A landmark work that upends traditional thinking about strategy, this book charts a bold new path to winning the future.. They have fought for competitive advantage, batled over market share, and struggled for differentiation. Wining 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. 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. Blue Ocean Strategy presents a systematic aproach to making the competition irrelevant and outlines principles and tools any company can use to create and capture blue oceans. Chan Kim and Renée Mauborgne argue that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pol. Such strategic moves—which the authors call “value innovation”—create powerful leaps in value that often render rivals obsolete for more than a decade. 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
EAN: 9781591396192
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Should I buy the Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant?
Value Innovation - strategy book of the year 2005?
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
"To strive, to seek, to find...."
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.
How to find, analyze, and develop new markets
I got to listen to Renée Mauborgne speak about "Blue Ocean Strategy." She was a very entertaining speaker and she made a number of interesting points. I tracked down the book and read it. I am glad I did. This book is the result of years of research into the history of business. One of the key questions the authors focus on is: "What makes a business profitable?" They came to the conclusion that companies which develop new markets can basically print money for the first five to ten years.
A "Blue Ocean" represents an uncontested market, a product or service that only one company is selling. The authors show that historically this has been the most profitable situation to be in, as opposed to a market with lots of competitors, or a "Red Ocean." The authors found that most of the tools for developing strategies in business are focused on "Red Oceans." The authors found that most "Red Ocean" strategies take the current industry's structural conditions as a given. A "Blue Ocean Strategy" sees market boundaries and industry structures as flexible. This book was written to help people find new markets, analyze if the new market could be profitable, and then develops strategies for fully exploiting the new market.
One of the key tools for finding new markets is what the authors call a "Strategy Canvas." The idea is to pick a set of key factors that current markets focus on, then on a scale from low to high put a point for where a market is for each factor, and then draw a line for a market. By looking at where there are no lines you may get some ideas for new markets.
Once a new market is identified the authors help analyze if there is potential for making money. They have a set of ideas on how to look beyond the existing demand, more importantly they provide some tools and processes for the analysis just how big a new market might be.
And once the decision is made to move into a new market, the authors have ideas on how to organize the business. They made the point that there is often a lot of reluctance to make changes and provide some ideas on how to get employees on board.
In many ways developing a new market, or a "Blue Ocean," is a lot of work. And in the past it has been very risky. By using the ideas from "Blue Ocean Strategy" businesses will have a better chance of finding and developing profitable new markets. It will be interesting to see if there is a new emphasis by businesses to more systematically look for new markets, and where that leads us.
This is going to be a classic. It is very readable, and worth rereading. The key insights and principles in the book are well explained, and supported by lots of examples. People will be reading it for the next twenty or more years. If you enjoy books about business, read this book. If you are looking for ways to expand or develop your business, read this book.
Lots of food for thought
It is not the ideas that makes this book great. The idea of 'untapped markets' and 'making competition redundant' are as old as oceans of all hues.
The real strength of this book is its compilation of cases. Taking examples from several industries - circus, transportation, wine, and many more, the authors create a compelling list of 'tried and tested' ideas to pursue. While some of the cases are well known and documented, there are several others that are extremely stimulating.
This book did not really help me resolve the Red-Blue dilemma, but it did provide a lot of food for thought in searching for new opportunities.
A great set of strategy tools that are worth the effort to understand
Over the past four months I have been looking for good business books on subjects of interest in vain and this book has been worth the search. Kim and Mauborgne have taken a look at how to create new markets. The value of this book is in the tools used to help identify new markets. To be honest the tools are not particularly unique and the ideas and examples are ones that have been used before.
What makes this book a must read is the way the tools are described and illustrated -- some of the best I have ever seen. The tools are clear, explainable, and something that you yourself can use on your own company, a triple win that is rare in business books.
The weak part of the book is its organization and its obsession with the term "blue ocean". The reader just has to work their way through the terms, something that you can do.
The book is well organized and while it starts a little slow and you may need to push your way through the first 50 - 60 pages, the push is worth it.
Part 1: Describes what we mean by a blue ocean strategy which is one that revolves around creating new markets where there are few customers. This is created through doing a strategy canvas that looks at your performance relative to the rest of the industry.
Part 2: Goes through the process of formulating the strategy. It talks about how you find your blue ocean. Frankly, the first part of this section is not particularly strong, very conceptual. The last part that talks about the strategy formulation process is good.
Part 3: Executing the Blue Ocean Strategy is an innovative and good way of looking at managing enterprise change. In particular, the part talks about a non-traditional and innovative approach to leading change. The notion of "tipping point" change management is something every executive should know about.
A good book, with great tools that one can apply. That makes the book well worth the effort to understand, particularly as you move into the middle of the book.
