Blue Ocean Strategy
for Computer programming activities (ISIC 6201)
The computer programming industry is characterized by rapid technological change, intense competition, and increasing commoditization of basic services. This creates a strong imperative for firms to differentiate beyond price. Blue Ocean Strategy offers a potent framework to achieve this by moving...
Strategic Overview
In the highly competitive landscape of computer programming activities, many firms operate in 'red oceans' – market spaces where competition is fierce, leading to price erosion (MD03) and difficulty in differentiation (MD07). Blue Ocean Strategy (BOS) provides a framework for escaping these bloody waters by creating new, uncontested market spaces, rendering competition irrelevant. Instead of competing on existing demand, BOS focuses on creating new demand by offering a leap in value for buyers, simultaneously pursuing differentiation and low cost, thereby redefining market boundaries.
For computer programming, BOS means moving beyond standard web development, mobile app creation, or enterprise software customization, which are often commoditized. It encourages firms to identify and unlock entirely new market opportunities by focusing on non-customers and eliminating or reducing factors that the industry takes for granted, while raising and creating elements that offer unprecedented value. This strategy is critical for firms looking to overcome 'Market Obsolescence & Substitution Risk' (MD01) and 'Pressure on Pricing and Margins' (MD01, MD03) by innovating their value proposition.
Applying BOS can lead to breakthroughs in how programming services are delivered, packaged, or even what problems they solve. It addresses 'Difficulty in Value Capture for Innovation' (MD03) by ensuring that innovation directly leads to new market creation and premium pricing. Furthermore, it helps companies navigate 'Structural Market Saturation' (MD08) and 'Talent Acquisition & Retention' (MD08) by creating exciting, unique projects that attract and retain top programming talent, allowing them to escape the race to the bottom.
4 strategic insights for this industry
Escaping the Red Ocean of Commodity Coding
Much of traditional computer programming has become a 'red ocean' where firms compete on price and features for a diminishing pool of customers, leading to 'Price Erosion & Margin Compression' (MD07) and 'Decreased Demand for Commodity Coding' (MD01). BOS provides a methodology to break free by identifying untapped market potential and creating differentiated value propositions.
Unlocking New Demand Through Non-Customer Focus
Instead of focusing on existing clients, BOS encourages programming firms to analyze 'non-customers' – those who are either excluded from the market, or reluctantly use existing solutions. Understanding why these groups don't use current programming services can reveal opportunities to create entirely new services or software products that address their unmet needs, expanding the total market.
Value Innovation in Service Delivery Models
BOS is not just about new software products but also about innovating service delivery. For example, a programming firm could create a 'productized service' that offers a novel combination of automation, rapid deployment, and specialized consulting at an attractive price point, thus creating a new market category for complex problem-solving (MD03: Difficulty in Value Capture for Innovation).
Leveraging Emerging Technologies for Market Creation
Emerging technologies like AI, blockchain, quantum computing, or advanced IoT present fertile ground for Blue Ocean creation. Programming firms can develop unique applications or platforms based on these technologies that solve previously unsolvable problems or create entirely new capabilities for businesses, thus establishing uncontested market space (IN03: Innovation Option Value, IN02: Accelerated Skill Obsolescence).
Prioritized actions for this industry
Conduct an ERA (Eliminate-Reduce-Raise-Create) Grid Analysis
Apply the ERA grid to current programming service offerings. Identify factors to Eliminate (e.g., unnecessary features, complex processes), Reduce (e.g., consultation time for simple tasks), Raise (e.g., data security, speed of deployment), and Create (e.g., integrated AI-driven insights, proactive maintenance models) to develop a new value curve and differentiate from competitors.
Map the Six Paths to Value Innovation
Systematically explore the six paths of Blue Ocean Strategy (e.g., looking across alternative industries, strategic groups, buyer chains, complementary offerings, functional/emotional appeal, time) to discover new market spaces or re-segment existing ones for programming services. This structured approach helps uncover opportunities that are not immediately obvious.
Form Cross-Functional 'Blue Ocean' Innovation Teams
Assemble dedicated teams comprising developers, strategists, designers, and market researchers to identify, conceptualize, and pilot new software solutions or service models based on BOS principles. This fosters interdisciplinary collaboration crucial for breaking traditional industry boundaries and attracting diverse talent.
Invest in 'Pioneer Projects' for Uncontested Markets
Allocate dedicated R&D budget and resources to speculative projects aimed at creating entirely new market demand, rather than incrementally improving existing services. These 'pioneer projects' should leverage cutting-edge technologies to solve problems for non-customers or redefine value in novel ways, accepting higher initial risk for potentially exponential long-term gains.
From quick wins to long-term transformation
- Conduct internal workshops to introduce BOS concepts and brainstorm 'red ocean' aspects of current services.
- Identify and analyze a specific non-customer group that the firm currently ignores, using publicly available data.
- Perform a preliminary ERA grid analysis for one key existing service offering.
- Launch a pilot 'Blue Ocean' project with a small, dedicated team focused on a specific identified new market space.
- Develop a visual 'strategy canvas' for existing offerings and potential new blue ocean ideas, comparing value curves.
- Integrate BOS principles into the annual strategic planning and budget allocation process for R&D.
- Establish a dedicated 'Innovation Lab' or unit focused solely on exploring and developing Blue Ocean opportunities.
- Foster a company culture that rewards experimentation, learning from failure, and challenging industry conventions.
- Seek strategic partnerships or alliances with companies in adjacent industries to co-create new market spaces.
- Reverting to competitive benchmarking: Continuously looking at competitors instead of focusing on non-customers and value innovation.
- Lack of courage to abandon 'red ocean' products: Hesitation to divest from old, highly competitive services even when new opportunities arise.
- Insufficient market research on non-customers: Not deeply understanding the pains and gains of those outside the current market.
- Fear of failure: Blue Ocean strategies often involve higher initial risk and require a tolerance for experimentation and potential setbacks.
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| Revenue from New Market Offerings | Percentage of total revenue derived from services or products created through Blue Ocean initiatives. | 20% within 3 years |
| Gross Profit Margin on Blue Ocean Offerings | Measures the profitability of new market creations, which should ideally be higher due to reduced competition. | 10-15% higher than average current offerings |
| Market Share in New Segments | Percentage of market share captured in newly created or redefined market spaces. | Lead position in new segments |
| Customer Acquisition Cost (CAC) for New Markets | Cost to acquire a customer for Blue Ocean offerings, which may be lower due to unique value propositions. | 20% lower than red ocean CAC |
| Innovation Pipeline Value | A quantitative assessment of the potential value (revenue, profit) of ongoing Blue Ocean projects in the development pipeline. | Growing pipeline value YoY |
Other strategy analyses for Computer programming activities
Also see: Blue Ocean Strategy Framework