“The only way to beat the competition is to stop trying to beat the competition."
– Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renee Mauborgne
In Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, W. Chan Kim and Renee Mauborgne, offer a new way of thinking about competition in business. The main premise is to eliminate an organization’s competition by searching for ways to gain access to an uncontested market space.
Successful industry leaders understand that developing blue ocean strategies are key to both creating and cornering a market and a holistic way to add exponential value to a company, its employees, clients and other internal and external stakeholders.
Red Oceans and Blue Oceans
Companies have long engaged in head-to-head competition in search of sustained profitable growth. They have fought for competitive advantage, battled over market share and struggled for differentiation. Yet, in today’s overcrowded industries, competing head-on results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool.*
According to Kim and Mauborgne, red oceans represent all the companies in business or the “known marketplace.” In the metaphoric red ocean, companies “try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities and cutthroat competition turns the ocean bloody red.”
In stark contrast to the red ocean is the blue ocean. The metaphoric blue ocean is defined by “untapped market space, demand creation, and the opportunity for highly profitable growth.” Successful companies understand that along with navigating the competitive waters of the red ocean, they must chart the waters of the blue ocean to render that same competition irrelevant.
Blue Ocean Strategy
Kim and Mauborgne offer five strategies to create a blue ocean:
- Reconstructing market boundaries
- Focusing on the big picture, not the numbers
- Reaching beyond existing demand
- Getting the strategic sequencing right
Blue oceans are not limited to a particular industry. All companies, within all industries, can challenge the way they think about strategy and competition. Instead of relying on traditional strategic analysis, diving into the blue ocean is an innovative way for companies to achieve significant profits and influence their trajectory in the marketplace.
Differences between Red and Blue Oceans
Before trying to create a blue ocean strategy it is helpful to understand how it is different from a more traditional red ocean strategy. Dr. Sarah Layton, a Certified Management Consultant, outlines differences between red and blue oceans:
- Focusing on current customers vs. noncustomers
- Competing in existing markets vs. creating uncontested markets
- Beating the competition vs. making the competition irrelevant
- Exploiting existing demand vs. creating and capturing new demand
- Making the value-cost tradeoff vs. breaking the value-cost tradeoff
- Aligning the organization with differentiation OR low-cost vs. aligning the organization with differentiation AND low-cost
Eight Principles of Blue Ocean Strategy
The authors explain that in the decade since their book was published, they have received countless questions about how the blue ocean strategy can be best understood and implemented. In response, they created 8 guiding principles. Blue Ocean thinking is:
- Grounded in data
- Pursues differentiation and low cost
- Creates uncontested market space
- Empowers users through tools and frameworks
- Provides a step-by-step process
- Maximizes opportunity while minimizing risk
- Builds execution into strategy
- Shows how to create a win-win outcome
Understanding how to create a Blue Ocean Strategy and implementing these 8 principles can create new opportunities for growth and profit for business.
* Excerpt from the Blue Ocean Strategy