Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant [Chan Kim, Renée Mauborgne]
What are the alternative industries to your industry? What are the strategic groups in your industry? What is the chain of buyers in your industry? Does your industry compete on functionality or emotional appeal? What trends have a high probability of impacting your industry, are irreversible, and are evolving in a clear trajectory?
These are just some of the questions raised in “Blue ocean strategy” by W. Chan Kim and Renée Mauborgne, Professors of Strategy and International Management at INSEAD. The authors come up with a new approach for corporate strategy, which they propose to companies: why struggle to get a higher percentage of the market in limited red oceans, when you can create your own blue ocean? The author suggests that creating a new product that would address certain customer segments overlooked by the competition or certain needs not satisfied by the market brings more value than struggling to reduce costs under the competition’s or to develop a superior product compared to the existing ones.
The new strategy implies a cost reduction while consequently increasing the purchase value. Kim and Mauborgne completely invert the generally accepted concept that value innovation is created only when the entire variables system of a company – utility, cost, price – is coherently integrated, which presumes a cost increase for any value growth of the product. In this way „the value innovation is more than innovation” as, instead of beating the competition, you focus on making it irrelevant by creating „a leap in value for buyers and your company”, correlated with the strategy of the entire system of organizational activities.
Cirque du Soleil, Southwest Airlines, [yellow tail] are just a few of the examples analyzed by case studies, representing companies that created the “blue oceans” in various business circumstances and different macroeconomic context. Their strategic profiles were created based on the same three qualities: focus, divergence and a compelling tagline.
The authors recommend coherent methodology for how to discover possible blue oceans, how to construct the strategy canvas that clearly articulates the future blue ocean strategy, how to aggregate the largest possible mass of buyers for a new offering, how to build a robust business model to ensure a healthy profit of the blue ocean idea and finally how to get the strategic sequence right, implement and execute the new strategy. In the end, emphasizing the idea that creating a blue ocean is not a static achievement, but a dynamic process, the conclusion states the need to maintain and renew the strategy. Each chapter is followed by precise and detailed examples (an annex with such detailed blue ocean examples is also included in the book).
At first sight the concepts presented seem to be common sense – ideal theoretical concepts, the dream of any entrepreneur: to create a differentiated product that addresses a new consumer segment „stealing” at the same time users of alternative products (positioned above or beyond theirs), with low costs and high value for consumers – the authors go beyond the conceptual part, building a structure to analyze the market, the consumers, your own business, creating a pattern for developing a new strategy, enforced by precise examples, which will inspire the reader to re-think her own strategy, to look for new strategic options and why not, discover her own „blue ocean”.