Blue Ocean Strategy is a bestselling book by W. Chan Kim and Renée Mauborgne that challenges the conventional wisdom of business strategy. The authors argue that most companies compete in overcrowded and shrinking markets, where they fight for a competitive advantage over their rivals. This results in a bloody “red ocean” of cutthroat competition, low profits, and diminishing growth.
The authors propose a different approach: instead of competing in existing markets, companies should create new markets that are uncontested and offer ample opportunities for growth. These are called “blue oceans” of untapped potential, where competition is irrelevant and value is created for both customers and the company.
The Six Principles of Blue Ocean Strategy
The book presents a systematic framework and a set of practical tools to help companies formulate and execute blue ocean strategies. The authors identify six principles that guide the process of creating blue oceans:
- Reconstruct market boundaries: To find new market spaces, companies need to look beyond the existing industry boundaries and explore alternative ways of satisfying customer needs. The book introduces the “six paths framework” to help companies identify new market opportunities by looking across alternative industries, strategic groups, buyer groups, complementary offerings, functional-emotional orientation, and time.
- Focus on the big picture: To avoid getting lost in the details, companies need to have a clear vision of their strategic intent and the value proposition they offer to customers. The book introduces the “strategy canvas” to help companies visualize their current position in the market and compare it with their desired future position. The strategy canvas also helps companies identify the key factors that influence customer value and eliminate or reduce those that are not important, while raising or creating those that are.
- Reach beyond existing demand: To capture new customers and create new demand, companies need to go beyond the existing or known segments of the market and discover the latent or unmet needs of noncustomers. The book introduces the “three tiers of noncustomers” to help companies segment the potential market and tailor their offerings to appeal to each tier: soon-to-be noncustomers, refusing noncustomers, and unexplored noncustomers.
- Get the strategic sequence right: To ensure the viability and sustainability of their blue ocean strategy, companies need to align their value proposition with their profit proposition and their people proposition. The book introduces the “four hurdles of execution” to help companies test their strategy along four dimensions: buyer utility, price, cost, and adoption.
- Overcome organizational hurdles: To implement their blue ocean strategy effectively, companies need to overcome the internal resistance and challenges that may arise from changing the status quo. The book introduces the “tipping point leadership” to help companies mobilize their people and resources by focusing on the factors that have a disproportionate influence on performance: cognitive hurdles, resource hurdles, motivational hurdles, and political hurdles.
- Build execution into strategy: To ensure that their blue ocean strategy is executed consistently and continuously, companies need to embed feedback loops and mechanisms that monitor and adjust their actions according to changing market conditions. The book introduces the “fair process” to help companies foster trust and commitment among their employees by involving them in the strategy formulation and execution process through three principles: engagement, explanation, and expectation clarity.
Blue Ocean Strategy is a groundbreaking book that offers a new perspective on how to achieve lasting success in business. By applying the six principles and tools presented in the book, companies can create new markets that are uncontested and profitable, while making their competitors irrelevant.