by W. Chan Kim and Renée Mauborgne
Problem
Businesses often find themselves stuck in fierce competition, struggling for growth and profitability in overcrowded industries, or what the authors term “red oceans.”
Promise
“Blue Ocean Strategy” presents a strategic framework for companies to break out of competition, create uncontested market space, and capture new demand.
Perspective
“By applying the Blue Ocean Strategy, I can unlock new growth opportunities and create innovative solutions that bring unique value to the market.”
Précis
“Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne offers a groundbreaking approach to strategic business development. The authors argue that companies tend to engage in a head-to-head competition, fighting for a share in existing markets. These markets, referred to as “red oceans,” represent the known market space where industry boundaries are defined and accepted, and the competitive rules are known.
The central premise of the book is that sustainable success comes not from battling competitors, but from creating “blue oceans”—new, untapped market spaces ripe for growth. These blue oceans are created by expanding industry boundaries or by launching entirely new industries.
One of the key concepts in the book is the “value innovation.” Instead of focusing on beating the competition, the authors argue, companies should focus on making the competition irrelevant by creating a leap in value for buyers and the company itself. This involves the simultaneous pursuit of differentiation and low cost, creating a new value curve.
The book introduces a set of analytical tools and frameworks, like the Strategy Canvas, the Four Actions Framework, and the Eliminate-Reduce-Raise-Create Grid, which are designed to help managers and entrepreneurs break from the competition, create blue oceans, and sustain such strategic moves.
The final part of the book deals with the organizational hurdles to blue ocean strategy and principles to overcome them. The authors provide practical guidance on how to build an organization’s execution into strategy making, overcome key organizational hurdles, and build execution into strategy.
Playbook
- Construct a Strategy Canvas: Plot the current state of play in the known market space to understand where the competition is currently investing. For example, a retail business might consider factors such as price, product variety, and customer service.
- Apply the Four Actions Framework: To break the value-cost trade-off, consider what you can eliminate, reduce, raise, or create in your industry. For example, an airline might eliminate reserved seating, reduce onboard services, raise the speed of service, and create a friendly, relaxing environment.
- Employ the Eliminate-Reduce-Raise-Create Grid: This tool pushes companies to act on all four to create a new value curve. For instance, a coffee shop might eliminate expensive store furnishings, reduce the variety of its menu, raise the quality of its coffee beans, and create a unique store ambiance.
- Overcome Key Organizational Hurdles: To execute the blue ocean strategy, you need to overcome cognitive, resource, motivational, and political hurdles within your organization.
- Build Execution into Strategy: From the start, you should consider how you will execute your new strategy. This includes aligning your team’s goals and incentives with the new strategy.
Prompt
Reflect on a business or industry you are familiar with. What would a “Blue Ocean Strategy” look like in this context? What factors could you eliminate, reduce, raise, or create to deliver unique value and open up new market space?