Archian Speaks in Bacolod and Dubai

A Cool mix of Real Life, Architecture, Finances, Working as an OFW, Business

Marketing: Six Sigma vs Blue Ocean Strategy

30 Comments


Archian - Life, Bacolod, Architecture, Finances & Dubai

Marketing: Six Sigma vs Blue Ocean Strategy

In order to succeed in a capitalistic society, a business must have a defined edge over its competition. Companies go to great lengths in order to develop their competitive edge. It may be the technological advancement of its products or services, its cutting-edge marketing programs, or the way it recruits its employees. These are examples of the common areas that most companies seek to build, define, and expand their edge over competition. Another way that businesses seek to develop an edge is in their actual strategy, and two of the most popular business strategies in operation today are the 6 Sigma Strategy and the Blue Ocean Strategy. Both of these business strategies have gained widespread traction in the business world over the last 10 years. Although they are both effective, they are different, and depending on a company’s primary operations and objectives, one may be a better fit than the other.

Blue Ocean Marketing Strategy

Blue Ocean Marketing Strategy

Blue Ocean strategyThe “Blue Ocean Strategy” is based on a business strategy book released in 2005 by authors W. Chan Kim and Renée Mauborgne of The Blue Ocean Strategy Institute at INSEAD. The basic idea behind the Blue Ocean Strategy is that an organization may experience higher growth and increased profits by creating new demand in an uncontested market space instead of trying to compete in a market space that is already overcrowded with competitors. Blue Ocean seeks to capitalize on the most basic premises of economic theory which is supply and demand. Is it easier to generate profit in a market that is full of sellers, or in a market in which your company is the only seller. The answer, of course, is in a market where you are the only seller. The challenge in the Blue Ocean Strategy, though, is creating this new demand. Creating is not easy. It requires innovation, creativity, and strong vision. It may be very difficult to establish market share at first in a new market space, but once the difficult first steps are taken, a company can increase profits and growth at exceptional levels. There are four basic principles in the Blue Ocean Strategy that must be adopted by a company: The uncontested market space must be created by:

1-Expanding market boundaries.

2.Focusing on the Big Picture

3.Reaching beyond the existing demand and

4. Establishing and implementing the correct strategic sequence.

Blue Ocean strategy explains that a Red Ocean is where competition already exists. The term Red Ocean is used to denote that is where companies fight each other in a plethora of ruthless and even unethical ways in order to gain an edge over the competition and capitalize on the market. The term red is used to symbolize blood in the water from all the fighting.

Blue Ocean Sstrategy by Chan Kim & Renee Mauborgne

Blue Ocean Sstrategy by Chan Kim & Renee Mauborgne

The Blue Oceans, however, are where the water is clear. No one has been there, the market is open, and competition is scarce. Instead of trying to find all of one’s market in the Red Oceans that are infested with other companies, a company may do better to venture out into the Blue Oceans in order to find clean water and fresh markets.

Six Sigma - Define, Measure, Analyze, Improve, Control

Six Sigma - Define, Measure, Analyze, Improve, Control

Six SigmaThe business acumen of Asian companies has gained widespread respect throughout the world in the last 20 years. Not only do they often know how to make profits, but companies such as Toyota and Motorola who practice Six Sigma are recognized as world leaders in company management and business practices. The 6 Sigma business strategy is a business management strategy originally developed by Motorola in 1981, and throughout the last 20 years, this business strategy has been adopted by countless companies in the United States. 6 Sigma’s primary objective is to improve the quality of process outputs by identifying and removing the causes of defects, or errors, and minimizing variability in manufacturing and business processes. 6 Sigma actually creates an infrastructure within an organization of people who are experts in various 6 Sigma principles. These people are recognized by colored belts, similar to karate. Different businesses will find each strategy unique Due to its very basic and comprehensible approach, 6 Sigma will generally be much more attractive to businesses that are heavily involved in manufacturing. While a business that is not in manufacturing may still find benefit with the 6 Sigma Strategies, it is without a doubt, most effective in companies that are manufacturers. While Six Sigma is great for optimizing existing processes, it can sometimes inhibit the development of new products and markets. To start thinking outside of the box, you might want to create a blue ocean strategy.

Six Sigma Logo

Six Sigma Logo

The Blue Ocean Strategy, however, is a bit more applicable to wide array of business types. Companies that may find Blue Ocean most applicable are technology companies or companies that are able to easily innovate their products. Innovation is a key component of this business strategy, and therefore companies that are able to innovate product development in basic and creative ways may find it easier and more productive to adopt the Blue Ocean Strategy.

Author: bacolodseo

I am a Search Engine Optimization Professional from Bacolod City with a Knack for finding our way to the top of the Search Engines.

30 thoughts on “Marketing: Six Sigma vs Blue Ocean Strategy

  1. Thanks for the article. It definitely provides some insight to the benefits and applications of Six Sigma and Blue Ocean strategies. Although neither is specifically designed for nonprofit management, which would you suggest for individuals seeking to sharpen their nonprofit management skills.

  2. Am in wrong in saying that Six Sigma can actually compliment Blue Ocean? My thoughts are that Six Sigma is more an operational imperative and that any strategy execution can use Six Sigma to attain its objectives?

    • Hi Ali, You are correct. Here is an example of how the two would work together. Suppose that you identify a new market segment that is either unattended or underattended (Blue Ocean). Knowing that it will be very important to enter with a feasible business plan that offers an excellent customer value and has the capability of delivering the best message, you might use 6 Sigma to define, measure, analyze, improve and control your product entry.

      It is not uncommon for a company to enter a Blue Ocean ill-prepared to succeed, only to bring the attention of the market to potential competitors who then capitalize on the opportunity by introducing a better value and more more efficiency.

    • I agree with Ali. Surely they are complementary as they address different parts of the lifecycle?
      Thanks for the debate.
      Iain

      • Agree with Nancy. The concept can be used and practiced in every sphere. Well, if you so desire to, then use the concept at home in your domestic life too, right from waking up in the morning to going back to bed at night. Introduce this or and TPM at home strictly following the process one will experience a quality-life, high-life condition and time to devote on all those activities that one always wanted to do but couldn’t find the time, because one spent time on redundancies etc… Try it out and I PROMISE & GUARANTEE it works.
        Happy Living.
        Subodh

  3. Six Sigma is not a strategy, it is a toolbox that can be used to reduce cost in design, test and production. It is, at best, a tactical tool. This is how a company would stay competitive (or become more competitive) in it’s chosen market.

    As described, Blue Ocean really isn’t a strategy either. It seems to be more a set of “requirements” that strategy could (should?) consider in order to improve the odds of success. Care must be taken in formulating strategy based on “blue ocean,” how many companies have gone under because there was no market for the cool, new idea. Does anyone remember Apple’s first attempt at a table computer in the early 1990’s?

    To the comment that neither addresses the non-profit, you are missing the point. A non-profit has a mission, and striving to achieve the mission is something that it shares with for-profits. A non-profit can, and should look for new ways to achieve and expand it’s mission (Blue Ocean), and it should evaluate how it does its work, and try to improve the results (Six Sigma).

    • Hi Parag,
      I admire your understanding about Six Sigma. I’m just beginning to read about it and I thought it would help to post about it here.

    • I disagree with the idea that Blue Ocean isn’t a strategy. If you read carefully the book, it doesn’t say that all the companies can be successful trying this strategy, the authors only develop a possible strategy.

      One of the keys in the book is the difference between innovation (as the Apple’s case) and value innovation.

      Moreover, no strategy assures the success, they’re context dependent.

  4. Blue Ocean Strategy is about creating niche market segment or innovative product. We can say that we are creating entirely new battle field where you are the strategist and first mover.
    Six Sigma is about dealing with first time right/defect free and high quality product or service to improve bottom line as well as to improve top line by retaining the existing customers and attracting new customer by virtue of word of mouth publicity by satisfied customer.
    Both these technique can co-exist for same market or product which will give high impact.
    Simple example is you are developing a new product/market category, you needs to be first time right or otherwise this will leads to failure. Six sigma play a vital role here

    My point of view that
    1) both these technique should co-exist. . FMEA is also relevant to Blue ocean strategy .
    2) It knows fact that both are standalone model, but result will be inferior to first suggestion.

    • Blue Ocean is just the opposite of creating a niche market, its about broadening the market, making it as big as possible. Its about reducing the elements in your own market that costumers dont find necesarry combined with creating new elements that have never been seen in your market.

      In the book severall examples are given of companies who are not at all working in a niche market eg Wallmart

  5. A strategy explains how an organization will behave to survive existing forces (internal and external) that could impact it. Blue ocean is part of the environment that is considered during strategy development, but it is not a strategy. 6 Sigma is a tool for finding efficiencies in process, and is related to performance management as an extension of implementing a strategy. A strategy focuses an organization on those activities (mission, vision, values, goals) that strengthen its chances for survival and its ability to thrive in a given environment. Interesting reading for finding your organization’s sweet spot is the 80/20 principle, which explains the phenomenon that 20% of our efforts bring 80% of our return on investment. Finding your organization’s sweet spot and focusing investments and resources on it is a sample strategy for success. There are many different schools of thought on strategy.

  6. muy buen artículo

  7. blue ocean…positioning /fracturing the market, been around forever.
    six sigma…been around forever(since the late 40’s)…process improvement

  8. Wonderful material. New concept of “Red” & “Blue” and very informative / interesting comments by various readers.
    Thanx

  9. I think that Blue Ocean Strategy is actually a tool to develop a strategy. The main advantage in my view is the avoidance of too much detail, that 6 Sigma is pushing. I understand that the 6 Sigma Strategy is a tool to fight in the Red Oceans. Although 6 Sigma Strategy has been a useful tool for many companies, it might lead to fighting in an area of diminishing return.

  10. I fully agree with Parag, well explained.

  11. I fully agree with Parag

  12. In my view ususally the Red Ocean is still quite staurated with fish and provided you can identify your niche and relate to the demands of the target market segment you still have a commercially viable proposition. The issue sometimes with the Blue Ocean is that since you do not find saturated clusters of the target market segment in a defined area / zone, the available market may be too narrow. Growth may therefore be slow as the fixed costs will be high in the beginning as the critical mass of customers will be acquired overa period of time through communication techniques etc.

  13. In response to Michael Henderson’s earlier comment, I don’t see why Lean Six Sigma would not apply to non-profits. It’s a great way to look at you processes and you will always find areas of “waste” (time, effort, redundancy, etc.). Simple LSS approaches could be great in non-profits. I have worked with public sector organizations that have seen much success with it. Give it a shot!

  14. Paraq’s comments are right on. Neither is a strategy but both are either good tools or things to consider in executing one’s strategy.
    Timing is everything in markets and all too many are either too early or too late to readily achieve their growth objectives cost effectively.
    Too early and you tend too continue to spend and the cash is gone and you are not working on the next target andyou lost your momentum. Too late and the growth rate shrinks as do the margins due to competition and you miss or lose the loyalty of the very important early adopters

  15. Interesting Topic

  16. I view Six Sigma as a tool to improve operations (hence its utility in manufacturing and other areas where efficiency is critical), while blue cean is a strategy framework, helping companies to develop innovative strategies. I really don’t think that they should be directly compared, because their usefullness is totally different.
    Both are very important though, and it is up to each company to decide if the should implement one of them or both (maybe in different areas).

    Kasia

  17. I strongly believe that successful organization needs balanced approach – Blue Ocean and Six-sigma strategy. The reason why I think so is that company needs to manage cash or resources to run its operations.

    Blue ocean is definite one that provides tremendous future business benefits but it sucks lots of cash/resources in innovation… most of the organizations would need “cash cows” to get the resources/cash for injection into innovation (blue ocean strategy). “Cash cows” usually require incremental improvement thats where Six-Sigma is very useful tool/methodology.

  18. Like Mahesh, I strongly believe that successful organization needs a balanced approach – perhaps a combination of the Blue Ocean and Six-sigma approaches. I look forward to following this discussion.

  19. What an excellent article!
    Both strategies do work very well, dispite I agree that:
    6 Sigma is more for the manufacturing sector / industry AND that
    both strategies can work to gether and one complement the other
    Thanks for sharing it with us. Xenophon

  20. I disagree with the conclusion of the author:

    “Companies that may find Blue Ocean most applicable are technology companies or companies that are able to easily innovate their products. Innovation is a key component of this business strategy, and therefore companies that are able to innovate product development in basic and creative ways may find it easier and more productive to adopt the Blue Ocean Strategy.”

    The type of innovation that you mention is technological innovation, the type of innovation that is mentioned in the Blue Ocean Strategy is value innovation.

    An excellent example of a company that created a blue ocean by doing exactly the opposite of technological innovation is Nintendo with its Nintendo Wii. They used a ten year old processor, thus the opposite of technological innovation, in a market where competion was, untill than, always based on having the best immages with the state of the art processor. By putting the focus on a whole new consumer, families instead of gamers, the newest proccesor sudently wasnt a necessety anymore.

  21. Pingback: Applying Blue Ocean Strategy to Architecture and Business Models « Archian Speaks

  22. Pingback: Bacolod Context: Marketing, Entrepreneurship and Franchising | Archian Speaks in Bacolod and Dubai

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s