Blue Ocean Strategy [book review]

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 sector compete on functionality or emotional appeal? What trends are likely to impact 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 propose a new corporate strategy approach: why struggle to get a higher percentage of the market in limited red oceans when you can create your own blue sea? Furthermore, the author suggests that creating a new product that would address certain customer segments overlooked by the competition or specific needs not satisfied by the market brings more value than struggling to reduce costs under the competition 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 examples analyzed by case studies, representing companies that created the “blue oceans” in various business circumstances and macroeconomic contexts. Yet, their strategic profiles were created based on the same three qualities: focus, divergence and a compelling tagline.

The authors recommend a 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 most significant 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 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 specific and detailed examples (an annexe with clear 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 specific examples, which will inspire the reader to re-think her own design, to look for new strategic options and why not, discover her own „blue ocean”.