This book contains numerous examples of successful blue ocean strategies, and it teaches how to discover and execute them.
Blue Ocean Strategy
Creating Blue Oceans
According to the authors value innovation is a consistent pattern leading to successful blue ocean strategies. Blue ocean strategy creates new market spaces, creates new demand, and thus leads to profitable growth.
Therefore to succeed, blue ocean strategy requires doing things in a new way that delivers a leap in value to customers.
The properties of Blue Ocean are as follows:
• Blue oceans are being continuously created
• These lead to more profitable growth
• It doesn’t seek to trade off value
• There is no eternal successful executor of blue ocean strategy
• Technology innovation is not necessary for blue ocean strategy
One of the major reasons imitative competition is so popular is that it provides a straightforward blueprint for what to do.
The Strategy Canvas
The strategy canvas represents how a blue ocean strategy differs and what is the current state of the industry. It plots two axes:
On the horizontal axis it list the values the customer it cares about, and current dimensions of competition. On the other hand, the vertical axis Segment buyers into distinct groups. Finally for each group, show how much buyers receive in each of the horizontal factors by plotting a value curve.
Thus it requires a four Actions Framework to create a distinct curve.
1. Which factors the industry takes for granted should be eliminated?
2. Factors that are well below industry standards should be reduced.
3. Which factors need improvement well above industry standards?
4. Those factors should be created that the industry has never offered?
Therefore, the three Characteristics of a Good Blue Ocean Strategy are:
1. Focuses on a few factors, instead of spreading itself thin across many.
2. Diverges from competition, instead of imitating it.
3. Can articulate its strategy with a clear tagline.
Formulating Blue Ocean Strategy
In this section the author teaches the ways to discover blue oceans.
Reconstruct Market Boundaries
The author offers 6 paths to find new blue ocean opportunities:
Path 1: Look across -Alternative Industries
Path 2: Strategic Groups within Industries
Path 3: The Chain of Buyers
Path 4: Complementary Product and Service Offerings
Path 5: Functional or Emotional Appeal to Buyers
Path 6: Look across Time
Focus on the Big Picture, Not the Numbers
A strategy canvas accomplishes the following:
• It identifies the important factors of competition in the industry.
• Strategic canvas shows the strategic profile of current competitors.
• Shows unique value curve critical to customers at the expense of less-important factors.
The Blue Ocean Strategy’s method to generate strategy canvases:
1. Visual awakening
-Goal: Agree on the current state of play and overcome denial about your company’s current position.
-Create separate teams to highlight different opinions on competitive factors
-See where your strategy needs to change and notice where your organization has lost focus, is the spread thin, or resembles the exact strategy of competitors and take note of where your competitor’s strategy differs.
2. Visual exploration
-Goal: See customer problems in person.
-Go directly to customers, non-customers, lost customers, and competitors’ customers to evaluate the 6 paths to creating blue oceans
-Talk to people and watch them in action.
– Then find which factors they care a lot about and which factors they couldn’t care. At least a few of your assumptions are probably wrong.
So try alternatives to your product to find new factors your product doesn’t have
– Finally, draw a range of new strategy canvases and decide which factors you will eliminate, reduce, raise, or create
-Force people to create multiple canvases to push thinking and consider creating one canvas for each of the six paths.
3. Visual strategy fair
-Present canvases to stakeholders, including not just management but also employees, customers, non customers
-Limit presentations to 10 minutes
-Judges award stickers to their favorites. They explain their picks and also their non-picks
-Find commonalities between strategy curves.
-End by synthesizing a value curve for the new strategy
4. Visual communication
-Distribute your strategic profile to team members.
-Support only those projects that bridge the gap between outcome and new strategy.
Reach Beyond Existing Demand
Blue Ocean Strategy requires that you must reach beyond existing demand. In addition, you must build on commonalities between customer groups to find unmet pain points.
The book argues there are three tiers of non customers:
-First tier: Soon-to-be non customers are begrudging customers in your market, waiting to jump to better alternatives.
-Second tier: Refusing non customers have considered your industry’s options but have decided not to consume them.
-Third tier: Unexplored non customers have never thought of your industry’s products as an option.
Get the Strategic Sequence Right
Blue Ocean Strategy proposes the following strategic sequence:
-Buyer utility: Regarding exceptional utility in your idea.
-Price: Regarding accessibility to the target mass of buyers.
-Cost: Regarding attainment of your cost target to profit at your price.
-Adoption: Regarding hurdles that impede your idea.
Executing Blue Ocean Strategy
This section covers the common hurdles faced in executing your blue ocean idea.
Overcome Key Organizational Hurdles
Organizations undergoing a strategic shift face these four hurdles:
1.Cognitive – recognizing the need for change
2. Limited resources
3. Motivation – inspiring real action
4. Politics
Build Execution into Strategy
The point of this chapter is that you shouldn’t develop and implement the blue ocean strategy in a silo, ignoring people and
Blue Ocean Strategy highlights the importance of procedural justice i.e people care as much about the fairness of the process as they do about the ultimate outcome.
There are three elements of fair process:
1. Engagement
Involve people by asking for their input and discuss their ideas.
2. Explanation
Make clear that you have considered people’s opinions and decided for the overall interest of the company.
3. Clear expectations
Make clear how employees will be evaluated and specify successful goals. As a result, workers can focus on execution rather than angst.
Align Value, Profit, and People Propositions
When all 3 propositions (value, profit, and people) are aligned they work beautifully in harmony, reinforcing each other and making the strategy more defensible. The three propositions reinforce each other.
An organization’s activities are mutually reinforcing and lead to a strong competitive advantage. Any activities that do not reinforce the other activities are discarded.
Renew Blue Oceans
When you create a blue ocean will definitely attract imitators turning it into a red ocean. This raises two challenges:
1. How do you prolong the sustainability of your blue ocean to maximize profits?
2. How do you perpetuate your organization as your former blue oceans turn red?
Maximizing a Blue Ocean Business
To prolong sustainability of your blue ocean broaden your defensive moat to ward off competitors and renew the blue ocean with constant innovation.
Renewing the Organization
When the blue ocean turns red and it’s difficult to value innovate further, and then the company needs to look for more blue oceans to enter. Therefore the company maintains a portfolio of businesses at different stages of their life cycle.
Avoid Red Ocean Traps
Blue Ocean Strategy ends with ten cognitive traps that can deter you from creating blue oceans or it can jeopardize your execution.
1. Myth: Blue ocean strategy is a customer-led strategy.
Reality: Blue oceans are about exploring non customers and creating new demand.
2. Myth: To create blue oceans, you must venture beyond your core business. Reality: It doesn’t have to be this risky or scary. Discover
3. Myth: Blue ocean strategy requires new technologies.
Reality: Customers care about values in their lives instead of new technology.
4. Myth: You must be first to market with a blue ocean strategy.
Reality: It’s more important to be the company that makes a huge leap in customer value
5. Myth: Blue ocean strategy is the same as differentiation strategy
Reality: Rather than trying to maximize all factors, blue oceans focuses on the critical value factors and eliminates unnecessary factors.
6. Myth: Blue ocean strategies are low-cost strategies that price low.
Reality: Blue ocean strategies try to change the basis of competition, with lower cost.
7. Myth: Blue ocean strategy is purely about marketing.
Reality: A successful strategy requires great propositions of value, cost, and people. Marketing is important, but focusing on this at the expense of other components will cripple the sustainability of the strategy.
8. Myth: Blue ocean strategy is about finding and dominating niches.
Reality: Blue ocean strategy tries to de-segment buyers by focusing on commonalities across customers and non customers, and creating a new value proposition. This creates a larger market than further segmentation.
9. Myth: Blue ocean strategy sees competition as always bad, when it can actually be good.
Reality: Competition is bad at a certain point, when supply exceeds demand, and cutthroat competition leads to fall in margins.
10. Myth: Blue ocean strategy is synonymous with creative destruction or disruption.
Reality: Blue oceans don’t necessitate displacement, because they redefine industry boundaries and reach non customers, thus expanding the industry. This is nondestructive creation.