Blue Ocean Strategy: How to Create Uncontested Market Space
Blue Ocean Strategy: How to Create Uncontested Market Space
W. Chan Kim and Renée Mauborgne in Blue Ocean Strategy argue that the best competitive strategy is not to compete. Instead of fighting in a "red ocean" full of competition, create a "blue ocean" - a new market space.
Red Ocean vs Blue Ocean
| Red Ocean | Blue Ocean |
|---|---|
| Existing market | New market space |
| Competition | No competition |
| Fight for share | Create new demand |
| Value-cost trade-off | Value innovation |
| Beat competition | Make competition irrelevant |
Value Innovation
Key concept: Simultaneous pursuit of differentiation AND low cost.
Traditional strategy says: Choose - differentiation OR low cost. Blue Ocean says: Do both - find new value curve.
Four Actions Framework
System for creating new value curve:
| Action | Question | Effect |
|---|---|---|
| Eliminate | What can be completely removed? | Cost reduction |
| Reduce | What to reduce below standard? | Cost reduction |
| Raise | What to raise above standard? | Differentiation |
| Create | What new to create? | Differentiation |
Three Tiers of Noncustomers
Blue Ocean looks for noncustomers:
- Tier 1: Soon-to-be noncustomers
- Tier 2: Refusing noncustomers
- Tier 3: Unexplored noncustomers
Conclusion
Blue Ocean Strategy is not about being better - it is about being different in a way that creates new value.
Key question: "How can we make competition irrelevant?"
