SUMMARY OF BLUE OCEAN STRATEGY

INTRODUCTION

“Blue Ocean Strategy” is a groundbreaking business book by W. Chan Kim and Renée Mauborgne, first published in 2005. The book introduces a novel approach to business strategy, focusing on creating new market spaces, or “Blue Oceans,” that are free from competition, rather than competing in existing, crowded markets—known as “Red Oceans.” The fundamental idea of the Blue Ocean Strategy is to break away from traditional competitive thinking and focus on innovation, differentiation, and creating unique value for customers. Here’s a detailed summary of the book and its key concepts:

Key Concepts of Blue Ocean Strategy

1. Red Ocean vs. Blue Ocean The book draws a clear distinction between Red Oceans and Blue Oceans:
   • Red Oceans represent existing markets where companies fiercely compete for limited market share, leading to commoditization and price wars. The competition is cutthroat, and the market space is overcrowded, which often results in diminishing profit margins.
   • Blue Oceans, on the other hand, are untapped markets where companies create new demand by offering innovative products or services that differentiate them from the competition. This approach focuses on creating value for customers in a way that the competition becomes irrelevant.
   In essence, rather than battling competitors for a slice of the existing market, Blue Ocean Strategy encourages companies to seek out new, uncontested market space.
2. Value Innovation The cornerstone of Blue Ocean Strategy is value innovation, a concept that integrates both innovation and value creation. Instead of focusing solely on cutting costs or improving the quality of existing products, companies should aim to create significant value for both the company and its customers. This involves making the competition irrelevant by offering unique products or services that appeal to a broader audience, thus creating new demand.Value innovation is achieved by focusing on four key actions:
   • Eliminate factors that the industry takes for granted but are no longer necessary.
   • Reduce factors well below the industry standard.
   • Raise factors that are under-emphasized but are of great importance to the customer.
   • Create factors that have never been offered before, providing new value to customers.
3. The Strategy Canvas The strategy canvas is a diagnostic tool used in the book to help companies understand their position in the market and identify areas of opportunity. The horizontal axis of the canvas lists the factors that the industry competes on (such as price, quality, features), while the vertical axis measures the level of offering from low to high. By plotting their current position and comparing it with competitors, companies can visually identify gaps and opportunities to differentiate themselves and shift toward a Blue Ocean.
4. The Four Actions Framework The Four Actions Framework, as mentioned earlier, helps guide businesses in crafting their Blue Ocean strategy. By answering four key questions, companies can reimagine their offerings:
   • What factors should be eliminated? (Things that the industry considers a standard but are unnecessary)
   • What factors should be reduced? (Over-emphasized features or costs)
   • What factors should be raised? (Underemphasized aspects that customers value)
   • What factors should be created? (New elements that will provide fresh value)
   By analyzing these factors, businesses can reshape their strategies to provide a completely new value proposition.
5. The Six Paths Framework Kim and Mauborgne propose the Six Paths Framework to systematically explore new market opportunities. The six paths encourage companies to:
   • Look across alternative industries
   • Look across strategic groups within industries
   • Redefine the buyer group
   • Look across complementary product and service offerings
   • Rethink the functional-emotional orientation of the industry
   • Shape external trends over time
   These paths provide a structured way to identify and create Blue Oceans by challenging the conventional boundaries of industry and competition.

Real-Life Examples of Blue Ocean Strategy

1. Cirque du Soleil One of the most famous examples of Blue Ocean Strategy is Cirque du Soleil, which transformed the traditional circus industry by combining elements of theater, music, and dance with acrobatics, thereby creating an entirely new form of entertainment. By eliminating expensive elements like animal acts and traditional star performers, and instead creating an upscale and sophisticated experience, Cirque du Soleil attracted an entirely new audience and created a Blue Ocean, making competition with traditional circuses irrelevant.
2. Nintendo Wii Nintendo’s Wii is another great example of a Blue Ocean Strategy. Instead of competing with Sony’s PlayStation and Microsoft’s Xbox on graphics, processing power, and games for hard-core gamers, Nintendo shifted its focus toward casual gamers and families. By introducing motion-sensor technology and easy-to-play games, Nintendo created a new, uncontested market space and opened up gaming to a much wider demographic.
3. Yellow Tail Wine Yellow Tail, an Australian wine brand, adopted the Blue Ocean Strategy to simplify the wine selection process. While the wine industry was traditionally complex and focused on connoisseurs, Yellow Tail simplified its offerings, eliminating the confusing wine jargon, and focused on taste, accessibility, and mass-market appeal. This strategy allowed them to open up the wine market to beer and cocktail drinkers, creating a new category of casual wine consumers.

Benefits of Blue Ocean Strategy

1. Non-Competitive Market Space: One of the biggest advantages of Blue Ocean Strategy is that it enables companies to operate in markets where there is no direct competition, reducing the need for aggressive tactics like price wars.
2. Increased Profitability: By creating new demand and offering unique value, companies that implement Blue Ocean Strategy often see higher profitability, as they are able to charge premium prices without the pressure of competition.
3. Long-Term Sustainability: Blue Ocean markets are often more sustainable because companies are not constantly fighting for the same customer base. Instead, they are focused on creating new customers and expanding the overall market.
4. Innovation: The strategy fosters a culture of innovation, encouraging companies to think creatively and differentiate themselves in ways that provide lasting value to customers.

Conclusion

“Blue Ocean Strategy” challenges conventional business thinking by advocating for the creation of new markets and customer demand rather than competing within existing markets. Through the principles of value innovation, the strategy canvas, and tools like the Four Actions and Six Paths frameworks, companies can break free from the competition and discover new opportunities. With real-life examples like Cirque du Soleil, Nintendo Wii, and Yellow Tail Wine, the book demonstrates how businesses can thrive by thinking outside the box and looking for uncontested market spaces.

For those interested in innovation and long-term growth, “Blue Ocean Strategy” offers a fresh perspective on how to outmaneuver competitors by making them irrelevant.

References

Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press.