Blue Ocean Strategy – Book Review

“The only way to beat the competition is to stop trying to beat the competition.”

“Blue Ocean Strategy” provides a framework for creating uncontested market space and making the competition irrelevant by innovating and creating new demand.

I first went over the concepts of this book in a case study at an MBA class at CEIBS, Shanghai. The book provides interesting examples of how Cirque de Solei redefined the circus business and became one of the most successful companies in history.

You can buy the book here.

Chapters

1. Creating Blue Oceans: Introduces the concept of Blue Oceans – new, untapped market spaces devoid of competition.
2. Analytical Tools and Frameworks: Presents tools and frameworks to help identify and create blue oceans.
3. Reconstruct Market Boundaries: Discusses strategies for breaking away from traditional industry boundaries.
4. Focus on the Big Picture, Not the Numbers: Encourages a holistic approach over purely numerical analysis.
5. Reach Beyond Existing Demand: Explores strategies for capturing new demand and customers.
6. Get the Strategic Sequence Right: Details the importance of proper sequencing in executing blue ocean strategies.
7. Overcome Key Organizational Hurdles: Addresses internal obstacles and management challenges.
8. Build Execution into Strategy: Integrates execution into strategy formulation from the start.

Powerful quotes:

1. “Value innovation is the cornerstone of blue ocean strategy.”
2. “The best way to create a blue ocean is to start with a blank canvas.”
3. “Focus on the big picture, not the numbers.”
4. “Do not compete with rivals; make them irrelevant.”
5. “Exploit untapped market space.”
6. “Success comes not from battling competitors, but from creating ‘blue oceans’ of uncontested market space.”
7. “Reconstruct market boundaries to break from the competition.”
8. “To sustain high performance, companies must build a blue ocean.”
9. “Price yourself for mass appeal, not for small-scale luxury.”
10. “Overcome key organizational hurdles to implement a blue ocean strategy.”

Book Review:

“Blue Ocean Strategy” is a revolutionary business book that shifts the paradigm from the cutthroat competition of “red oceans” to the vast potential of “blue oceans.” Authors W. Chan Kim and Renée Mauborgne argue that success no longer comes from battling competitors but from creating new market spaces, termed “blue oceans,” that are ripe for innovation. The book is well-structured, offering clear strategies, tools, and frameworks to help businesses break away from the competition and explore new frontiers.

The authors back their arguments with extensive research and examples from a variety of industries, making the concepts accessible and applicable. However, the book is not just about abandoning existing markets, but about expanding boundaries and creating new spaces where competition is irrelevant. This is a refreshing take that encourages creativity, innovation, and forward-thinking.

While the book has been immensely popular and influential, it’s important to approach it with a balanced perspective, recognizing that while blue ocean strategy can lead to remarkable breakthroughs, it also requires careful planning, execution, and alignment with overall business goals.

Interesting lessons from the book:

• The importance of non-confrontational market strategies.
• How to create and capture new demand.
• The significance of differentiation and low cost.

Business examples from the book

“Blue Ocean Strategy” provides several compelling case studies across a variety of industries. Here are some of the main examples from the book and the lessons learned from them:

1. Cirque du Soleil: This Canadian entertainment company successfully blended the circus with the theater to create a new form of entertainment, avoiding direct competition with traditional circuses and Broadway shows. Lesson: By merging elements from different industries and eliminating costly features that do not add value (e.g., animal acts), companies can create new market spaces and appeal to a broader audience.
2. Yellow Tail: This Australian wine company redefined wine for the American market by eliminating wine complexity and enhancing drinkability and fun. Lesson: Simplifying a product and making it accessible to a broader range of customers can open up new market spaces and attract non-customers.
3. Curves: This fitness company targeted an untapped market segment of women who were intimidated by traditional gyms. They offered a simple, 30-minute exercise routine in a supportive environment. Lesson: Addressing the needs of overlooked market segments can lead to the creation of new market spaces and rapid growth.
4. Southwest Airlines: By combining elements of airlines and buses (e.g., no assigned seats, no meals, and quick turnaround times), Southwest was able to create a new form of short-haul travel. Lesson: Reducing or eliminating the less essential aspects of a service can drastically cut costs and open up entirely new market segments.
5. NetJets: This company created the concept of fractional jet ownership, making private jet flying accessible to a wider audience. Lesson: Offering a luxury experience at a fraction of the cost can attract a new set of customers who were previously priced out of the market.
6. Nintendo Wii: Instead of competing in the high-end graphics and processing power race with Xbox and PlayStation, Nintendo focused on expanding the gaming market by introducing motion-sensing technology and games that appealed to non-gamers, including families and the elderly. Lesson: Companies can create new demand by targeting non-traditional customers and offering an innovative and differentiating experience.
7. [Bloomberg]: Bloomberg LP revolutionized the information industry for financial professionals by providing real-time financial data, news, and analytics via dedicated terminals. This comprehensive service was distinct from the fragmented offerings available previously, creating a new space in the market. Lesson: Integrating multiple services into a single, easy-to-use platform can create a new market space and become indispensable to users.
8. [Canon]: Canon targeted the home and small office market with personal copiers, which were simpler, smaller, and more affordable than the traditional large office copiers offered by competitors like Xerox. Lesson: Companies can create blue oceans by downsizing and simplifying complex and expensive products to serve a whole new set of customers.
9. [Philips]: Philips created the Blue Ocean in healthcare by developing the Ambient Experience CAT scan rooms, which integrated soothing designs and interactive elements to reduce patient anxiety during scans. Lesson: Enhancing customer experience and addressing overlooked emotional needs can differentiate a product and create new demand.
10. [Quicken]: Intuit’s Quicken simplified personal finance management, making it accessible to people without financial expertise, contrasting with the complex software available at the time. Lesson: Simplifying and demystifying complex tasks can open up entirely new customer segments.
11. [Body Shop]: The Body Shop carved out a new niche in the cosmetics industry by promoting natural ingredients, ethical sourcing, and social activism, distinguishing itself from competitors focused on glamour and luxury. Lesson: Companies can create new market spaces by aligning their products with social values and concerns, appealing to customers’ ethics and identities.
12. [Tata Nano]: Tata Motors created the Nano, an extremely affordable car targeting Indian families who previously could only afford motorcycles. Lesson: Making products radically more affordable can create new markets, but companies must ensure that they do not compromise on perceived value and safety.
13. [Kimberly-Clark]: Kimberly-Clark transformed the paper industry by focusing on high-quality, branded products like Kleenex and Huggies, shifting away from the traditional commodity-based business model. Lesson: Focusing on brand and quality can carve out a new market segment even in industries dominated by generic competition.

Lessons Learned from these Examples:

• Innovation Beyond Products: Successful blue ocean strategies often come from redefining the customer experience and the value proposition, not just improving the product.
• Look Outside Traditional Boundaries: The best opportunities might lie in merging different industries or catering to customers who are currently ignored.
• Focus on Simplicity and Accessibility: Simplifying products and services can attract a broader audience.
• Cost Reduction with Value Increase: Striking a balance between reducing costs while increasing value for customers can unlock new markets.
• Non-Customer Focus: Significant new demand can be found by understanding and targeting non-customers.
• Differentiation Is Key: Standing out from the competition by offering unique value can make traditional competition irrelevant.

How to build a blue ocean?

1. Start with a Clear Understanding of the Current State: Use tools like the Strategy Canvas to understand how the industry competes and where the competition is investing.
2. Identify the Non-Customers: Look at who is currently not buying or using your industry’s products or services and figure out why.
3. Explore Alternative Industries and Concepts: Look for inspiration outside your direct competitors for ways to solve the problems or fill the needs of your identified non-customers.
4. Use the Four Actions Framework: Analyze your current offerings and industry standards to see what can be eliminated, reduced, raised, or created to offer new value to customers.
5. Develop and Test Your Blue Ocean Idea: Based on the insights from the above steps, develop your blue ocean strategy. Test it to ensure it meets the criteria of utility, price, cost, and adoption.
6. Implement with Fair Process: Engage employees and stakeholders throughout the process, explain the strategic shifts and expectations, and clarify everyone’s role in achieving the new strategy.

Quiz to Build a Blue Ocean

Get a pen and paper ready!

Here’s a set of questions or quiz that a business can use to explore potential Blue Ocean Strategies:

Understanding the Current Market Landscape

1. Who are our current competitors, and what factors do the industry compete on?
2. What are the current industry trends, and how do they affect our business?
3. Who are our current customers, and what are their key needs and preferences?
4. Who are the non-customers or underserved segments in our industry, and why do they stay away?

Identifying New Opportunities

5. Can we identify any pain points or unmet needs for both current customers and non-customers?
6. What are the alternative industries or products that our non-customers turn to, and why?
7. How can we redefine the boundaries of our current market to include a broader scope of potential customers?
8. Are there any complementary products or services that add value to our current offerings?

Applying the Four Actions Framework

9. Which of the factors that the industry takes for granted should be eliminated?
10. Which factors should be reduced well below the industry’s standard?
11. Which factors should be raised well above the industry’s standard?
12. Which factors should be created that the industry has never offered?

Validating the Blue Ocean Idea

13. Does our new strategy offer a leap in value to the customer while simultaneously reducing costs?
14. How can our new strategy tap into the unmet needs of a large group of non-customers?
15. Is there a viable business model that supports our new strategy?
16. What are the potential obstacles to implementing our new strategy, and how can we overcome them?

Planning for Implementation

17. How can we communicate the value of our new strategy to customers and non-customers?
18. What changes are required in our operational processes to support the new strategy?
19. What are the short-term and long-term goals for our Blue Ocean Strategy?
20. How will we measure success and make adjustments to our strategy over time?

Examples of Blue Oceans that could exist now

1. Healthcare – Telemedicine and Integrated Wellness Solutions:
   • Traditional Boundary: Healthcare primarily focuses on treating illnesses through in-person visits and standard medical practices.
   • Blue Ocean Strategy: Develop integrated wellness solutions that combine telemedicine, preventive care, mental health services, and nutrition counseling into a single, user-friendly platform. This approach not only makes healthcare more accessible but also shifts the focus from illness treatment to holistic well-being.
   • Value Innovation: Increases accessibility and convenience for patients while potentially reducing healthcare costs and improving overall health outcomes.
2. Education – Personalized Learning Platforms:
   • Traditional Boundary: Education is often standardized, with one-size-fits-all teaching methods and materials.
   • Blue Ocean Strategy: Create personalized learning platforms using AI to tailor educational content to each student’s learning pace, style, and interests. This can extend to lifelong learning, beyond traditional school ages.
   • Value Innovation: Enhances student engagement and learning outcomes, addresses diverse learning needs, and supports continuous education beyond traditional school settings.
3. Automotive – Sustainable and Shared Mobility Solutions:
   • Traditional Boundary: The automotive industry has traditionally focused on individual car ownership and internal combustion engines.
   • Blue Ocean Strategy: Develop sustainable mobility solutions combining electric vehicles, car-sharing, and autonomous driving technologies to provide environmentally friendly, flexible, and cost-effective transportation alternatives.
   • Value Innovation: Reduces environmental impact, caters to changing consumer preferences towards sustainability, and addresses urban congestion and parking issues.
4. Retail – Experiential and Community-Based Shopping:
   • Traditional Boundary: Retail is often transaction-based, focusing on in-store or online purchases without significant differentiation.
   • Blue Ocean Strategy: Transform retail spaces into community hubs offering unique in-store experiences, workshops, and social events that align with the brand’s products and values. This strategy can also integrate online and offline experiences seamlessly.
   • Value Innovation: Builds brand loyalty, enhances customer engagement, and turns shopping into a community and experiential event rather than just a transaction.
5. Food Industry – Sustainable and Traceable Food Sources:
   • Traditional Boundary: The food industry often prioritizes scale and cost-efficiency, sometimes at the expense of sustainability and transparency.
   • Blue Ocean Strategy: Develop a supply chain focused on sustainable sourcing and full transparency, allowing consumers to trace their food from farm to table. This could include partnerships with local farms, sustainable packaging, and clear labeling about the source and impact of ingredients.
   • Value Innovation: Meets growing consumer demand for ethical, sustainable, and healthy food choices while promoting environmental stewardship and supporting local communities.

How is blue ocean strategy different to just building a good business?

The concept of a Blue Ocean Strategy differs from simply building a good business, although both aim for success and sustainability. Here are the key distinctions:

Blue Ocean Strategy:

1. New Market Space: Blue Ocean Strategy focuses on creating, identifying, or exploring new market spaces that are uncontested, thus termed ‘blue oceans.’ This involves innovating or offering something so different that it either creates a new market or reshapes an existing one, making the competition irrelevant.
2. Value Innovation: Central to Blue Ocean Strategy is value innovation, which is the simultaneous pursuit of differentiation and low cost, creating a leap in value for both the company and its customers.
3. Strategic Move: It involves a strategic move that encompasses the entire system of a company’s activities, aiming to make the trade-offs faced by competitors irrelevant and tap into new demand.
4. Break from the Past: It requires a departure from traditional industry boundaries and competitive rules. It’s about challenging the status quo and the conventional wisdom of an industry.

Building a Good Business:

1. Competing in Existing Market Space: Traditional business strategies often focus on competing better in existing markets (red oceans), where the boundaries are defined, and the competitive rules of the game are known. It’s about building a better mousetrap.
2. Operational Effectiveness and Quality: While innovation can be a part of building a good business, the focus is often on improving operational effectiveness, quality, and customer satisfaction within the existing market framework.
3. Incremental Improvement: Traditional approaches might focus more on incremental improvements and sustaining innovations to stay ahead of competitors.
4. Following Industry Norms: Building a good business often involves adhering to and excelling within the accepted norms and standards of the industry.

In summary, while building a good business is about operating effectively within established markets and possibly outperforming the competition, a Blue Ocean Strategy is about creating entirely new markets or redefining existing ones to make the competition irrelevant. Both approaches aim for business success but through different paths. A Blue Ocean Strategy requires a more radical rethinking of what a business can be, pushing beyond the traditional boundaries and focusing on untapped market potential.

What makes blue ocean strategy profound?

The concepts in “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne are considered profound for several reasons:

1. Shift in Strategic Thinking: The book challenges conventional competitive strategies focused on battling competitors in crowded markets, known as “red oceans.” Instead, it advocates for creating new, uncontested market spaces or “blue oceans.” This represents a significant shift in how businesses approach strategy and competition.
2. Value Innovation: The concept of value innovation is central to Blue Ocean Strategy. It goes beyond traditional competitive strategies by emphasizing the simultaneous pursuit of differentiation and low cost. This challenges businesses to think beyond the trade-off between value and cost and to pursue innovation in a way that creates new demand and opportunities for growth.
3. Systematic Approach: Unlike many business theories that are based on anecdotal evidence or isolated examples, Blue Ocean Strategy provides a systematic and actionable framework for identifying and developing blue oceans. The tools and frameworks, such as the Strategy Canvas and the Four Actions Framework, offer a structured approach to breaking away from competition and redefining market boundaries.
4. Broad Applicability: The principles of Blue Ocean Strategy can be applied across a wide range of industries and sectors, from consumer goods to technology to services. This universality makes the concepts relevant to a broad audience, including entrepreneurs, corporate leaders, and policymakers.
5. Sustainability and Renewal: The book also addresses how to sustain blue ocean strategies over time and renew them in the face of changes, helping businesses not only to create but also to maintain and rejuvenate their strategic approach.
6. Empirical Basis: The concepts are backed by years of research and analysis of a wide variety of companies and industries around the world. This empirical foundation adds credibility and depth to the arguments and recommendations presented in the book.
7. Inspiration for Innovation: By showcasing numerous examples of companies that have successfully carved out new market spaces, the book serves as a source of inspiration for businesses at any stage. It encourages leaders to think creatively and to question the prevailing industry logic.
8. Addressing Overcompetition: In an era where many markets are saturated and competition is intense, Blue Ocean Strategy offers a way out of the zero-sum game by encouraging the pursuit of growth through innovation rather than just competition.

These reasons contribute to the profound impact of “Blue Ocean Strategy” on modern business thinking, offering a new lens through which companies can view strategy, competition, and growth.

Alternatives?

Blue ocean strategy is one way of thinking. But there are lots of other frameworks we can use to build a better business.

Some alternative strategies or frameworks that may complement or serve as alternatives to Blue Ocean Strategy include:

1. Jobs to be Done Theory: This framework focuses on understanding the customer’s specific circumstances and the ‘jobs’ they are trying to get done. By focusing on customer needs and motivations, companies can innovate in ways that are highly relevant to their target audience.
2. Disruptive Innovation: Coined by Clayton Christensen, this concept focuses on how smaller companies can challenge established incumbents by targeting overlooked segments or creating lower-end, more accessible solutions that eventually disrupt the market.
3. Value Curve Analysis: While this is part of the Blue Ocean toolkit, it can be used independently to analyze and understand how a company’s offerings compare to competitors’ on factors that matter to customers, identifying opportunities for differentiation.
4. Lean Startup Methodology: Proposed by Eric Ries, this approach focuses on rapidly developing products and services through iterative cycles of building, measuring, and learning, allowing businesses to discover viable business models more quickly and efficiently.
5. Strategic Group Analysis: This involves examining groups of firms within an industry that have similar business models or strategies. By understanding the strategic groups, companies can identify opportunities to differentiate themselves or to target gaps in the market.
6. Customer Segmentation and Personalization: This strategy involves dividing the market into distinct groups of customers with different needs, characteristics, or behaviors, and tailoring products, services, or marketing strategies to these segments.
7. Platform-based Strategies: This approach involves creating a platform or ecosystem where external producers and consumers can interact and create value, such as through marketplaces, apps, or social networks. Platforms can transform traditional markets and create new spaces for growth.
8. Porter’s Five Forces: Developed by Michael E. Porter, this framework helps businesses analyze the level of competition within an industry based on five forces: threat of new entrants, threat of substitute products or services, bargaining power of customers, bargaining power of suppliers, and intensity of competitive rivalry. Understanding these forces can help companies identify strategic positions that are less vulnerable to competition and outside influences.
9. Resource-Based View (RBV): This strategic framework emphasizes the importance of internal resources and capabilities as the primary source of a firm’s competitive advantage. Companies that identify, develop, and leverage their unique resources and capabilities (such as patents, brand reputation, proprietary technology, and skilled workforce) can achieve sustained competitive advantage.
10. Value Chain Analysis: Another framework by Michael E. Porter, this involves breaking down a company’s activities into strategic components (such as inbound logistics, operations, outbound logistics, marketing and sales, and service) to identify areas for improvement and differentiation. By optimizing these activities, a company can create unique value for its customers and gain a competitive edge.
11. Balanced Scorecard: Developed by Robert S. Kaplan and David P. Norton, this strategic planning and management system helps organizations translate their vision and strategy into actionable objectives. It balances traditional financial measures with non-financial measures related to customers, internal business processes, and learning and growth, providing a more holistic view of business performance.
12. Ansoff Matrix: Created by Igor Ansoff, this framework helps businesses determine their product and market growth strategy by analyzing four different strategies: market penetration, market development, product development, and diversification. It aids in assessing risk and identifying growth opportunities.
13. BCG Matrix (Boston Consulting Group Matrix): This strategic tool helps companies analyze their business units or product lines based on their market growth rate and market share. The matrix categorizes products into four quadrants—Stars, Question Marks, Cash Cows, and Dogs—to help companies decide where to invest, develop, or divest.
14. Scenario Planning: This strategic method involves creating detailed narratives about possible future events to anticipate changes in the business environment. It helps companies prepare for various future scenarios and develop flexible long-term strategies.
15. OKRs (Objectives and Key Results): A goal-setting framework used by companies like Google, OKRs help organizations set ambitious goals with measurable results. They focus on setting company-wide, team, and individual objectives aligned with the company’s strategic goals, promoting focus and transparency.

The Authors:

W. Chan Kim and Renée Mauborgne are professors at INSEAD, one of the world’s leading business schools. They have co-authored numerous articles and books and are considered leading experts in strategy and innovation. Their work on Blue Ocean Strategy has won several prestigious awards and has been adopted by organizations around the world.

Main Critiques of the Book:

1. Overly optimistic: Assumes that blue oceans are easily identifiable and accessible.
2. Lacks a detailed implementation plan: Provides frameworks but not detailed step-by-step processes.
3. Not all blue ocean strategies result in success: Some examples overlook external factors and survivorship bias.
4. Applicability: May not be applicable to all industries or companies.
5. Risk underestimation: Underplays the risks and challenges associated with venturing into unknown markets.
6. Overemphasis on innovation: Not all companies may have the resources or capability to innovate.
7. Neglect of competitive response: Underestimates how competitors might react to the creation of a blue ocean.
8. Historical examples may not reflect current market realities: Some case studies may be dated or not applicable to today’s fast-changing environments.

Related Books:

1. “Good to Great” by Jim Collins
2. “The Innovator’s Dilemma” by Clayton M. Christensen
3. “Crossing the Chasm” by Geoffrey A. Moore
4. “Value Proposition Design” by Alexander Osterwalder and Yves Pigneur
5. “Competing Against Luck” by Clayton M. Christensen

These books complement the ideas in “Blue Ocean Strategy” by exploring different aspects of innovation, strategy, and market positioning. They can provide readers with a broader understanding of how to navigate and succeed in today’s competitive business landscape.