Blue Ocean Strategy - W. Chan Kim, Renée Mauborgne

Blue Ocean Strategy - W. Chan Kim, Renée Mauborgne

Winning by not competing: a fresh approach to strategy Since the dawn of the industrial age, companies have 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 these hallmarks of competitive strategy are not the way to create profitable growth in the future. In a book that challenges everything you thought you knew about the requirements for strategic success, W. Chan Kim and Renée Mauborgne argue that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, the authors argue that lasting success comes not from battling competitors, but from creating “blue oceans”: untapped new market spaces ripe for growth. Such strategic moves—which the authors call “value innovation”—create powerful leaps in value that often render rivals obsolete for more than a decade. Blue Ocean Strategy presents a systematic approach to making the competition irrelevant and outlines principles and tools any company can use to create and capture blue oceans. A landmark work that upends traditional thinking about strategy, this book charts a bold new path to winning the future.

From the Inside Flap "After reading Blue Ocean Strategy, you will never again see your competition in quite the same light. Kim and Mauborgne present a compelling case for pursuing strategy with a creative, not combative, approach. Their emphases on value innovation and stakeholder engagement alone make this book a must-read for both executives and students of business." -Carlos Ghosn, President and CEO, Nissan Motor Co., Ltd.

"This is an extremely valuable book to read. It examines the experience of companies in areas as diverse as watches, wine, cement, computers, automobiles, and even the circus to shed new light on the development of future strategies."

-Nicolas G. Hayek, Cofounder and Chairman of the Board, Swatch Group

"I recommend Blue Ocean Strategy to any executive in the private or public sector. It shows how to break from the status quo, create a winning future strategy, and execute this fast at low cost. As much a practical guide as an eye-opener."

-William J. Bratton, Chief of the Los Angeles Police Department, former Police Commissioner of the City of New York

"Kim and Mauborgne's strategies are not only original but practical. Our company has used them and obtained powerful results. The authors chart a bold new path to winning the future."

-Patrick Snowball, Chief Executive, Norwich Union Insurance

About the Author W. Chan Kim is The Boston Consulting Group Bruce D. Henderson Chair Professor of Strategy and International Management at INSEAD and an advisory member for the European Union. Renée Mauborgne is The INSEAD Distinguished Fellow and a professor of strategy and management and a Fellow of the World Economic Forum. Together, they have written for the Wall Street Journal, New York Times, and Financial Times, and their Harvard Business Review articles have sold over 500,000 reprints. They were selected for Thinkers 50, the global ranking of business thinkers, and The Sunday Times (London) called them “two of Europe’s brightest business thinkers…Kim and Mauborgne provide a sizeable challenge to the way managers think about and practice strategy.” They split their time between New York and Fontainebleau, France.

Book Review: Blue Ocean Strategy

Book Review: Blue Ocean Strategy

I'm posting this one rapidly in hopes that I can cover up my last post before anyone sees it. :) "Blue Ocean Strategy" is a very thought provoking book that puts structure behind strategic planning. It reminds me a lot of "Purple Cow" type of thinking and is definitely worth a read. My only real complaint is the authors don't make the book all that exciting or entertaining. It did a good job putting me asleep on more than one occasion.

The sub-title of the book is "How to Create Uncontested Market Space and Make Competition Irrelevant." The focus of the majority of the book is strategies for discovering your Blue Ocean. I liked their ideas on how to put a process around strategic thinking.

Damn, too late, AMartin is already on my case for the Martha post.... :)

So, what is a Blue Ocean? Just think about how instead of one-upping your competition with the next big feature, how can you make the competition irrelevant by creating a new market space where there is no competition. For example, "Curves for Women" created a new type of health club aimed at the millions of women who hated working out at home, but also hated spending hours at a high priced, intimidating health club. Typical health clubs want you to spend a lot of time there, spend a lot of money, and use equipment that is complicated. On top of that, there are a ton of bulky guys there starring. Curves created a new environment that had equipment that was easy to use and didn't require a lot of time to workout. Curves made regular health clubs and home workout equipment irrelevant by moving into this uncontested market space.

Damn, second comment on my blog, I can tell I'm in trouble so I'll go ahead and post this one!

Blue Ocean Strategy Customer's Review By J. Revel

By J. Revel (USA) - See all my reviews

Blue Ocean Strategy is described as the creation of new markets; where market space is uncontested; where the competition becomes irrelevant; and where the tendency to engage in value-cost trade-off is broken. It was written by W. Chan Kim and Renee Mauborgne.
The book takes the reader through a descriptive analysis of the Blue Ocean Strategy. However, I feel it fails to make a convincing case for maintaining a competitive advantage in the long run, even though it attempts to do so in its conclusion "The sustainability and Renewal of Blue Ocean Strategy". For example, it defends the Blue Ocean Strategy by demonstrating how CNN and its 24 hour news business model, was ridiculed by the major networks as an unsustainable business model. The authors point out that "ridicule does not inspire rapid imitation". Perhaps they are right, but for how long? A few years later we now have MSNB, CNBC and the new ratings king, for now anyway, Fox News. You could make a point that Fox News actually benefited from NOT being the Blue Ocean innovator.

Also, the risks of the Blue Ocean Strategy are not discussed extensively. There is something to be said about joining a crowded market (red ocean) and competing by improving the value proposition minimally. Most business people dream of creating this elusive "Blue Ocean" where there is no competition, however, I would venture to speculate that for every successful blue ocean strategy there are hundreds of failures that could have had a better result had they decided to compete in an established market.

We all admire the Blue Ocean creators for their vision and value to the marketplace and this book describes some of the advantages of creating such an enterprise quite well. The authors do get you thinking creatively and they do a fabulous job analyzing their Blue Ocean companies and how they broke from the status quo by their focus on value innovation.

Blue Ocean has made it into the vernacular of the business world. I am surprised how often I have heard and used this term to describe the creation of a new market.
Enjoy!

Blue Ocean Strategy Customer's Review By Andrew White

By Andrew White (Atlanta, United States) - See all my reviews

Overall mildly interesting; though I would not recommend to read. Much of this book is obvious and what you and I should remember from all the strategy books we read 20 years ago (avoid competition by developing new markets - the essence of blue ocean strategy; value innovation which is just innovation that has an implied market). Overall this is a re-hash of previously published theory with a smattering of interesting ideas (much strategy analysis that looks at the `firm' or `industry' is not that useful and it might be better to look at the `strategic move'; there is no such thing as a perpetually high performing firm). I also disagree with the premise that creating developing a new market leads to a unique offering "at the lowest cost" which is one of the comparisons with red ocean strategy that, according to the authors, force all industries to center on differentiation or cost, since in a brand new market there is no competition so cost is not even as important as in the red oceans. It is on as the market develops and attracts competition that cost becomes more important. Either these authors have not read widely (they argue that Built to Last and In Search of Excellence were wrong since many case study firms in those books later fell from grace) or they did not take away from those books and others what they should have about market development, dynamics, and evolution. Don't both with this book - buy In Search of Excellence and revel in the exciting times that was then.

Blue Ocean Strategy Customer's Review by D. F Shafer

By D. F SHAFER "don" (austin, tx United States) - See all my reviews

As opposed to many of the other reviewers we tried to use this process in a strategic marketing session with four teams in our company. This was a frustrating and disappointing process! First, the book, Blue Ocean Strategy, is a trite misrepresentation of an ex post facto process that has been dismissed by professional researchers and analysts. You do NOT prove your theory by fitting the past into your "model of the future". They did NOT work with Southwest Airlines to make them successful. They looked for examples that fit their thesis and applied it to ones they knew were succssful. This is not academically honest nor is it a good way to predict the future. It is like using Neural Networks to make predictions - they are 100% accurate in predicting the past.

Second, our team got to the point that we "believe" we found an underserved market area and we have three options and a full list of targeted areas for discussion. Now, how in the world can this book or anyone else on my team or in our company give me any insight into which one of these will be accepted by a prospect? This book promotes the worst form of pedantic navel gazing and raises self-reference to an absurd level. If we held the answer we would not need the strategic marketing exercise. Continuing this charade does us all a disservice. I worked with and managed product marketers for years in high tech companies who had companies like IBM and Intel as our customers. They did not do pencil whipping exercises. They went out and talked to prospects and asked them what they needed. This is not a novel approach but this Blue Ocean strategy seems to think that validation comes at the end after lots of silly charting and analysis.
This book will send you on a fools' errand. Buy it for your competition and hope that they follow it.

Blue Ocean Strategy Customer's Review by Robert Morris

By Robert Morris (Dallas, Texas) - See all my reviews

This is an especially thought-provoking book which, as have so many others, evolved from an article published in the Harvard Business Review. According to Kim and Mauborgne, "[in italics] Blue ocean strategy [end italics] challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant...This book not only challenges companies but also shows them how to achieve this. We first introduce a set of analytical tools and frameworks that show you how to systematically act on this challenge, and, second, we elaborate the principles that define and separate blue ocean strategy from competition-based strategic thought." There are six principles which are introduced and then discussed on pages 49, 82, 102, 117, 143, and 172, respectively.

Frankly, I was somewhat skeptical that this book could deliver on the promises made in its subtitle. In fact, the material provided by Kim and Mauborgne is essentially worthless unless and until decision-makers in a given organization accept the challenge, are guided and informed by the six principles, and effectively use the tools within appropriate frameworks. The responsibility is theirs, not Kim and Mauborgne's. To assist their efforts, Kim and Mauborgne focus on several exemplary companies which have dominated (if not rendered irrelevant) their competition by penetrating previously neglected market space. They include the Body Shop, Callaway Golf, Cirque du Soleil, Dell, NetJets, the SONY Walkman, Southwest Airlines, Starbucks, the Swatch watch, and Yellow Tail wine.

Of greatest interest to me is Kim and Mauborgne's assertion that the innovations which enabled these companies to succeed with a Blue Ocean strategy did NOT depend upon a new technology. Rather, each company pursued a strategy which enabled it to free itself from industry boundaries. For Dell, that meant mass production of computers sold directly to consumers per each customer's specifications. Quite literally, each sale is "customized." For Callaway, creating an enlarged sweet spot to increase the frequency of solid contact for new or infrequent golfers just as, years ago, the enlarged Head racquet did so for new or infrequent tennis players. For Starbucks, creating a congenial environment within which to socialize, go online, or read while consuming coffee. All of these Blue Ocean strategies created new or much greater value for customers. Their emphasis is on the quality of experience, not on the benefits of a new technology.

According to Kim and Mauborgne, their research indicates that "the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering." The cornerstone of a Blue Ocean strategy is value innovation which occurs "only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch." For Kim and Mauborgne, value innovation is about strategy that embraces the entire system of a company's activities. It requires companies to orient the whole system toward achieving a "leap" in value for both buyers and themselves. Kim and Mauborgne explain HOW to create uncontested market space wherein competition is essentially irrelevant.

To paraphrase Henry Ford, whether decision-makers think they can or think they can't do that, they're right.

Blue Ocean Strategy Customer's Review By Peter Leerskov

By Peter Leerskov "The Strategist" The authors have published many articles over the last decade on Value Innovation. This is their first book. It summarizes their extensive knowledge on out-of-the-box strategic thinking.

What is a BLUE OCEAN STRATEGY? The authors explain it by comparing it to a red ocean strategy (traditional strategic thinking):
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company's activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company's activities in pursuit of both differentiation and low cost.

A red ocean strategy is based on traditional strategic thinking - e.g. Harvard's strategy guru Michael Porter.

Some cases:
* Airline industry price wars result in bankruptcies and low profit margins. Southwest Airlines creates a new market by offering the speed of air travel with the low cost and flexibility of driving.
* Golf equipment industry competes to win a greater share of existing golf customers. Callaway Golf creates "Big Bertha", a golf club with a large head that attracted new customers to golf that had been frustrated by the difficulty of hitting the ball.
* The cosmetic industry creates a red ocean with models, expensive advertising, and promises of youth and beauty. The Body Shop creates a blue ocean that lasts more than a decade by creating functional cosmetics that defied the industry which sold emotionally appealing cosmetics.
* The wine industry gluts the market with a red ocean of thousands of brands competing on the finest oaks and tannins and legacy winey names. Casella wines creates [yellow tail], a blue ocean wine that succeeded by eliminating complexity, elitism and consumer confusion and creating a fun simple image that non-wine drinkers could enjoy.

A blue ocean is created in the region where a company's actions favourably affect both its cost structure and it value proposition to buyers. Cost savings are made from eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.

Examples of strategic moves that created blue oceans of new, untapped demand:
- NetJets (fractional Jet ownership)
- Cirque du Soleil (the circus reinvented for the entertainment market)
- Starbucks (coffee as low-cost luxury for high-end consumers)
- Ebay (online auctioning)
- Sony (the Walkman - personal portable stereos)
- Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan (1984)
- Computers: Apple personal computer (1978) and Dell's built-to-order computers (mid-1990s).
The INSEAD professors Kim and Mauborgne have written regularly on the subject of Value Innovation since 1997 in Harvard Business Review. Being a business development manager, their thought leadership on strategic innovation has inspired me tremendously over the years. Their articles have been standard texts for many MBA students for some time (e.g. "Value Innovation", "Creating New Market Space", "Charting your Company's Future"). I expect their first book to be just as dominant in any strategy library as Michael Porter's books (the guru behind the classic red ocean strategies).

Peter Leerskov,
M.Sc. in International Business (Marketing & Management) and Graduate Diploma in E-business

Editorial Reviews - Blue Ocean Strategy

Editorial Reviews From Publishers Weekly

Kim and Mauborgne's blue ocean metaphor elegantly summarizes their vision of the kind of expanding, competitor-free markets that innovative companies can navigate. Unlike "red oceans," which are well explored and crowded with competitors, "blue oceans" represent "untapped market space" and the "opportunity for highly profitable growth." The only reason more big companies don't set sail for them, they suggest, is that "the dominant focus of strategy work over the past twenty-five years has been on competition-based red ocean strategies"-i.e., finding new ways to cut costs and grow revenue by taking away market share from the competition. With this groundbreaking book, Kim and Mauborgne-both professors at France's INSEAD, the second largest business school in the world-aim to repair that bias. Using dozens of examples-from Southwest Airlines and the Cirque du Soleil to Curves and Starbucks-they present the tools and frameworks they've developed specifically for the task of analyzing blue oceans. They urge companies to "value innovation" that focuses on "utility, price, and cost positions," to "create and capture new demand" and to "focus on the big picture, not the numbers." And while their heavyweight analytical tools may be of real use only to serious strategy planners, their overall vision will inspire entrepreneurs of all stripes, and most of their ideas are presented in a direct, jargon-free manner. Theirs is not the typical business management book's vague call to action; it is a precise, actionable plan for changing the way companies do business with one resounding piece of advice: swim for open waters.

Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

Book Review - Blue Ocean Strategy

W. Chan Kim and Renee Mauborgne (Cambridge, Mass.: Harvard Business School Press, 2004) : Reviewed by R. Lemuel Lasher

This is one small book that packs one big punch. At a mere 216 pages, including appendices, it’s a delightful and satisfying read. Here’s why.

W. Chan Kim and Renée Mauborgne have made a real contribution to advancing the thinking on business strategy, and they have done so with clear prose and an engaging style. They offer a set of practical frameworks and models that enables one to quickly grasp what appear to be intuitively obvious points, but are in reality profound insights and breakthrough contributions to business strategy literature.

By choosing as the title of their book a colorful metaphor not normally associated with strategy, the authors have given us a simple and memorable way of distinguishing their approach from more traditional ones.

A Blue Ocean is a market space that is created by identifying an unserved set of customers, then delivering to them a compelling new value proposition.

The first chapter, “Creating Blue Oceans,” introduces their thinking in a manner that is engaging and compelling. Their language of “creating” strategy, rather than the more traditional approaches to strategy development, sets the tone for the entire book. This is not just about strategy analysis and formulation; it is about using solid empirical data, rigorous analysis, and a strong dose of imagination.

According to the authors, a Blue Ocean is a market space that is created by identifying an unserved set of customers, then delivering to them a compelling new value proposition. This is done by reconfiguring what is on offer to better balance customer needs with the economic costs of doing so. This is as opposed to a Red Ocean, where the market is well defined and heavily populated by the competition. All parties in these markets are engaged in an intense competitive struggle for the same customers, with different and incremental yet easily comparable, value propositions.

The Blue Ocean is the unserved, unstructured demand that is all around us, if we could only see it. The Blue Ocean strategy is all about avoiding head-to-head competition. Because established markets in the developed world are saturated, head-to-head competition cannot bring attractive returns.