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Blue Ocean Strategy

Creating uncontested market space. Explanation of Blue Ocean Strategy of W. Chan Kim and Renée Mauborgne. ('04)

Blue Ocean Strategy Red Ocean

What is Blue Ocean Strategy? Description

Rather than competing within the confines of the existing industry or trying to steal customers from rivals (Bloody or Red Ocean Strategy) W. Chan Kim and Renée Mauborgne are suggesting Blue Ocean Strategy: developing uncontested market space that makes the competition irrelevant.

 

According to Kim and Mauborgne in the HBR of October 2004, competing in overcrowded industries is no way to sustain high performance. The real opportunity is: to create blue oceans of uncontested market space.

 

Competitive Advantage critique

Of course competition is important. But by focusing on competition and competitive advantage, according to Kim and Mauborgne, scholars, companies, and consultants have ignored two very important - and far more lucrative - aspects of strategy:

  • To find and develop blue oceans, and
  • To exploit and protect blue oceans. These challenges are very different from those to which strategists have devoted most of their attention.

In blue oceans demand is created, rather than fought over. There is ample opportunity for growth that is both profitable and rapid.

 

Two ways to create blue oceans

  1. One is to launch completely new industries, as eBay did with online auctions.
  2. It is more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry.

Certainly Kim and Mauborgne deserve credits for having made the point of the over-focus on competitive advantage and also for their beautiful metaphor of the two types of oceans.

 

Book: W. Chan Kim, Renée Mauborgne - Blue Ocean Strategy -

 

Blue Ocean Strategy Forum

Recent User Comments
Bekti Harsono - Indonesia Another use of BOS "Many people think BOS is only applicable for creating new markets, outside a company. Though, the Blue Ocean concept can also be applied while working inside companies. Discovering new/breakthrough in problem solving, effectively get the result will result in better business for the company. Why I say inside a company? Not every single one of us has a business mind / orientation / talent. Most of creative & genius people need someone else to sell & convert their ideas to become money. So, yes, we need to think out of the box, given we have searched in every single corner INSIDE our box."    32
Enrique - Colombia BOS: more of the same "Blue Ocean Strategy is just more of the same old stuff. It takes industry analysis from Porter, differentiation from Trout and the ancient concept of strategy from Sun Tzu. There is not anything new with this theory. It is just a nice catching title, merely good for selling books."    14
Helen - Canada Four Actions Framework "The second tool Kim and Mauborgne are describing is the "Four Actions Framework". This Four Actions Framework can be used to challenge the existing strategic logic and create new value curves by asking 4 questions: 1. Which of the factors that the industry takes for granted should be ELIMINATED? 2. Which factors should be REDUCED well below the industry's standard? 3. Which factors should be RAISED well above the industry's standard? 4. Which factors should be CREATED that the industry has never offered? The answers to these 4 questions can then be listed in a 2x2 matrix the authors call the Eliminate-Reduce-Raise-Create Grid."    10
Helen - Canada Strategy Canvas "Kim and Mauborgne introduce in their book an interesting tool they call "The Strategy Canvas". The Strategy Canvas is both a diagnostic and an action framework for building a Blue Ocean Strategy. In this diagram you plot on the vertical axis the value (low to high) that CUSTOMERS of the product give to it on certain EXISTING factors, which are listed on the horizontal axis. With a line connecting all scores you list each offering. Then you shift the focus to look for ALTERNATIVES for NONCUSTOMERS, introducing new factors for new customers. This can be achieved in 6 ways: by looking across alternative industries, by looking across strategic groups (pursuing a similar strategy), by looking across the chain of buyers, by looking across complementory product and service offerings, by looking across functional or emotional appeal to buyers, and even by looking across time."    5
K. Ravindran - India Blue Ocean within a Red Ocean "You can always find calm water spots (blue ocean) within the choppy water (red ocean). As the water is flowing constantly, so the the business environment too. There exists new market opportunities. Many such opportunities are unfulfilled. Marketers have to take note of this unmet demands by supplying new product solution. This way there is always a blue ocean within the red ocean"    13
Best User Comments
Jalpa - India Blue Ocean Strategy "After creating new market/industry, how competitors can be restricted to imitate the same. Complete overlook of competition is possible ?"    18
Sapto Rahardjo - Indonesia Blue Ocean Strategy "I think the success of blue ocean strategy depends on the person who is in charge as manager or CEO to run this strategy."    11
Jose - India BOS "It is definitely an interesting insight and can prompt us to think out of the box. I am sure often one is too engrossed in red ocean fights and a novel way to explore blue oceans by leveraging ones core competence is a good strategy. An eg. could be the technology products always reinvent new blue oceans. Apple IPOD, Digitial camera, GPS phones are all blue oceans."    11
Kashif Riaz - Pakistan Blue Ocean & Red Ocean "Blue ocean is a segmentation of the market into competitor less markets mostly these markets have better buying power (you can price what ever you want) and can help a startup company up the ladder... Nice Book"    2
Mahendra - india Blue ocean strategy "It should have more detail explanation with examples."    1

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Compare with Blue Ocean Strategy:  Business Process Reengineering  |  Product/Market Grid  |  Core Competence  |  BCG Matrix  |  McKinsey Matrix  |  Resource-Based View  |  Disruptive Innovation  |  Forget Borrow Learn  |  Rule of Three  |  Strategic Types

 

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  § Karuna (India) Blue Ocean strategy "It's all about new ideas, innovation and out of the box thinking. And of course these opportunities can be fetched from the existing market trends. One can only think OOB if one has enough knowledge in his special field and has more and more expectations or we can say not satisfied by red ocean."

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  § GS Raina (India) BOS "Rightly said my Enrique. The concept is not new, it only comes with an attractive title. Additionally this can also be referred as the New Market/ Product Entry which drills down from the Gap Analysis. BOS is a good jargon to use."
  § Juan (Spain) More of the same? "Note that even if one only mixes certain existing components skillfully, this can still present a valuable contribution to management science. Certainly Kim and Mauborgne have gone beyond merely mixing existing knowledge."
  § Zdzislaw (USA) BOS "I am so glad to read responses that recognize that this to be derivative work. It is shamelessly derivative. However, it is obvious that many readers have not neen exposed to the seminal ideas referenced by previous writers so if it helps promote the ideas it serves a useful purpose. It does make a contribution as Juan indicated. My hope is that these types of discussions will motivate people to read the original work by Porter and others."
  § Guillermo (Colombia) BOS "It is necessary to study strategic thinking deeply to be able to understand BOS. I recommend Senge on systems dynamics and Morin on complexity. In this way people might be able to understand how deep and meaningful this new and excellent theory represents for strategic management."
  § Mamun (Bangladesh) BOS "This world likes innovation and people like to get more new things in this changing world. Here BOS understands the customer as they want to get new things also about the company as they are getting more profit in a compititionless market."
  § Dany Sturtewagen (Belgium) BS "There is never anything new in the business world, it all comes down to the fact that we reshuffle the "older" ideas and then, all of the sudden, see the problem and the solution from another perspective. That is what the writers did and therefor deserve credits"

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  § Weston (USA) When is a BOS solid? "Thanks Helen. By using the 4 actions framework, you formulate a BOS that meets the following 3 demands for a Blue Ocean Strategy to be valid or strong: FOCUS - The company does not spread its efforts across too many factors in the Strategy Canvas. DIVERGENCE - The value curve of the company stands apart from its competitors. COMPELLING TAGLINE - A strong, authentic and truthfull slogan, which can be easily communicated to the market."
  § Majd Elias (Syria) Four Actions framework "Dear Helen, I absolutely agree with you, you are seeing issues differently. Thank you"

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  § Jerry (Singapore) Clarification "Hi Helen. I would like to know more about this s-canvas. Is this canvas used to identify, say a particular industries current market competion state? The values on the X-axis is about the values provide by the company to customers? and y-axis is the degree the company invest on it? When I look at the s-canvas of an industry, how i going to interpret it? For example a group of companies in the red oceans etc. I have a lots to clarify with you? We are curently doing a project for the company. But stuck at s-canvas and values. Regards Jerry"

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  § Joanne (Canada) Blue / Red Oceans "Blue ocean strategies are the foundation for innovation in highly commoditizing industries; quantifying the value and mitigating the risk of these blue oceans are not limited to known market segments - they are only limited by the ability of the entity to optimize all of its resources."

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  § Sangeet (India) Competitive Advantage "Should be explained with core competence also. How core competence helps build cost leadership or differentiation with real examples."

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  § james tang (country) blue ocean strategy "absolutely agree"

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  § Dom (France) Blue Ocean Strategy "Take your own organization and try to apply the Strategy Canevas you will have a good example, and play"
  § James (Malaysia) Blue Ocean Concept "An excellent defination. It will be more interesting if more Asian examples are highlighted."

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