Blue Ocean Strategy

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



  

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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 -

 

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Recent User Comments
 - USA Blue Ocean Strategy for Office Equipment (Xerox) "I decided to look at Xerox and the office equipment industry and see if I could get Xerox headed toward a blue ocean. Here is my 6 paths strategy for conceiving new market space:
Path 1: analyze alternative industries. There are many reasons why consumers choose another solution for their office equipment needs. They may go to an off-site printer instead of an in-house one. I would set up a consulting group that could help new printing businesses from start to finish
Path 2: look across strategic groups. Xerox needs to re-assess the strategic groups it competes with, and figure out where its technology and services can be applied where they are not currently.
Path 3: look across the chain of buyers. This is a challenge. Xerox is known as the Cadillac of office equipment, right along with the Cadillac price! They are also known for quality, however.
Path 4: look across complimentary product or service offerings. Holds lots of promise for xerox. The idea of a total office equipment solution from one provider holds lots of appeal. Xerox does this now, but I would simply expand it, and consultants able to provide this service.
Path 5: look across functional or emotional appeal to buyers. Xerox already follows this oath. They have a well recognized brand. Anyone who hears that name will know what they do. The need to market a little better to show the overall competitive cost of the life of their equipment.
Path 6: look across time. Xerox is strong along path six as well. They have a research division second to none in the industry. They should be able to leverage this to further differentiate themselves from their competition.
My work is cut out for me with Xerox. Thanks in advance for any comments."		    0
 - USA BOS for Garmin (A Focus on 6 Paths) "6 paths strategy for conceiving new market space:
Path 1: analyze alternative industries - Garmin should look at designing a watch that is uncomplicated to use, has a minimal complement of buttons, and give it a sleeker look.
Path 2: look across strategic groups. Developing a watch that is customizable for different groups of common users including only the functionality customers typically want.
Path 3: look across the chain of buyers. I don’t see how this path would be beneficial to garmin. Any suggestions?
Path 4: look across complimentary product or service offerings. Does anyone have any ideas?
Path 5: look across functional or emotional appeal to buyers. To add emotional appeal, garmin could produce a fitness watch focused on fashion so customers can wear them to workout as well as to work.
Path 6: look across time. Garmin will definitely need to pace their actions with the latest developments in technology, like solar/kinetic power, to incorporate more value into their watches."		    0
 - Pakistan BOS in Existing Businesses? "How can one utilize BOS in an existing business like freight forwarding, where thousand of companies have been working; what possibly can be the competitive advantage?"    0
 - Nigeria BOS in Power Industry "What are the differences between red and blue ocean strategy, especially as it will be applied to power industry?""    -2
 - Malawi BOS in Africa: Statutory Corporations "Can we say that statutory corporations mainly in Africa are operating in a blue ocean strategy since they operate in uncontested market and most of them like national water boards have natural barriers which will require huge investments if another company has to venture into this and also they are mostly protected by laws on their countries which makes competition irrelevant?"    0
Best User Comments
Sharad Donga - Netherlands Visionary Leadership and Blue Ocean Strategy "I think it merely depends on the leadership of the leaders, how visionary a leader is and how far business is seen. The process of achieving vision will generate and execute blue ocean strategy involuntary. I think it is all about being visionary and setting the vision changing the world."    32
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."    24
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 ?"    19
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."    14
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."    10
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."    9
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."    6
 - USA BOS on Disney "For school, I have to devise a blue ocean strategy for a specific business and industry (and post it in a user group such as this one_- I also need your responses to work with, lol:)
I chose to use the amusement park industry, focusing on Disney. My strategy involves finding the commonalities of my non customers (the three tiers spoke of in the book). I am going to focus on those who may choose camping as an alternative activity-but have, on occasion, visited the park; those who may have considered Disney but opted not to come because they hate long lines, crowds, etc.; and those who don't even consider Disney because they don't think Disney has what they want (such as a camper--who thinks of going camping at Disney?).
I have to map out the stages of buyer experience and the utility levers at each stage, trying to find an area that needs improvement-because that is where one should find blue ocean. Any comments?"		    3
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."    3
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"    2
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
Steve - UK Blue Ocean Strategy Valid? "My issue with BOS is that there are very few good examples of the principle being applied from the outset.
The book certainly suggests how the principles are applied to real world examples, but they are all applied to companies which had already created the "Blue Ocean" for themselves.
There are very few examples of organisations using BOS from the outset to develop a market and exploit it... Hindsight is a wonderful thing!!"		    1
 - USA Blue Ocean Strategy for AT&T "For a class paper, I have to develop a blue ocean strategy for an industry. The industry I chose was home telephone companies such as AT&T and Verizon. For many years they operated under a red ocean strategy; however, in the past few years, they have lost a substantial amount of home telephone customers to cable companies. I have to identify the three tiers of noncustomers as well as map out the stages of a buyer utility. If anyone has any input that would be beneficial, I would appreciate it."    0
 - Malaysia Blue Ocean Strategy Research "I am a Phd Student and would like to do a research in Blue Ocean Strategy. Any research model can you suggest."    0
Daniel - Malaysia Blue always becomes Red "Well.. It is definitely good to be a market leader in a new blue ocean.. But as time passes by.. It will become another red ocean again.. And as time passes by.. Somehow.. It will end up like a saturated red ocean..."    -1
 - Germany Examples of Blue Ocean Strategy Cases "Does anyone know of companies that have announced they would use the Blue Ocean Strategy AFTER the book appeared in 2005? Which companies? How successful were they?"    -2
Justin - Singapore SunZi "Sunzi advocated a similar strategy when he said that "one must defend the undefended." Walmart used a similar strategy when they built stores at the edge of growing towns. Once the town inevitably grew, the stores became within the town. SMH did the same thing with SWATCH. They created a new market ..."    -2
Harsh - INDIA Blue ocean strategy-marketing "There exists infinity of possibilites so BLUE OCEAN STRATEGY is one of them, yet change is required. Nothing is forever keep changing strategy in positive attitude."    -3
Olaf de Hemmer - France From Blue Ocean to Value Products and Operations ? "Thanks to Kim & Mauborgne, the 'Value' approach enters the close circles of strategy with a lot of legitimacy ! Remember that for 50+ years now, the ‘Value / system’ approach has been used to optimize product design on the same ground ! For the last 20 years, numerous applications have shown it can also be used to significantly upgrade industrial processes, but also services, organizations, information systems, projects, investments, buildings, etc. in all company functions, in all sectors of industry, services, administrations, not-for-profits … These experiences may probably be used to strengthen the Value innovation tools. Maybe we'll see the good news of executives using the same approach to design strategy and optimize operations ? I'll be happy to participate !"    -3
Cameron - UK Extra Blue and Red Oceans Factors "I believe the concept is correct, however there need to be some control or hygiene factors wrapped around the concept.
For example barrier to entry: developing a new product or market with high costs but can be copied quickly means your unique value period will be short.
Also make sure your customers are ready for the new market, anyone remember the Digital 64bit CPU, fell into the chasm. Great technology but no s/w and the market wasn't ready."		    -4
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Copyright 2009 12manage - The Executive Fast Track. V10.4 - Last updated: 11/21/2009. All names tm by their owners.



  ●  (Australia) BOS in Large competitive traditional markets "BOS is possible if we look at Yellow Tail in wine or the Jet Blue cases. One has to look at the market at a different perspective then test to see if this has viability. Jet Blue took the airline industry and looked at market from consumer experience, Yellow tail looked at wine from perspective of non-wine drinkers. The innovation in such industries is to discover that perspective that returns value."



  ● Elizabeth (USA-stanford) BOC and leadership "Yes I do agree partly, if leader namely CEO is not able to forsee the business and correctly launch the vision then it automatically discourages the out of box thinking process and so does BOC."
  ● Mark (UK- oxford said) Leadership and BOS "i completely agree since often we experience that in the end only leaders or their voice builds the consensus. And this entire process as well as its outcome normally shapes the organization or business activities. So if the idea or built voice is lousy anyway then forget the BOS. Capable leadership and especially a capable CEO plays a crucial role here."
  ● Annie (UK) ownership "fully agree!!!! ownership is key thing here"
  ● Shanti (nl) blue ocean strategy "it is definitely interesting wht u said here. agree completely!!"

  ● 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."

  ● Sangeet (India) Competitive Advantage "Should be explained with core competence also. How core competence helps build cost leadership or differentiation with real examples."
  ● Harshil (India) BOS Jalpas Reaction "That is something called your "TM". One basically cannot stop people from imatating, but can still work in BOS finding the UNIQUE space and tll some1 do not imatae you, u r the leader. there are some programs with govt that do not allow imatating of some products for so many years. i think that is much possible with all R&D Products"

  ● 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"

  ● 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"
  ● Sharad /Nimbas (Netherlands) Blue Ocean Strategy and Porter "The whole discussion of BOS is situated around Porter's generic strategy model. Application of that in the pursuit of BHAGs eventually results in to Blue Ocean, isn't it?"
  ● Randy A (USA) Blue Ocean good reminder "The ideas are not new. Baking your own pie instead of worrying about attaining more of the same pie with your competitiors has many examples of success. Think of the Mac from Apple. Invented their own market called graphics!
That being said, at least it is a good reminder to allow management to put themselves in a position to be able to think differently about their business and how to innovate with products, services or business design."
  ● Roel (Philippines) Re-hash of Porter's work "I didn't buy this book since i think this is just a rehash of Porter's work. The canvass is very similar to strategic maps. Putting the curves just complicates the case. Stop the hype please."
  ● Francisco (UK / Brazil) About new and old "I don`t think the book is a revolution or anything. But I think there isn't any problem of building and connecting from other ideas because that has been done for as long as science exists. Sometimes with fanatic results such as the airplane, the steam engine, the relativity theory, etc. Sometimes with good useful results such as 6 Sigma, Blue Ocean, etc etc and sometimes with useless results (that usually, for obvious reasons, do not become famous)."

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

  ● 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"
  ●  (USA) Blue Ocean Success by Identifying Customer Goals Early "Certainly the Four Actions Framework is compelling - it's a simple way of getting organizations to re think their offering with structure. I've used it, and it's worked well, and in a brainstorming environment. We tested our outcomes with customers. The strategy canvas is simple, and therefore works! I take more from the market research techniques described. Don't ask your customers frustrations at the point they use your product. Ask you customer goals, at the point they make the decision to enter in your market space. I forget the name, but there was a really strong example of a cinema who learnt that more parents would come out to the cinema, but they can't afford a baby sitter. What made the management and market research firm ask the customer at this point in the decision making? Brilliant vision from that company. Understand your core customer goal, and everyone will achieve a blue ocean eventually. Times are changing. Now is the time to ask."

  ●  (Portugal) Thank You "I'm doing a MBA and this is very helpful, for a paper that I doing in Strategic Analysis. Every piece of information on this subject is important for me... Thank you"
  ●  (Phlippines) Blue Ocean "It's not only creating demand and new opportunities and somehow cushioning the effects of head on competition. It's all about asymmetry - where creating unexpected turns and orientation against your rival. We shape and create opportunities to employ our strength by creating the condition for decisive maneuver. It's fighting smart where you are sure to use your strength by creating that condition for success."
  ●  (New Zealand) BOS on Disney "With a Blue Ocean strategy you may find that disney has only cast their net in shallow water. As a destination for overseas travellors coming into the USA Disney has become less of an attraction and has not had the market focus of other destinations within the USA."
  ●  (UK) BOS "I believe to create a Blue Ocean Strategy is the way to be ahead of the game. I'm currently trying to introduce Lean Software Outsourcing in my company (suaju.com) therefore making the use of Outsourcing and Lean Principles and Software in one. "
  ●  (Jordan) Strategy of Successive Blue and Red Waves "We may imagine overall strategy as a movement of successive blue and red waves. The entrepreneur will face competition later or sooner. He/she should strive to defend his/her leadership position and BOS. An alternative ROS could be adopted when another competitor defeats him/her. Competitors watch eachother closely. Interior BOS outcomes will be launched and disclosed. These matters are governed by environmental factors."


  ● 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."

  ● Richerd (UK) Blue ocean "Strategically very good elaboration of concept. I do agree with you"

  ● Vega (Germany) Examples "Hi Steve, which are the very few good examples where BOS was applied from the outset? Can you name me the companies (and sources where you read it)? Thx!"


  ● Mark (RO) Research "do research.............."

  ●  (France) Blues always becomes Red "This is what business interresting"
  ● James (Australia) Blue always becomes Red "This is a well known fact in economics.... the point is that your organization can capitalize upon the blue ocean... while continuing to innovate and stay ahead."





  ●  (Taiwan) Technology push vs market pull "1. I think a "Barrier to entry" is only a temporary limitation. Because the larger competitiors can allocate much more resources to make the blue ocean into a red ocean.
2. We might consider two major forces - market pull and technology push. Sometimes, enterprises focus on what they are interested in too much and do not consider what customers want. It can lead to business failure. For instance, "Windows Vista", the O.S. provided by Microsoft is not very popular by the users though microsoft said that it's a better product than Windows XP. They neglected customers' feeling and only focus on the technology capability they have. The new system might be fantastic and could attract some technology fans; however the transition cost of most customers is too high. I guess this is the major reason why the sales of Vista has not been very good.
3. No Blue Ocean lasts forever, only innovation may sustain it."