“Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant” by W. Chan Kim and Renée Mauborgne presents a new way of thinking about business strategy. Instead of focusing on competing in a crowded marketplace or “red ocean” filled with rivals, the authors encourage businesses to innovate and create their own uncontested markets, or “blue oceans”, where competition is irrelevant.
The book is based on a study of 150 strategic moves, spanning more than a hundred years and thirty industries. The authors identified that leading companies succeeded not by battling competitors, but by creating ‘blue oceans’ of uncontested market space ripe for growth. These strategic moves create a leap in value for the company, its buyers, and its employees while unlocking new demand and making the competition irrelevant.
The authors propose that a blue ocean strategy can be created through the simultaneous pursuit of differentiation and low cost, resulting in the creation of a new value curve. They introduce several analytical tools and frameworks, such as the Strategy Canvas, the Four Actions Framework, and the Eliminate-Reduce-Raise-Create Grid that companies can use to implement a blue ocean strategy.
The book challenges the traditional belief that successful strategies are dependent on the specific industries and encourages businesses to break out of the status quo and redefine market boundaries to gain a competitive edge. The key message is that the strategic challenge for businesses is not just about outperforming the competition in the existing industry, but about creating new market spaces and thus making the competition irrelevant.
“Blue Ocean Strategy” uses a number of case studies to illustrate its principles and frameworks. Here are five such examples:
- Cirque du Soleil: This is one of the most iconic examples in the book. Cirque du Soleil redefined the circus industry by eliminating animal shows and aisle concessions, reducing the importance of star performers, and creating a unique mix of theater and circus.
- Southwest Airlines: The authors discuss how Southwest created a new market space in the airline industry. By eliminating assigned seating, meal services, and inter-airline baggage transfers, Southwest was able to offer quick, point-to-point travel and friendly service at a significantly lower price than competitors.
- NetJets: This company created a blue ocean in the aviation industry by providing the advantages of private jet travel without the costs of ownership. They introduced the concept of fractional jet ownership, which allowed customers to buy a share in a plane, significantly reducing the entry cost of private jet travel.
- Yellow Tail: The Australian wine producer created a blue ocean by producing a wine that was easy to drink and choose, reducing the importance of vintage and complexity that were typically associated with wine. By doing so, they attracted a whole new group of customers who were previously intimidated by the complexity of choosing wine.
- The NYPD CompStat: The New York Police Department revolutionized law enforcement with the CompStat approach. Instead of focusing on reactive measures, they used data and analytics to predict and prevent crime, transforming the way law enforcement works.
These case studies and others in the book exemplify the core principles of the blue ocean strategy—companies succeeding not by battling competitors, but rather by creating ‘blue oceans’ of uncontested market space.