Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne

Last updated: Jul 7, 2023

Summary of Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne

Blue Ocean Strategy, written by W. Chan Kim and Renee Mauborgne, is a groundbreaking book that challenges traditional business strategies and offers a new approach to creating uncontested market space. The authors argue that businesses should not compete in overcrowded "red oceans" where competition is fierce, but instead, they should create new markets in "blue oceans" where competition is irrelevant.

The book begins by explaining the concept of red oceans, which represent existing industries with established rules and boundaries. In red oceans, companies compete for a share of the existing market, resulting in cutthroat competition, declining profits, and limited growth opportunities. The authors argue that this approach is unsustainable and propose a shift towards blue oceans.

Blue oceans, on the other hand, represent untapped market space with high potential for growth and profitability. The authors provide numerous examples of companies that successfully created blue oceans by offering innovative products or services that cater to unmet customer needs. They emphasize the importance of value innovation, which involves simultaneously pursuing differentiation and low cost to create a leap in value for both customers and the company.

The book introduces the "Four Actions Framework" as a tool for creating blue oceans. This framework encourages companies to challenge industry norms by asking four key questions: Which factors should be eliminated? Which factors should be reduced? Which factors should be raised? And which factors should be created? By answering these questions, companies can identify new value propositions and differentiate themselves from competitors.

Furthermore, the authors provide a systematic approach for implementing blue ocean strategies. They outline six principles that guide the process, including reconstructing market boundaries, focusing on the big picture rather than small details, reaching beyond existing demand, getting the strategic sequence right, overcoming organizational hurdles, and building execution into strategy.

Throughout the book, the authors support their arguments with real-world examples from various industries, including Cirque du Soleil, Southwest Airlines, and Yellow Tail wine. They also address potential challenges and offer advice on how to overcome them.

In conclusion, Blue Ocean Strategy presents a compelling case for businesses to shift their focus from competing in red oceans to creating uncontested market space in blue oceans. The book provides a comprehensive framework and practical tools for companies to successfully implement blue ocean strategies and achieve long-term success.

1. Redefining industry boundaries

One of the key takeaways from Blue Ocean Strategy is the concept of redefining industry boundaries. The authors argue that instead of competing within existing industries, companies should focus on creating new market spaces, or "blue oceans," where competition is irrelevant. By identifying and targeting untapped customer needs and preferences, companies can break away from the traditional industry boundaries and create uncontested market space.

This approach allows companies to differentiate themselves from competitors and create unique value propositions. By offering something new and different, companies can attract a whole new set of customers who may have been previously underserved or overlooked by existing industry players. This strategy not only helps companies to avoid head-to-head competition but also allows them to set their own rules and capture significant market share.

2. Value innovation

Another important concept discussed in the book is value innovation. The authors argue that companies should focus on creating and delivering exceptional value to customers while simultaneously reducing costs. This approach is different from traditional strategies that often involve a trade-off between value and cost.

Value innovation involves identifying and eliminating unnecessary features and costs while simultaneously creating new features and benefits that customers value. By doing so, companies can create a leap in value for both customers and themselves. This approach not only allows companies to differentiate themselves from competitors but also enables them to achieve higher profit margins and sustainable growth.

3. The six paths framework

The book introduces a framework called the six paths framework, which provides a systematic approach for companies to identify new market opportunities. The six paths include looking across alternative industries, looking across strategic groups within industries, looking across the chain of buyers, looking across complementary product and service offerings, looking across functional or emotional appeal to buyers, and looking across time.

By exploring these different paths, companies can uncover new insights and opportunities that may have been overlooked. This framework helps companies to think outside the box and challenge industry assumptions, leading to the discovery of new market spaces and the creation of blue oceans.

4. The four actions framework

The four actions framework is another valuable tool discussed in the book. It encourages companies to simultaneously eliminate, reduce, raise, and create different factors that are taken for granted in their industry. By doing so, companies can break away from the industry norms and create a unique value proposition.

Eliminating and reducing factors that are not valued by customers allows companies to lower costs and focus on what truly matters. Raising and creating factors that are valued by customers enables companies to differentiate themselves and create new market space. This framework helps companies to challenge industry assumptions and think creatively about how to deliver exceptional value to customers.

5. The importance of execution

While the book provides valuable insights and frameworks, it also emphasizes the importance of execution. The authors argue that even the best strategy is useless without effective execution. They highlight the need for disciplined execution and continuous improvement to turn blue ocean ideas into reality.

Companies need to have a clear plan, allocate resources effectively, and align their organization towards the blue ocean strategy. This requires strong leadership, effective communication, and a culture of innovation and continuous learning. By focusing on execution, companies can turn their blue ocean ideas into a sustainable competitive advantage.

6. The power of non-customers

Blue Ocean Strategy highlights the importance of understanding and targeting non-customers. Non-customers are individuals or organizations who are not currently using a company's products or services. By understanding the reasons why non-customers are not using their offerings, companies can identify new market opportunities.

By addressing the needs and preferences of non-customers, companies can create new demand and expand their customer base. This approach allows companies to tap into untapped market potential and create uncontested market space. By focusing on non-customers, companies can gain a competitive advantage and achieve sustainable growth.

7. The role of value curves

The book introduces the concept of value curves, which visually represent the value that a company's offering provides compared to its competitors. By analyzing value curves, companies can identify areas where they are underperforming or overperforming relative to competitors.

By understanding the key factors that drive customer value, companies can make strategic decisions to improve their value proposition. This could involve eliminating or reducing factors that are not valued by customers and investing in factors that are highly valued. Value curves provide a visual tool for companies to assess their competitive position and make informed decisions to create a blue ocean strategy.

8. The importance of constant innovation

Blue Ocean Strategy emphasizes the need for constant innovation to sustain a company's competitive advantage. The authors argue that blue oceans are not static but are constantly evolving. Therefore, companies need to continuously innovate and adapt to stay ahead of the competition.

Companies should foster a culture of innovation and encourage employees to think creatively and challenge industry assumptions. This requires a willingness to take risks, experiment, and learn from failures. By embracing constant innovation, companies can stay relevant and continue to create blue oceans in an ever-changing business landscape.