The relationship between Blue Ocean Strategy and fintech offerings

By Ebenezer YALLEY

Blue Ocean Strategy is defined as the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand.

It is about creating and capturing uncontested market space, thereby making the competition irrelevant.

It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players.

Red Oceans on the other hand are all the industries in existence today – the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.

Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, profits and growth are reduced. Products become commodities, leading to cut-throat or ‘bloody’ competition.

The characteristics of red ocean strategy are as below:

• Compete in existing market space
• Beat the competition
• Exploit existing demand
• Make the value-cost trade-off
• Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Swinging back to the conversation on Blue Oceans, it denotes all the industries not in existence today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid.

In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth.

The major characteristics of blue ocean strategy are as below:

• Create uncontested market space
• Make the competition irrelevant
• Create and capture new demand
• Break the value-cost trade-off
• Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Blue ocean strategy is based on a decade-long study of more than 150 strategic moves spanning more than 30 industries over 100 years. From assessing the current state of play in an industry, to exploring the six paths to new market space, to understanding how to convert non-customers into customers, blue ocean strategy and shift provides a systematic process to create a blue ocean.

Blue ocean strategy is based on the simultaneous pursuit of differentiation and low cost. It is an ‘and-and’ not an ‘either-or’ strategy. As an integrated approach, blue ocean strategy shows how to align the three strategy propositions – value, profit, and people – to create a win-win outcome. Blue ocean shift builds humanness into the process to build people’s confidence to own and drive the process.

A key set of businesses that has been formed out of the utilization of blue ocean strategy is linked to Fintech companies that rely primarily on technology to conduct fundamental functions provided by financial services, affecting how users store, save, borrow, invest, move, pay, and protect money.

In the last couple of years, Fintechs have emerged as a hotbed for innovative financial solutions as some of these companies have grown into unicorns in Africa. By 2025, the value of revenue of Africa’s Fintech industry could reach around US$12billion.

Based on the growth potential of the industry, the likes of Visa and Mastercard have invested heavily in the Fintech industry due to the potential of the industry for growth. It is reported that Visa has directly invested in more than five African Fintech startups, including three of the largest players in Nigeria and one company each in Sudan and South Africa.

Mastercard has directly invested in Africa’s biggest e-commerce player, Jumia, besides backing more companies through the Mastercard Foundation. As can be seen in today’s digital financial services landscape, Fintechs continue to act as a bridge and enabler for financial inclusion while aggregating offerings across the vertical.

Clearly, the potential and viability of Fintechs hinges on utilizing the blue ocean strategy, which as aforementioned, aims to create new offerings outside the bloody red ocean of digital financial offerings. By utilizing established blue ocean tactics, Fintechs offer products through raising their features above traditional offerings while conservative features are eliminated outside known industry standards.

The creation of digital wallets and accounts present a perfect example of the use of Blue Ocean strategy, as the relatively low KYC feature associated with the offering clearly depicts that, stringent KYC requirements are eliminated for easy customer on-boarding while manual features are reduced, scaled and recreated through automation. Through the birth of digital wallets and accounts, a new electronic money market was introduced through the adoption of a low cost and a differentiation approach.

Another example that comes to mind on the utilization of Blue Ocean strategy by Fintechs is on the offer of micro-lending products. Just as with digital wallets, manual processes for customer verification and credit scoring are completely automated giving rise to a completely new digital offering. This has created a new lendtech market and disrupted traditional micro-lending services.

Aside digital wallets and lendtech offerings, many other examples abound of the symbiotic relationship that exists between Fintechs and the application of blue ocean strategy in creating new markets and customer demands. It is therefore safe to conclude that the Fintech industry will continue to depend on the employment of Blue ocean strategy for new offerings into the future.

>>>The writer has over 10 years hands-on experience in sales, marketing and operational management of digital financial products and services, with strength in developing strategies and coordinating complex projects within the digital banking, financial inclusion and Fintech ecosystem. He is the Founder of Financial Inclusion Forum Ghana and can be reached via [email protected]

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