Blue ocean strategy may be perceived as involving high risk. How does blue ocean strategy address the issue of risk?

Blue ocean strategy may be perceived as involving high risk. How does blue ocean strategy address the issue of risk?

Above all, blue ocean strategy is about risk minimization and not about risk taking. Of course, there is no such thing as a riskless strategy. Any strategy, whether red or blue, will always involve risk. Nonetheless, when it comes to venturing beyond the red ocean to create and capture blue oceans there are six key risks companies face: search risk, planning risk, scope risk, business model risk, organizational risk, and management risk. The first four risks revolve around strategy formulation, and the latter two around strategy execution.

Each of the six principles in Blue Ocean Strategy expressly addresses how to mitigate each of these risks. The first blue ocean strategy principle - reconstruct market boundaries - addresses the search risk of how to successfully identify, out of the haystack of possibilities that exist, commercially compelling blue ocean opportunities. The second blue ocean strategy principle - focus on the big picture, not the numbers - tackles how to mitigate the planning risk of investing lots of effort and lots of time but delivering only tactical red ocean moves. The third blue ocean strategy principle - reach beyond existing demand – addresses the scope risk of aggregating the greatest demand for a new offering. The fourth blue ocean strategy principle - get the strategic sequence right – addresses how to build a robust business model to ensure that you make a healthy profit on your blue ocean idea, thereby mitigating business model risk. The fifth principle - overcome key organizational hurdles – tackles how to knock over organizational hurdles in executing a blue ocean strategy addressing organizational risk. The sixth principle - build execution into strategy – tackles how to motivate people to execute blue ocean strategy to the best of their abilities, overcoming management risk.

Hence, as much as blue ocean strategy is about maximizing opportunities it is also about minimizing risk. That is why blue ocean strategy speaks the language of executives. Executives cannot afford to be riverboat gamblers.