Blue Ocean Strategy | W. Chan Kim and Renée Mauborgne | Cliff Note Books
“Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant” is a business strategy book by W. Chan Kim and Renée Mauborgne, published in 2005. The book presents a new approach to strategy formulation and execution, challenging the traditional focus on competing in crowded markets.
The main concept of the book is the distinction between “blue oceans” and “red oceans.” Red oceans represent existing market spaces where companies engage in fierce competition, leading to shrinking profits and growth. In contrast, blue oceans refer to untapped market spaces where demand is created rather than fought over, resulting in high growth and profitability.
The authors argue that businesses can achieve long-term success by creating and capturing blue oceans, rather than competing in red oceans. To do this, they introduce a set of tools and frameworks to help companies systematically develop and implement blue ocean strategies:
Strategy Canvas: A visual representation of a company’s current competitive position and how it can differentiate itself from competitors by creating new value for customers.
Four Actions Framework: A tool to help companies identify the factors they should eliminate, reduce, raise, and create in their offerings to generate new value for customers and break away from competition.
Eliminate-Reduce-Raise-Create (ERRC) Grid: A matrix that helps businesses analyze their offerings and identify the changes required to create a blue ocean strategy.
Value Innovation: The central concept of blue ocean strategy, which involves creating new value for customers by focusing on both differentiation and low cost.
Six Paths Framework: A set of guidelines to help companies identify untapped market spaces by looking beyond existing industry boundaries and exploring alternative industries, strategic groups, buyer groups, complementary product and service offerings, functional or emotional appeal, and time.
Tipping Point Leadership and Fair Process: Concepts that guide organizations in overcoming internal hurdles and implementing blue ocean strategies effectively by focusing on critical factors, mobilizing key influencers, and ensuring transparency and engagement in decision-making processes.
The authors support their concepts with various case studies, including Cirque du Soleil, Southwest Airlines, and Yellow Tail wine, demonstrating how these companies successfully created blue oceans and redefined their industries.
In summary, “Blue Ocean Strategy” is a groundbreaking book that challenges traditional thinking about competition and market dynamics. It provides businesses with a roadmap for creating uncontested market spaces and achieving sustainable growth by focusing on value innovation, differentiation, and cost leadership.
QUOTES
“Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant.”
“Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.”
“The only way to beat the competition is to stop trying to beat the competition.”
“To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry.”
“In the field of strategy, the pioneer-migrator-settler map enables companies to see their business’s position in the market space at any point in time.”
“The strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and the root of profitable growth.”
“The simultaneous pursuit of differentiation and low cost is key to creating a blue ocean.”
“Tipping point leadership hinges on concentrating on the factors of disproportionate influence that are the linchpin to performance and change.”
AUTHORS
W. Chan Kim and Renée Mauborgne are both accomplished professors, authors, and management experts who have made significant contributions to the field of strategy and business management.
W. Chan Kim:
W. Chan Kim is a South Korean business theorist and professor of strategy and management. He serves as a professor at INSEAD, one of the world’s leading business schools, and is the co-director of the INSEAD Blue Ocean Strategy Institute. Kim has published numerous articles and papers on strategy and management and is recognized as a leading expert in the field. He holds a Bachelor’s degree from the University of Michigan, an MBA from the University of Lancaster, and a Ph.D. in management from the University of Michigan.
Renée Mauborgne:
Renée Mauborgne is an American business theorist, professor, and author. She also serves as a professor at INSEAD and is the co-director of the INSEAD Blue Ocean Strategy Institute. Mauborgne is a leading expert in strategy, management, and organizational culture. She has published several influential articles and papers on these subjects. She holds a Bachelor’s degree from the University of Virginia, an MBA from the Wharton School at the University of Pennsylvania, and a Ph.D. in management from the University of Michigan.
Together, Kim and Mauborgne co-authored the best-selling book “Blue Ocean Strategy,” which has been translated into dozens of languages and sold millions of copies worldwide. Their work on blue ocean strategy has received numerous accolades and has been widely adopted by businesses, non-profits, and governments around the world. In 2019, they published a follow-up book called “Blue Ocean Shift: Beyond Competing,” which offers a practical guide for implementing blue ocean strategies in organizations.
CRITICISMS
While “Blue Ocean Strategy” has been widely praised for its innovative approach to business strategy, it has also faced some criticisms. Some of the main critiques include:
Lack of originality: Critics argue that the ideas in “Blue Ocean Strategy” are not entirely new, as the concepts of differentiation, value innovation, and finding uncontested market spaces have been previously discussed in the literature on strategy and marketing. Some see the book as a repackaging of existing ideas with a new label.
Limited applicability: Some critics question the practicality of the blue ocean strategy for all businesses and industries. They argue that not every company can identify or create a blue ocean, especially in highly regulated or saturated markets.
Overemphasis on case studies: The book heavily relies on case studies of successful blue ocean strategies, which may create an impression of survivorship bias. Critics argue that the book does not sufficiently address the challenges and failures that some companies may encounter when trying to create or enter blue oceans.
Difficulty in sustaining a blue ocean: Critics point out that creating a blue ocean might be a temporary advantage, as other companies may eventually enter the market and turn the blue ocean into a red ocean. The book does not extensively discuss how companies can maintain their competitive advantage in the long run.
Lack of empirical evidence: Some critics argue that “Blue Ocean Strategy” lacks rigorous empirical evidence to support its claims. The book primarily relies on anecdotal evidence from case studies, which may not be generalizable or applicable to all situations.
Despite these criticisms, “Blue Ocean Strategy” has undoubtedly made a significant impact on the field of business strategy and has been adopted by many organizations worldwide. The book’s concepts continue to be influential in shaping the way businesses think about competition, innovation, and value creation.
SUMMARIES
Part One: Blue Ocean Strategy
Creating Blue Oceans:
This chapter introduces the concept of blue oceans, representing uncontested market spaces with little competition, as opposed to red oceans, where companies fight for market share. The authors emphasize that companies should strive to create blue oceans to achieve sustainable growth and profitability.
Analytical Tools and Frameworks:
This chapter presents the Strategy Canvas, the Four Actions Framework, and the Eliminate-Reduce-Raise-Create (ERRC) Grid. These tools help companies visualize their competitive positions, identify opportunities to create new value, and determine the strategic moves required to create blue oceans.
Part Two: Formulating Blue Ocean Strategy
Reconstruct Market Boundaries:
This chapter introduces the Six Paths Framework, which guides companies in identifying untapped market spaces by exploring alternative industries, strategic groups, buyer groups, complementary product and service offerings, functional or emotional appeal, and time.
Focus on the Big Picture, Not the Numbers:
This chapter discusses the importance of focusing on the big picture when creating a blue ocean strategy. It introduces the concept of value innovation, which emphasizes balancing differentiation and low cost to create new value for customers and the company.
Reach Beyond Existing Demand:
This chapter highlights the importance of targeting non-customers and unlocking new demand. The authors present the Three Tiers of Noncustomers framework to help companies identify potential new customer segments and expand their market reach.
Get the Strategic Sequence Right:
This chapter explains the four-step strategic sequence required for successful blue ocean strategy execution: (1) identifying the right value proposition, (2) determining the right profit and cost structure, (3) aligning the value, profit, and people propositions, and (4) overcoming adoption hurdles.
Part Three: Executing Blue Ocean Strategy
Overcome Key Organizational Hurdles:
This chapter focuses on overcoming organizational obstacles when implementing a blue ocean strategy. The authors introduce Tipping Point Leadership, which involves focusing on key factors, mobilizing influencers, and creating a domino effect to bring about change within the organization.
Build Execution into Strategy:
This chapter emphasizes the importance of incorporating execution into the strategy formulation process. The authors discuss the concept of Fair Process, which involves engaging employees, encouraging open dialogue, and fostering trust and commitment to ensure successful strategy execution.
Epilogue:
Sustainability and Renewal:
This chapter addresses the concerns about maintaining a blue ocean strategy’s competitive advantage over time. The authors propose the concepts of Value Pioneers, Value Migrators, and Value Settlers to illustrate the dynamics of value creation and capture, emphasizing the importance of continuous innovation and renewal to sustain a blue ocean strategy.