Blue Ocean Strategy: Out of Price Competition
When everyone in the industry offers the same, price becomes the only argument. Here is Blue Ocean Strategy explained: the ERRS model, the value curve, six steps, and a Danish example of an offering that cannot be compared on an hourly rate.
Published · 8 min read
In short
- Raise value and lower costs simultaneously — not either-or.
- ERRS: eliminate, reduce, raise, and create. All four must be completed.
- The value curve reveals if you are truly only competing on price.
- Test on one segment with hit rate and coverage ratio as KPIs.
What is Blue Ocean Strategy?
Blue Ocean Strategy is about creating a market where competition is irrelevant, instead of fighting for shares of an existing market. The 'red ocean' is the known industry where everyone offers the same and competes on price. The 'blue ocean' is an offering that no one else delivers in the same way.
The model was formulated by W. Chan Kim and Renée Mauborgne and is based on one central principle: value and price should not be compromised. You cut away cost-intensive elements that customers don't value anyway, and elevate the elements that matter to them.
For a Danish SME, the realistic ambition is not to invent a new industry, but to move out of price comparison. This almost always happens by changing what is sold: from product to service agreement, from delivery to guaranteed uptime, from hours to results.
The Four Actions Framework: ERRS Model
Review your industry's competitive factors and place each one into one of the four actions.
Eliminate
Remove entirely
Which factors, taken for granted by the industry, can you remove without customers missing them?
Examples: Physical showroom, printed catalog, offers on everything regardless of profitability.
Reduce
Below industry standard
Where does the industry over-deliver on something the customer doesn't pay for?
Examples: Number of variants, amount of optional extras, over-specified documentation.
Raise
Above industry standard
What matters most to the customer, and where can you be significantly better than everyone else?
Examples: Delivery reliability, response time, price transparency.
Create
New to the industry
What element doesn't exist in the industry today but would solve the customer's real problem?
Examples: Service agreement with guaranteed uptime, digital overview for the customer, fixed monthly price.
Blue Ocean in Six Steps
Half a day with management and two-three customer interviews go a long way. Customer interviews are the most important part.
1. Draw the industry's value curve
List the 6-10 parameters on which the industry competes, and give yourselves and two competitors a score from 1-5 on each. If the curves look similar, you are in the red ocean.
2. Talk to non-customers
Interview three companies that don't buy from anyone in the industry, or solve the task themselves. Their reasoning is the raw material of the blue ocean.
3. Find the customer's real jobs
What is the customer trying to achieve — beyond the product? Avoid downtime, avoid hassle, avoid using their own management time. This is where a new value proposition emerges.
4. Run the ERRS exercise
Place each parameter in eliminate, reduce, raise, or create. The requirement is that both eliminate and create are filled in — otherwise, you've only made an improvement.
5. Test the business model
Can the customer see the benefit, can you price it, can you deliver it, and do you make money from it? If one of the four fails, the offering must be adjusted before launch.
6. Pilot on one segment
Choose a defined segment, set two KPIs (hit rate and coverage ratio for the new offering) and evaluate after one quarter before rolling it out broadly.
Example: from red to blue ocean in an installation company
Same craft, different business foundation. Note that the price is not lowered.
| Parameter | Industry Standard (Red Ocean) | New Offering (Blue Ocean) |
|---|---|---|
| Sales Model | Offer per task, competition on hourly rate. | Fixed monthly service agreement with agreed response time. |
| Documentation | Paper report after visit, often without overview. | Digital system overview the customer can see themselves — new to the industry. |
| Response Time | “We'll come next week.” | Guaranteed four hours for critical faults, significantly raised. |
| Number of Variants | Everything can be delivered, everything can be customized. | Three standard packages — consciously reduced to lower costs. |
| Showroom and Catalog | Fixed cost, rarely used. | Eliminated. Funds reallocated to on-call service. |
Template: value curve as a table
Parameter | Competitor A | Competitor B | Us today | Us after ---------------------+--------------+--------------+----------+--------- Price (low = 5) | 4 | 5 | 3 | 3 Delivery reliability | 3 | 2 | 3 | 5 Response time | 2 | 2 | 3 | 5 Number of variants | 5 | 4 | 5 | 2 Digital overview | 1 | 1 | 1 | 5 Showroom | 4 | 3 | 3 | 1
Score 1-5. The column “us after” is your new curve — it should look distinctly different.
Common Mistakes
- Only “raise” and “create” are filled in, so costs increase without anything being removed.
- The value curve is built on management assumptions rather than on conversations with customers and non-customers.
- The new offering is launched to the entire market at once without a pilot and without KPIs.
- The price is lowered at the same time as value is raised — thus the margin disappears.
- Salespeople receive the new offering without new arguments and revert to hourly rates.
- No one decides what the company should no longer sell. So it still does.
Frequently asked questions
What is Blue Ocean Strategy?
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Blue Ocean Strategy is a method for creating new market space where competition is irrelevant, by simultaneously increasing value for the customer and lowering costs. The opposite is the red ocean, where companies compete on price in a known market.
What does ERRS stand for?
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Eliminate, Reduce, Raise, and Create. The four actions are applied to the industry's competitive factors to change both the value proposition and cost structure at the same time.
What is a value curve?
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A value curve shows how you and your competitors score on the industry's competitive factors. If the curves look similar, you are effectively only competing on price. A blue ocean curve looks distinctly different.
Can a small business use Blue Ocean Strategy?
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Yes. For an SME, the goal is rarely a new industry, but to move out of direct price comparison — e.g., from project sales to service agreements or from hours to a guaranteed result.
What is the difference between Blue Ocean and Porter's Five Forces?
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Five Forces analyzes how attractive an existing industry is and how to position oneself within it. Blue Ocean is about changing the rules of the game itself, so the forces of industry analysis become less significant.
Related guides
These guides are closely connected to blue ocean and are natural next steps in your strategy work.
- Porter's Five Forces explainedThe five forces that determine profitability in your industry.
- Value Proposition CanvasMatch customer pains and gains with what you actually offer.
- Business Model Canvas explainedThe nine building blocks of your business model, written for SMEs.
- Growth strategy for SMEsFour growth paths, risk, growth engine and KPIs for tracking growth.
More strategy guides
Analysis and environment
Goals, KPIs and performance
Strategy process and planning
Make the new offering a strategic goal
Create a free account and track pilot, hit rate, and coverage ratio of the new value proposition quarter by quarter.