Blue Ocean Strategy
How to Create Uncontested Market Space and Make the Competition Irrelevant
by W. Chan Kim and Renee Mauborgne
“Blue Ocean Strategy is a must-read for any CEO who wants to transform their organization to seize new growth.”
“Blue Ocean Strategy is the most successful book on business master-planning in recent years.”
Blue Ocean Strategy is a book written by W. Chan Kim and Renée Mauborgne, which outlines a business strategy that focuses on creating uncontested market space, or a "blue ocean," rather than competing in overcrowded and highly competitive marketplaces. The authors argue that companies that create blue oceans have the opportunity to achieve high growth rates and profits while avoiding the intense competition that characterizes red ocean markets. This summary will provide an overview of the key concepts and strategies presented in Blue Ocean Strategy.
Red Ocean vs. Blue Ocean
The authors argue that traditional business strategy is focused on competing in red oceans, or markets where there is fierce competition among companies. In these markets, companies compete on price, quality, and features, and often resort to cost-cutting measures to gain a competitive edge. This competition leads to shrinking profit margins and can ultimately result in a "race to the bottom" where companies are forced to lower prices and sacrifice quality to remain competitive.
In contrast, blue ocean markets are characterized by a lack of competition and the creation of new demand. Companies that create blue oceans are able to create new markets and attract new customers by offering a unique value proposition that differentiates them from their competitors. Blue ocean companies are often able to charge higher prices and achieve higher profit margins, as they are not subject to the same pricing pressures as companies in red oceans.
The Four Actions Framework
To create a blue ocean, the authors propose the Four Actions Framework, which involves identifying and eliminating factors that are taken for granted in the industry (reducing), increasing factors that the industry has neglected (raising), creating factors that the industry has never offered (creating), and reducing factors that the industry has overemphasized (eliminating).
By applying the Four Actions Framework, companies can create a new value curve that sets them apart from their competitors and creates a blue ocean. The authors provide several examples of companies that have successfully used the Four Actions Framework to create blue oceans, including Cirque du Soleil, which redefined the circus industry by eliminating animal acts and adding artistic elements to create a new form of entertainment, and Southwest Airlines, which reduced costs by eliminating in-flight meals and assigned seating while raising the level of customer service.
The Six Principles of Blue Ocean Strategy
The authors also outline six principles that are essential to creating a successful blue ocean strategy:
Reconstruct market boundaries: Companies must look beyond the boundaries of their industry to identify new opportunities and create new demand. This involves identifying potential substitutes and complementary products and services that can be incorporated into the new value curve.
Focus on the big picture, not the numbers: Rather than focusing on short-term financial goals, companies should focus on creating a compelling value proposition that will attract new customers and generate long-term growth.
Reach beyond existing demand: Companies should focus on creating new demand rather than competing for existing demand. This involves targeting non-customers and creating a value proposition that meets their needs and preferences.
Get the strategic sequence right: Companies must sequence their strategic moves in the right order to create a successful blue ocean strategy. This involves first creating a new value curve and then aligning the organization's resources and processes to support the new strategy.
Overcome organizational hurdles: Companies must overcome internal resistance and barriers to change to successfully implement a blue ocean strategy. This involves building a team of committed and capable employees and creating a culture that supports innovation and experimentation.
Build execution into strategy: Companies must build execution into their strategy to ensure that they are able to successfully implement their blue ocean strategy. This involves developing metrics to track progress, creating a system for continuous improvement, and providing the necessary resources and support to ensure that the strategy is executed effectively.
Blue Ocean Strategy provides a valuable framework and set of principles for companies looking to differentiate themselves and create new market opportunities. By focusing on creating a blue ocean rather than competing in a crowded and highly competitive red ocean, companies can achieve higher growth rates and profits while avoiding the downward pricing pressures that can characterize red ocean markets.
Through the Four Actions Framework and the six principles of blue ocean strategy, companies can identify new opportunities, create a compelling value proposition, and execute their strategy effectively. Blue Ocean Strategy is a valuable resource for businesses seeking to create a new market space and differentiate themselves from their competitors in today's highly competitive global economy.
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