Entrepreneurs, as well as established companies, continually look for growth opportunities. One of these opportunities is entering into blue ocean markets with large potential but little competition. But how can blue ocean spaces be identified and targeted before competitors find them? What factors make the emergence of these market spaces more likely? What are the risks associated with entering these markets? After defining a blue ocean market, this article discusses key factors that define potential blue ocean opportunities so they can be captured.
Market Dynamics and Market Spaces
Markets are highly dynamic spaces defined by constantly emerging, shifting, and disappearing levels of supply and demand. These shifts define business opportunities and levels of competition. Two types of market spaces are red oceans and blue oceans.
Two types of market spaces are red and blue oceans.
A red ocean is a market that is at an advanced stage of maturity, has a well-developed market infrastructure, and has multiple competitors. In these markets, gaining a foothold is often challenging, competition is fierce, and margins tend to be thin. In free markets, as a general rule, all markets tend to become red ocean spaces over time.
The opposite of a red ocean is a blue ocean market space. In a blue ocean, the market tends to be undefined; there are few, if any, competitors, there is an opportunity to acquire a large share of the market quickly, and margins tend to be high. Successfully entering blue oceans can very quickly build a firm’s value and position it for other growth outside of the blue ocean space.
Blue Ocean Market Spaces
Blue ocean market spaces have several characteristics.
Lack of a defined market. In a well-developed market, consumers have clear ideas about many products and services, and sellers cater to those ideas. For example, many consumers have a clear idea about what a pizza is and restaurants produce pizzas that are generally very close to those defined consumer preferences.
In a blue ocean market, however, the market is not clearly defined. From the demand side, consumers have a general idea about a demand they have or a problem they would like to solve, but there is not, or they are not aware of, a product or service to meet that demand. From the perspective of a seller, there may be a product, but the seller of that product may not know who the target audience of that product should be.
Two types of blue ocean spaces are demand-driven and product-driven blue ocean opportunities.
These can be defined as two types of blue ocean market spaces:
- Demand-driven blue ocean opportunity. This is a situation where there is a vague demand for something, but the product does not exist, or the consumer is not aware that the product exists.
- Product-driven blue ocean opportunity. This is a situation where the product or service exists, but the seller only has a vague idea about who the consumers for the product might be.
Large potential. A second characteristic of a blue ocean space is that it has a great deal of potential. Even if a consumer would be willing to pay for a certain type of product if it existed, more is needed to be considered a blue ocean space.
Lack of competitors. A third element of a blue ocean space is often a lack of competitors. This is not surprising because product offer typically follows product demand rather than the other way around where the product is created and then demand for that product is manufactured. As no clearly defined demand exists, many competitors do not wish to find or build the market because of the high risk involved and business return uncertainty
Lack of market infrastructure. To gain momentum, markets need infrastructure to match supply with demand. In blue ocean spaces, this structure is often not there. A lack of this infrastructure typically adds costs to purchasers and suppliers of products, which also restrains market growth.
Blue Ocean Identification Challenges
As might be expected given their great business value, blue oceans are not easy to identify.
Market size over-estimation. One of the reasons for this is overestimating demand. One might imagine a type of product or service that can address a need for a large group of people, but the actual demand for that product may be far less than expected.
A second challenge is market entry timing. Even if it is believed that a blue ocean has been identified, there could be significantly more competitors in the market than expected. This often results from mistakenly superimposing the realities of a small market segment onto a more significant market space.
Blue oceans tend to quickly become red oceans.
Market saturation. The third issue regarding blue oceans is that, while there is a large opportunity to gain market space once the market becomes defined and its potential becomes clear, other competitors will immediately try to capture the larger margins in these markets compared with red ocean markets. This means that the window of opportunity to capitalize on a blue ocean market can be relatively short.
Given these challenges, the critical issue to trying to forecast when these blue ocean spaces will come into existence and be prepared for it when the opportunity emerges.
Finding Potential Blue Ocean Market Opportunities
There are a number of potential indicators of emerging blue ocean opportunities
Unmet demand or unresolved pain points. One of the key indicators of a potential blue ocean market is the presence of unmet demand or unresolved pain points. In such situations, there is either no product or service available that adequately addresses the need, or the existing solutions are too expensive relative to the value they provide. These gaps represent significant opportunities for innovation, where new offerings can be created to fulfill the unmet demand at a more accessible price point, or to solve the pain point more effectively.
Potential blue ocean opportunity. One powerful way to address these challenges is by enabling broader participation in the creation of market solutions. Open-source technology is an excellent example of this approach, as it allows large communities to access and contribute to development tools for free. The Godot game engine, for instance, provides users with the ability to create high-quality video games without the need for costly software licenses. This democratization of technology not only solves existing pain points but also fosters innovation by opening up the market to a wider pool of creative talent.
Free open source software is one way to eliminate pricing barriers to blue ocean market spaces.
Market gaps. Blue ocean opportunities also arise from various market gaps, particularly when a product or service exists but remains underutilized because people are unaware of its existence, benefits, or affordability. A prime example is the global spread of sushi. Although sushi had been a well-established product in Japan for centuries, it was relatively unknown outside of Japan until the late 20th century. Once consumers became familiar with its unique taste, quality, and affordability, sushi quickly expanded into a massive global market. Establishing a sushi chain during the early stages of the U.S. sushi boom in the 1990s exemplifies capturing a blue ocean opportunity. A similar case is the worldwide expansion of yoga, which originated in India but gained widespread popularity once its benefits were better understood by global audiences.
Internationalization has historically been a powerful mechanism to capture blue ocean opportunities.
Blue ocean opportunity. There are significant opportunities to introduce culturally specific foods and similar products into larger markets where potential demand far exceeds that of the original market. Traditionally, one of the greatest challenges to these cultural exports has been the high cost of market entry. However, the advent of social media and digital marketing tools has dramatically lowered these barriers, making it easier than ever to enter new markets and reach broader audiences with less capital investment. This opens up numerous blue ocean opportunities for businesses to tap into untapped demand for unique products on a global scale.
Societal and cultural changes. Significant social and cultural shifts also create blue ocean opportunities. One prominent example is the dramatic increase in life expectancy. As people live longer and remain healthier well into old age, there is a growing need to rethink the products and services available to individuals after they retire. This shift demands innovation in areas ranging from healthcare and housing to entertainment, travel, and financial planning, catering to a demographic that is more active and engaged than ever before.
Increasing life spans create large blue ocean spaces because they allow many products and services that were previously targeted at younger people to be marketed to an entire new generation.
Potential blue ocean opportunity. The extended lifespan of elderly individuals opens up vast opportunities to reengage them in meaningful ways within society. With their wealth of life experience and wisdom, seniors can contribute significantly across various sectors, such as business, education, and mentoring. This creates opportunities for new programs, platforms, and services designed to leverage the unique skills of older generations, fostering intergenerational connections and creating societal value. By reimagining the role of elderly people in the workforce and community, businesses can tap into an underutilized yet highly valuable resource.
Technological convergence. Another potential source of blue ocean markets arises from the convergence of multiple technologies, creating new opportunities for innovative products and services. A notable example of this convergence is occurring in the entertainment industry, where game and film engines like Unreal are revolutionizing the filmmaking process. These tools allow creators to produce films in a fraction of the time and cost of traditional methods. By dramatically lowering the barriers to entry, this technological shift is enabling a broader range of cinematic and artistic voices to emerge and reach global audiences more easily.
Technology and technological convergence drive the creation of blue ocean spaces because they can simultaneously lower costs and create new markets.
Potential blue ocean opportunity. The combination of falling barriers to film production, the massive demand for content, the widespread use of smartphones for distribution, and the integration of AI presents a unique blue ocean opportunity. This convergence makes it possible to generate content much faster and tailor it to specific audiences in ways that were previously impossible. Content could evolve dynamically, shifting and expanding across multiple media forms—such as video games, commercials, and other products—blurring the lines between entertainment formats. This could lead to a new era of content creation where media is not static but constantly evolving to engage audiences in real-time and across platforms.
Changing workplace trends. Blue ocean opportunities can also emerge from significant shifts in how, where, and why people work. One of the lasting impacts of COVID-19 and its associated mobility restrictions was the establishment of remote work as a viable, mainstream option. Beyond expanding workplace choices, this shift has major economic implications: it could lower housing costs by enabling people to live in more affordable areas, far from city centers, while also reducing business expenses as companies downsize office spaces or relocate to lower-cost regions. The growing decoupling of business viability from physical location presents numerous opportunities for innovative products and services across industries—from real estate to home office solutions and beyond.
The increasing decoupling of business viability from physical location creates many blue ocean opportunities.
Potential blue ocean opportunity. One potential opportunity lies in repurposing empty malls and commercial spaces, left vacant by the rise of e-commerce, into creative workspaces. These spaces could be designed to be close to residential areas and offer easy access to amenities like gyms, cafés, and other services typically found in malls. This concept could create affordable, convenient satellite workspaces that enhance quality of life by offering a balance between work and lifestyle needs.
Regulatory shifts. Blue ocean opportunities often arise from regulatory changes that impose new requirements on markets or consumers. When regulations mandate that certain activities must be performed or particular standards met, the demand for new products and services emerges to ensure compliance. A clear example is Norway’s decision to ban the sale of new gasoline and diesel-powered cars by 2025, which has created immediate demand for electric vehicles and the necessary infrastructure to support this shift.
Potential blue ocean opportunity. One major area poised to be impacted by regulatory changes is AI. Given AI’s immense power and the potential risks it poses, it is likely to face increasing regulatory scrutiny in the near future. This opens up opportunities to develop AI applications that not only harness the technology’s transformative potential but also incorporate safeguards to prevent misuse. Companies that can create innovative, compliant AI solutions will have a significant advantage as regulations tighten around this evolving field.
Technological obsolescence. Another potential blue ocean space arises from sunset technologies—practices or systems that are declining in functionality and market relevance as they are gradually eclipsed by more advanced alternatives. This shift creates opportunities for innovation, allowing new technologies to step in and offer improved functionality, better integration with other systems, or a more seamless fit with evolving consumer preferences. Companies that recognize and capitalize on these transitions can position themselves to lead the market by providing superior solutions as outdated technologies phase out.
Potential blue ocean opportunity. A major area poised for technological obsolescence is the traditional computer and smartphone keyboard. While keyboards have been a standard input device for decades, they are inherently slow and inefficient compared to emerging technologies.
Key Article Points
- One way for entrepreneurs and companies to build value is by taking advantage of blue ocean spaces.
- As blue ocean spaces can become red ocean spaces very quickly, companies must try to identify and move into these spaces as quickly as possible.
- Some indicators of potential blue ocean spaces are unmet demand, market gaps, regulatory changes and technological obsolescence.
- By successfully moving into blue ocean spaces, companies can create large amounts of value in short periods of time.
The photo for this article was taken by Greg Becker and is available on Unsplash.