Blue Ocean Strategy

The dust jacket says over 3.5 million copies of the book have been sold. That alone makes this a bestseller in anyone’s book. The concept is an intriguing one and is outlined by looking at the experience of companies in areas as diverse as watches, wine, cement, computers, automobiles, textiles, coffee makers, airlines, retailers, and even the circus.

In Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne argue that tomorrow’s leading companies will succeed not by battling competitors, but by creating “blue oceans” of uncontested market space ripe for growth as opposed to competing in red oceans, where the old strategy is increasingly unlikely to create profitable growth in the future.

The fundamental defining process, which is based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, in this new sea of success is “value innovation”. Being the cornerstone of a blue ocean strategy, “value innovation”, the authors say, is the alignment of innovation with utility, price and cost positions.

Putting aside the old approach of competing in existing market spaces for scraps of profit, the theory creates an uncontested market space and makes competition irrelevant. The market that does not yet exist. This market is untainted by competition. In blue oceans the demand is created so there is no need to fight over space. There is 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. Such strategic moves, or “value innovation”, create powerful leaps in value for both the firm and its buyers, rendering rivals obsolete and unleashing new demand.

Key Insights

1. Don’t try to outperform competitors.
2. Create a new market space to make competitors irrelevant.
3. Value innovation is the key to creating a blue ocean strategy.
4. Value innovation simultaneously pursues low cost, and differentiation.

Practical Application

1. What factors of your industry are taken for granted, and can be eliminated?
2. Which factors of your industry can be reduced below industry standards?
3. Which factors should be raised above industry standards?
4. What new factors that have never been offered can be created?

Some Quotes from the Book

• The only way to beat the competition is to stop trying to beat the competition.
• To focus on the red ocean is therefore to accept the key constraining factors of war—limited terrain and the need to beat an enemy to succeed—and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.
• To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry.
• Good decision making is contingent on a basic ability to envision what happens next.
• Making good choices relies on forecasting the future. Accurate forecasting requires exposing ourselves to as many successes and disappointments as possible.