Blue Ocean Strategy Overview

Why you should read Blue Ocean Strategy

This breakthrough book provides an organized framework for identifying and implementing out-of-the-box "blue ocean strategies" in all industries. The blue ocean strategy explains how to sail your business into new markets with less competition and greater profitability. Disarmingly written by W. Chan Kim and Renée Mauborgne, the book is energized with fresh research about the impact of innovative ideas on old industries. The compelling business examples alone are worth taking this cruise. Even the appendices make interesting reading and contain more detailed examples about products ranging from the Model T to movie theaters (the authors explain how innovators reinvented theaters and created their own blue ocean phenomena). While the book provides its share of rules and principles for intrepid strategists to follow, complete with its own jargon, managers easily can navigate right to the authors' key strategic advice. getAbstract.com considers this book essential for any strategist or entrepreneur who wants to move out of intensively competitive shark-infested waters and into the relative tranquility of the open blue ocean. Getting there isn't risk-free, but great adventure awaits the intrepid executive who makes the voyage.

In Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, authors Renee Mauborgne and W. Chan Kim assert that the innovations which enabled several successful companies which have dominated their competition by entering previously neglected market space did NOT depend upon a new technology, but on their strategy to be free from industry boundaries.

The “ocean” refers to the market or industry. "Blue Ocean” is a market space that is created by identifying an un-served set of customers and delivering to them a compelling new value proposition. This is done by determining what offer will better balance the customer's needs with the economic costs of doing so. A "red ocean", on the contrary, refers to a saturated market where there is fierce competition. It is already crowded with companies providing the same type of services or producing the same type of goods. Goods turn into supplies, and increasing competition turns the water bloody.

There are two ways to create blue oceans. One is to launch a completely new industry, as eBay did with online auctions. It is more common, however, to create a blue ocean from within a red ocean by expanding the boundaries of an existing industry. The authors use such examples as Southwest Airlines, who did not go head to head with the competition with better meals or incentives, but captured a customer base of 'car drivers' by providing minimal amenities but convenient, low cost, short flights. On the other end of the scale, they put forth Virgin Atlantic Airways which upgraded its amenities to capture high-end business and luxury travelers. Both companies moved out of the red ocean of competition by succoring specific and uncontested customer bases by providing for their specific needs.

Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim and 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. Such strategic moves are termed “value innovation”.

According to Kim and Mauborgne “Value without innovation tends to focus on value creation on an incremental scale” and, “Innovation without value tends to be technology driven, market pioneering, or futuristic, often overshooting what buyers are ready to accept and pay for."

They assert that “Value innovation occurs only when companies align innovation with utility, price, and cost positions” and, “value innovation defies one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off.”

Value innovation is focused on customers, but not completely so. It balances the costs of delivering the value proposal with what the buyer values, and then resolves the barter dilemma. Instead of compromising the value desired by the customer because of the high costs associated with delivering it, a Blue Ocean company simultaneously uses the the strategies of low cost and differentation. The combination of these two is the catalyst of Blue Ocean market creation.

The Blue Ocean strategy is all about avoiding head-to-head competition. Because established markets in the developed world are saturated, head-to-head competition cannot bring attractive returns.

Kim and Mauborgne break the Blue Ocean strategy into three major points:

• Stop benchmarking the competition. Focusing on your competition stifles your innovation potential. You become just one of the crowd.

• Stop being content to swim in the red ocean. If you are caught up in the competition, you cannot see the horizon of possibility.

• Don’t count on your customers for growth. Look to non-customers; they provide the most insights into how you can create new, uncontested opportunities—new demand for your products or services.