fourth question is that what type
strategy can adapt to role out idea which enhance its effectiveness while minimizing risk.
Processes of blue ocean strategy
It is highly relevant to process innovation. It helps company to relate a new idea for
building a new business which is not existed before. Therefore, it's known as blue ocean
industries which is more profitable than traditional business which is highlighted by winning
competition in competition market. According to this strategy, organization should offer their
customers a tangible product or service which is unexpected to their assumption and
improves their quality of life after using it. Blue ocean strategy is completed in six steps
which is described below:
Reconstruct market boundaries: Blue ocean strategy helps organization to think that
how can process start for their customers and where can it really end. It is most the easiest
way which leads creativity in business activity. Additional it is not only helped to enlarge
value chain but also introduce new market space. There is an example of Ryanair to
understand this step. Ryanair is a airline company which doesn't fly people after that provides
whole holiday experience along with transportation services as well includes car rental. In
simple concept holidays never start or end for the public. By the example can be interpreted
that, this strategy supports business to lead a new level which is beyond to competition
boundaries.
Focus on big picture: This steps direct business to keep their eye on overall view
rather then stuck in competition market. On the basis of observation helps them to focus on

customers that what they really need from company and how organization can meet their
objectives by offering their desirable needs. This strategy instruct organization to keep
change in their business process per week till then customer doesn't get desirable outcomes.
Reach beyond existing demand : Generally overall business focuses on existing
demand of customers. This process can lead organization to greater market analysis and
supports to take competitive advantage. Market analysis can't lead real growth because it
comes when product or services lies beyond to existing demand. There is an example of
Apple Inc. to understand concept of this (Au and Tucker, 2018). Organization doesn't satisfy
by creating new version of iPhone. Even they reinvent that how people can use portable
device by offering iPad. Thus type creativity leads organization on different platform rather
traditional smartphone market.
Get strategic sequence right: To execute strategy well form requires sequence which
accomplishes their value innovation. To offer new technology requires that it should be
convenient, safe and entertainment. Additionally, it enhances quality of life customers and
make them simpler and easier. Ocean strategy helps business to introduce such kind
technology which is easier to use, simpler, safe. Convenient, entertaining and environmental
friendly as result enhance purchasing behaviour of customers. This technology innovation
company with government policies as well.
Overcome key organizational hurdles: Most of the organization unable to manage
their internal environment due to several issues such as internal politics, bureaucracy which
causes fail execution demands. To get success in execution demands needs to build process
bridge between employees and manger. It can build up when organization resolves their
internal environment difference as result get successful outcomes within workplace. Apart
from this, employees can provide better customer experience every time.
Build execution into strategy: Organization can minimize management risk by
implementing Blue ocean strategy into their operations. Automatically company can provide
perfect customer experience. Company can minimize their management risk when resolve
their issues on time, inspires employees to work in team and appreciate team efforts at
workplace that directly decline risk. It can be understood through as Zappo's example who
doesn't sell shoes but provide greater customer experience

Evaluation of Blue Ocean Strategy
Benefits of blue ocean theory
Blue ocean theory assist company to enter into such a market where there is no
competition or there is no saturation in the market. It helps a company to make a new market
place and find new opportunities to expand its operations and gain more profits. As it is all
about creating a demand for a new product in a new market where there is no competition
and so as an organisation can increase its demand and hence therefore can bring innovations
in its price or can change price and attract new consumers through its pricing policies. As
Blue ocean strategy assists a company to enter into a new market with a new product and
helps in creating its demand with no competitive environment, in this scenario a company can
rule the market with the increase in demand of its product and can work firmly Even when
competitors come into the market (Sitinjak, Pramawijaya and Gunawan, 2018). Blue ocean
theory works on proven facts and figures and not unproven theories, It helps an organisation
Illustration 1: Blue Ocean Strategy Process
Source: (Five Steps to Making a Blue Ocean Shift, 2019)

to make its strategic policies accurately. Blue ocean theory there is a new product so there is
always an innovation with the product as well with the prices and its marketing strategies. As
it a new product policy so it can put the organisation in the leading position and helps
organisation in making huge profits without any competition. Value creation is the main tool
of Blue ocean theory, it motivates the organisation to make continual changes in their product
as it is its pricing policies. It also creates an positive environment in the organisation when
there is a new product which is newly launch in the market which Which helps in
organisation in getting it works done effectively and efficiently.
Limitations of blue ocean strategy
It’s not an easy task to enter into a new market with a new product it Can often result
into a huge loss. This strategy works on all the past records and works on it and so cannot
predict the future occurrences. When an organisation enters into a blue ocean in the
beginning period there are Huge chances of losses and no responses of customers, it needs a
huge patience (Leavy, 2018). Faith and believe in our product to continuously work on it. As
to create a new market an organisation needs an big team of professional employees who can
create demand of a new product, But it is not all the time possible that employees can
accurately and effectively creates demand of new product to the organisation in the market.
With the growth of a new market there are chances that from the other ocean ocean other
competitors can come and work into the market where organisation is working. There is no
such formula to find out the exact need of customers so if a New product comes to an market
there is no surety that it fulfils the customers exact need and creates demand (Agnihotri,
2016). It needs a huge motivation the entire organisation to work on new product rather than
working on a existing product. They can be chances when some of the employs get
demotivated when there is no demand or less demand. In such a situation company needs to
fight with Both the internal as well as external environment. It needs to be in proper working
strategy to promote and new product in the new market also there should be some small
strategy to Avoid changes in internal as well as external environment. It is also difficult for
an association To work in a New market with varied customers of varied taste and
preferences. Entering a new market is always not an easy task for any organisation has every
market has its own benefits and limitations. To settle into a new market company needs to
Highly examine its prices and policies towards customer so as to work for a long time
and remain into the market for a long period with maintaining its leading position. Everything

depends on future occurrences and there is no past experiences which can help a company or
an organisation to work in a systematic and safe way to avoid losses and imbalances.
Application of Blue Ocean Strategy
Background of organization
TerraCycle is waste management industry which is headquartered in Trenton, New
Jersey. It operates in 21 countries through it’s stores and offers recycled goods to customer.
The organization collects non-recyclable pre-consumer and post-consumer waste then
converts into raw material so that can be used for new products. Organization is voluntary
based platform which has aim to make society and country pollution free or waste free. To
decline waste provides reusable packaging and raw material by TerraCycle company. It was
founded in the 2001 by Tom Szaky and Job Beyer. Initially organization was used to collect
organic waste which was proceed by worms into fertilizer. Over the time organization
changed its business model and started to sell its products in liquid form. The main goal of
the change was packaging because most of companies offers liquid product in the bottle
which was golden opportunity for the business to transform bottle into recyclable bottle.
Thus, organization continued this operation and sold their gardening products or goods as
“waste in waste”. Later on, TerraCycle gathered overall bottle waste from local organization
and schools and recycled them into reusable material (Shaw and Allen, 2018). Thus,
company became famous as “Bottle Brigade” in 2004. Organization got licence from other
companies like Coca-Cola and PepsiCo to use it’s bottle. Then Walmart company also
collaborated with Terracycle for using it’s recycled products. In 2007 started to media
campaign by organization which supported organization to expand it’s business in other
countries as well. By and by organization collaborated with various companies like tobacco
companies other MNC’s companies and offer own recycled products to them in 2009.
Currently organization provides diversified services i.e. USP a variety of foods-items,
household cleaning, personal care products etc. are given in reusable padded container.
TerraCycle company uses various business model to expand its business and product
portfolio to customer. Business strategies are described below:
Sustainability model
The model is used by organization in their recycling process. They has developed aim
to design profitable recycling solution instead of focusing on a specific waste stream then
building the infrastructure of company. The process is quite difficult to collect overall waste

and offers science-based solution. To lead sustainability in their practices inspires NGO’s
communities and schools and individuals to gather various waste on large scale so that can
turn into reusable products. To improve sustainability in the business offers own website as
official online retailer. The reason behind is that organization finds innovative uses for the
material instead of garbage deemed. While website supports company to retail high quality
recycled products on affordable price. Thus, organization gets sustainability in their business
and its process.
Collaboration strategy
It is another business strategy which adapts by organization to expands it’s services
and products. TerraCycle collaborates with Coca-Cola, Pepsi-Co etc. because these
companies offer liquid product in bottles. So, it is easy for company to collect waste from
these companies and transform into reusable material. This strategy helps company to expand
it’s service portfolio and gets high funds from the companies that leads growth in the
business expansion. While Coca-Coal and Pepsi-Co gets positive impact in their business
performance because they get reusable bottles as result reduces waste. Head and Shoulder
also collaborates with TerraCycle to get reusable shampoo bottles and in returns gives
massive waste (Cosyns and Cornfield, 2018). It is profitable collaboration for the TerraCycle
because they do not need to collect massive waste because H&S provides waste to company
on time. Due to this initiative organization gets more than 200 awards for sustainable
business and social entrepreneurship.
Success Model
Organization follows success model which supports company to expand it’s business
in the world. initially organization operates in Europe’s 12 countries i.e. Spain, France,
China, Switzerland, Belgium and others. Later on, organization operates in the America, Asia
and Australia. Thus, company expands its business in the world by the help of success model.
Business Canvas Model
It is a strategic management technique to quickly and easily explain and helps to
communicate business idea or concept. Business model canvas is used by organization
because it provides key resources, activities, relationship, customer segments, cost structure
and revenue stream. Business canvas model is basically dependent on seven components
which is described below:

Key Partners
 Plastic produce
manufacturer,
national and
regional
government.
Specific
investors are
PepsiCo, Coca-
Cola and
financers are the
key partners of
the company.
 Investors and
financers are the
most important
partners because
they provide
proper funds for
keep continuing
business
operations.
Key Activities
 Those
activities
which helps
organizatio
n to get
success in
their
operation
effectively.
 The key
activities
are reuse,
redesigning,
recycle and
disposal,
sustainable
strategy and
subsidiaries
selling.
Value
Proposition
 Value
propositi
on refers
as the
bundle
of
products
or
services
which
create
value for
specific
customer
segments
. Even
organizat
ion
applies
feedback
strategy
to
analyse
customer
s reviews
about
product
and
services.
 I can
provide
Customer
Relationships
 The customer
wants to keep
business
relationship
with
TarraCycle
because it
gets various
awards by
senior
authority as
sustainable
business. It
builds good
brand image
in the
business
market.
 Company can
provide best
experience to
the customer
by offering
high quality
reusable
products on
affordable
price as
result
improves
buying
Customer
Segments
 Customer
segment
can be
defined as
the
different
group of
customer
or
businesses
which has
aim to
research
and serves
their
services.
 TerraCycl
e has
various
consumer
segments
such as
manufactu
rer,
entreprene
urs,
collaborat
ors etc. are
the main
customer

different
type of
valuable
services
i.e. keep
environ
ment
waste
free and
pollution
free as
result
improves
quality
of their
life by
reducing
plastic
pollution
.
 Organiza
tion has
opportun
ity in the
plastic
market
where
they can
offer
reusable
plastic
and in
return
can get
behaviour of
customers.
 Media
marketing
campaign is
the best to
access
customer and
offers them
high quality
reusable
products.
segments.
In
addition,
organizati
on
collaborat
es with
Walmart
and builds
share
platform
where the
goods and
services
are shared
to each
other.
Key Resources
 Those
resources
which is
required to
get success
in business
model.
 Key
resources of
the
company
are
corporation,
collectors,
citizens and
own
business.
These
resources
Channel
 Organization
uses value
proposition
to reach their
customer
segments.
While
channel
building
defines that
how an
organization
can
communicate
and reach
their
customer and
to deliver
them value

support
company to
get
sufficient
funds and
massive
wastage as
well. For
example,
organizatio
n provides
incentives
to people
for
collecting
waste.
economi
c
benefits.
proposition.
TerraCycle
builds
various
channels
such as sales
force, web-
sale, own
stores,
partner stores
and others.
 These
channels are
cost-effective
and provides
direct access
to the
customer.
Cost Structure
 Organization keeps budget cost structure
which is reasonable for employees and
generates revenue as well. This cost structure
supports company to improve purchasing
behaviour of customers.
Revenue Streams
 It can be defined as the cash which
organization generates from each customer
segment. This business model helps
organization to set up two type of revenue
stream such as manufactures when hard
waste unable to transform into reusable.
While second transaction revenue where
generates revenue from third party vendors
who outsource manufacturing and logistics
(Jaradat, Amro and Alzeer, 2017) . In simple
word organization generates revenue from
customer segment.

Historical development of TerraCycle
Terra Cycle Company has launched its new recycled product liquid fertiliser. This is a
unique product that allows peoples to fertilise. Company has channelized blue ocean strategy
to launch new products. Blue ocean strategy supports company to make the product useful for
all its customers in all its promotional campaigns. Blue ocean strategy is used when there is
only a smaller number of market competitors. Terra Cycle Company is a waste management
company and this strategic tool enabled company to take competitive advantages in the
market with the support of blue ocean strategy. Blue ocean strategy work on the concept of
creating new market demand switch the launch of new products in the market. Terra Cycle
Company has launched these new products in such a way that company has projected the
products as the revolution in the recycling industry. Company has also channelized
innovation and technology in launching this new product. This product is a useful tool which
allows customers to manage waste in an effective manner. In fertilising this products will
Illustration 1: Business Model Canvas
Source: (Business Model Canvas. 2019)

improve the sustainability of the process. Company has also utilised natural ingredients to
improve the utility of the new products. Blue ocean strategy has guided company to
channelize all effective marketing and promotional campaigns to promote this product in the
target market. Company has conveyed all significant advantages associated with the products
to all its customers in its promotional campaigns. Blue ocean strategies have supported
company in creating the effective demand of the new products in the target market. Demand
has supported company in improving the profitability out of the new product launch.
Recommendation
Terracycle has come up with a lot of new products which is a great factor for the
organization. Terracycle is not having too many competitors in the organization but has to
work for the benefit of the human beings and the environment protection so that there is a
better functioning of the organization. It is very important for the organization to have
innovative ideas and creative products which are disposing of the waste properly so that there
is a better functioning. Terracycle is limited to the boundaries and has to become a global
leader yet but the ideas and the objectives the organization is having is very good which is
why the organization must become international so that they can not just create a market for
themselves but help the environment improvement globally (Forcinio, 2020). There are a lot
of innovations which have taken place in Terracycle which are giving the company an
competitive advantage for a long run. There is a need of such organizations to have an
effective functioning for themselves so that they can have a better market for themselves
which is a very essential factor.
Terracycle can capture the market as soon as they entire the market of other countries
as well which is why the organization will have to understand the environmental harm of the
waste and improve the products accordingly. There are products which are collecting the
buds of cigarette filters which no one else does in the market but that is a harm to the
environment which the organization is working on so that they can provide the human beings
with a healthy environment to work in. There are a lot of products which are highlighted in
the organization so that there is a better functioning and the organization will be able to have
a better functioning. Though producing new technologies is difficult but the organization will
have to do that so that they can make a better environment for the people to live in so that
they can have a better functioning and achieve their objectives from time to time.

CONCLUSION
It can be concluded definition, principles and process of Blue Ocean Strategy.
Business model canvas and cost-effectiveness strategy has been summarized in this report.
Historical development of product and services by applying blue ocean strategy has been
concluded in report.

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