Blue Ocean Strategy

How to Create Uncontested Market Space and Make the Competition Irrelevant


W. Chan Kim, Renée Mauborgne

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Value Innovation

  • Focus on making the competition irrelevant instead of focusing on beating the competition.
  • Redefine the problem itself. Instead of outpacing the competition by offering a better solution to the given problem
  • Eliminate and reduce the factors an industry competes on — save cost.
  • Raise and create elements the industry has never offered — lift buyer value.

Red Ocean

  • Complete in existing market space
  • Beat competition
  • Exploit existing demand
  • Make the value-cost trade-off
  • Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Blue Ocean

  • Create uncontested market space
  • Make the competition irrelevant
  • Create and capture new demand
  • Break the value-cost trade-off
  • Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Create Blue Oceans

Tools and frameworks for creating and capturing blue oceans

The Strategy Canvas

  • Captures the current state of play in the known market — understand where the competition is investing, the factors the industry competes on in products, service, and delivery, and what customers receive.
  • The horizontal axis captures the range of factors the industry competes on and invests in.
  • The vertical axis captures the offering level that buyers receive across all these key competing factors. High score = company offers buyer more = invest more.
  • The value curve: graphic depiction of a company’s relative performance across its industry’s factors of competition.
  • Focus on alternatives rather than competition, on noncustomers rather than customers.

The Four Actions Framework

  • Which of the factors that the industry takes for granted should be eliminated?
    Eliminating factors that industry have long competed on even though they no longer have value
  • Which factors should be reduced well below the industry’s standard?
    Determine whether products or services have been overdesigned in the race to match and beat the competition
  • Which factors should be raised well above the industry’s standard?
    Uncover and eliminate the compromises the industry forces customers to make.
  • Which factors should be created that the industry has never offered?
    Discover entirely new sources of value for buyers and create new demand and shift the strategic pricing.

Three Characteristics of a Good Strategy

  • Focus
    pick a few criteria to excel on
  • Divergence
    stand apart, differentiate from industry’s average. Avoid me-too strategy.
  • Tagline
    deliver a clear message and advertise an offering truthfully.
    Southwest airline: The speed of a plane at the price of a car—whenever you need it.