Blue Ocean Strategy, Expanded Edition
How to Create Uncontested Market Space and Make the Competition Irrelevant
Chat with the bookSummary
The book "Blue Ocean Strategy, Expanded Edition" by W. Chan Kim sets out to explore a new strategy for businesses to break free from competition and create uncontested market space, termed as "blue oceans". The authors argue that many companies operate within crowded and competitive markets ("red oceans") where they struggle to differentiate themselves from their rivals. This results in companies competing primarily on price, which erodes profit margins and stifles true innovation.
The book begins by examining the flaws of traditional business strategy, which emphasizes beating the competition and gaining market share. The authors argue that this approach only works in a limited way and is not sustainable in the long run. They propose that businesses open themselves up to new horizons by seeking out new markets, creating new products and services, and finding new customer groups that have not been targeted before.
The authors then provide a framework for creating blue oceans and achieving sustainable growth by looking beyond just traditional factors like price and product differentiation. They outline tools and frameworks that businesses can use to identify untapped opportunities and create unique value propositions for their customers.
The book concludes with case studies of businesses that have successfully created blue oceans and offers practical advice for managers and executives looking to implement these strategies in their own organizations. Overall, Blue Ocean Strategy is a thought-provoking and practical guide for businesses looking to break free from the constraints of traditional competition.
The book begins by examining the flaws of traditional business strategy, which emphasizes beating the competition and gaining market share. The authors argue that this approach only works in a limited way and is not sustainable in the long run. They propose that businesses open themselves up to new horizons by seeking out new markets, creating new products and services, and finding new customer groups that have not been targeted before.
The authors then provide a framework for creating blue oceans and achieving sustainable growth by looking beyond just traditional factors like price and product differentiation. They outline tools and frameworks that businesses can use to identify untapped opportunities and create unique value propositions for their customers.
The book concludes with case studies of businesses that have successfully created blue oceans and offers practical advice for managers and executives looking to implement these strategies in their own organizations. Overall, Blue Ocean Strategy is a thought-provoking and practical guide for businesses looking to break free from the constraints of traditional competition.
Key ideas
1. Red ocean vs. blue ocean strategy: In the book, the authors differentiate between the crowded red ocean market where competition is intense and the blue ocean which refers to the uncharted and untapped markets. The authors suggest that companies can gain a competitive advantage by identifying and exploiting untapped markets.
Example: Cirque du Soleil created a blue ocean by combining elements of circus arts with theater and live music, creating a new form of entertainment that appealed to a wider audience. By creating a new market, they were able to differentiate themselves from traditional circuses and avoid direct competition with them.
2. Value innovation: The authors propose that rather than focusing on competing with existing players in the market, companies should focus on creating new market spaces that will yield growth and profits. Value innovation is about offering unique value propositions that appeal to customers in new and different ways.
Example: Yellow Tail, an Australian wine brand, created a blue ocean by offering a simple and approachable wine lineup that appealed to customers who were intimidated by the traditional wine industry. The brand also used a non-traditional marketing approach to attract new customers, such as advertising during the Super Bowl.
3. Six paths framework: The Six Paths Framework is a tool for identifying new market space by looking at six different areas of the market, including customer groups, complementary products and services, functional and emotional appeal, time, and geography.
Example: The Ford Model T is an example of a company that used the Six Paths Framework to create a blue ocean by targeting a new customer group - the middle class. At the time, cars were considered luxury items reserved only for the wealthy. Ford broke this pattern by targeting a new customer group and offering a car that was affordable and easy to use.
4. Noncustomer analysis: Noncustomer analysis is about looking beyond your existing customers and identifying noncustomers who may have similar needs but aren't currently buying your product or service. By identifying noncustomers, companies can gain insights into what they need and develop products or services to meet those needs.
Example: The authors cite Starbucks as an example of a company that used noncustomer analysis to create a blue ocean by appealing to people who didn't like traditional coffeehouses. By creating a third place - a location that was not home or work - Starbucks attracted noncoffee drinkers who were looking for a comfortable and appealing space to socialize.
5. Strategic sequencing: The authors suggest that companies should approach market creation in a series of strategic moves rather than trying to change everything at once. By focusing on strategic sequencing, companies can gradually build momentum and gain a competitive advantage over time.
Example: Nintendo is an example of a company that used strategic sequencing to create a blue ocean by focusing on kid-friendly games and consoles. Nintendo started with the Game & Watch series, then moved to the NES, which became a top seller. Over time, they expanded to other consoles and markets, but always maintained a focus on creating products that appealed to a younger audience.
6. The power of execution: The authors stress the importance of execution in translating blue ocean strategy into results. Companies must have a clear plan for executing their strategy and must be willing to make changes along the way to achieve their goals.
Example: The Coca-Cola Company is an example of a company that has successfully executed blue ocean strategies over time. They initially created a blue ocean market with the introduction of Coca-Cola as a medicinal drink, but over time, they innovated and evolved, introducing new products and marketing campaigns to stay ahead of the competition and remain relevant to customers.
Example: Cirque du Soleil created a blue ocean by combining elements of circus arts with theater and live music, creating a new form of entertainment that appealed to a wider audience. By creating a new market, they were able to differentiate themselves from traditional circuses and avoid direct competition with them.
2. Value innovation: The authors propose that rather than focusing on competing with existing players in the market, companies should focus on creating new market spaces that will yield growth and profits. Value innovation is about offering unique value propositions that appeal to customers in new and different ways.
Example: Yellow Tail, an Australian wine brand, created a blue ocean by offering a simple and approachable wine lineup that appealed to customers who were intimidated by the traditional wine industry. The brand also used a non-traditional marketing approach to attract new customers, such as advertising during the Super Bowl.
3. Six paths framework: The Six Paths Framework is a tool for identifying new market space by looking at six different areas of the market, including customer groups, complementary products and services, functional and emotional appeal, time, and geography.
Example: The Ford Model T is an example of a company that used the Six Paths Framework to create a blue ocean by targeting a new customer group - the middle class. At the time, cars were considered luxury items reserved only for the wealthy. Ford broke this pattern by targeting a new customer group and offering a car that was affordable and easy to use.
4. Noncustomer analysis: Noncustomer analysis is about looking beyond your existing customers and identifying noncustomers who may have similar needs but aren't currently buying your product or service. By identifying noncustomers, companies can gain insights into what they need and develop products or services to meet those needs.
Example: The authors cite Starbucks as an example of a company that used noncustomer analysis to create a blue ocean by appealing to people who didn't like traditional coffeehouses. By creating a third place - a location that was not home or work - Starbucks attracted noncoffee drinkers who were looking for a comfortable and appealing space to socialize.
5. Strategic sequencing: The authors suggest that companies should approach market creation in a series of strategic moves rather than trying to change everything at once. By focusing on strategic sequencing, companies can gradually build momentum and gain a competitive advantage over time.
Example: Nintendo is an example of a company that used strategic sequencing to create a blue ocean by focusing on kid-friendly games and consoles. Nintendo started with the Game & Watch series, then moved to the NES, which became a top seller. Over time, they expanded to other consoles and markets, but always maintained a focus on creating products that appealed to a younger audience.
6. The power of execution: The authors stress the importance of execution in translating blue ocean strategy into results. Companies must have a clear plan for executing their strategy and must be willing to make changes along the way to achieve their goals.
Example: The Coca-Cola Company is an example of a company that has successfully executed blue ocean strategies over time. They initially created a blue ocean market with the introduction of Coca-Cola as a medicinal drink, but over time, they innovated and evolved, introducing new products and marketing campaigns to stay ahead of the competition and remain relevant to customers.
Quotes
1. "The introduction of a new perspective can shift the dimension of competition and create uncontested market space."
2. "Rather than competing within the confines of the existing industry or trying to steal customers from rivals, a blue ocean strategy offers companies opportunities to create new, uncontested market space."
3. "Blue ocean strategy is based on the view that the market universe is composed of two types of oceans: red oceans and blue oceans."
4. "To create blue oceans, companies need to explore new ways of delivering value to customers that do not yet exist in the market."
5. "In blue ocean strategy, the focus is not on beating the competition, but on making the competition irrelevant by creating new market space that is uncontested."
6. "To succeed in creating blue oceans, companies need to think beyond their current industry boundaries and consider how they can combine products, services, and experiences to meet the needs of customers in new and innovative ways."
7. "The first step in developing a blue ocean strategy is to shift the focus from competing for existing customers to creating new customer demand."
8. "Blue ocean strategy requires a willingness to challenge conventional wisdom and take risks in pursuing new market opportunities."
2. "Rather than competing within the confines of the existing industry or trying to steal customers from rivals, a blue ocean strategy offers companies opportunities to create new, uncontested market space."
3. "Blue ocean strategy is based on the view that the market universe is composed of two types of oceans: red oceans and blue oceans."
4. "To create blue oceans, companies need to explore new ways of delivering value to customers that do not yet exist in the market."
5. "In blue ocean strategy, the focus is not on beating the competition, but on making the competition irrelevant by creating new market space that is uncontested."
6. "To succeed in creating blue oceans, companies need to think beyond their current industry boundaries and consider how they can combine products, services, and experiences to meet the needs of customers in new and innovative ways."
7. "The first step in developing a blue ocean strategy is to shift the focus from competing for existing customers to creating new customer demand."
8. "Blue ocean strategy requires a willingness to challenge conventional wisdom and take risks in pursuing new market opportunities."
Action items
Step 1: Understand the concept of Blue Ocean
The first step in implementing a Blue Ocean Strategy is to understand its fundamental concept. Blue Ocean refers to a new market space, where there is no competition, and the market demand is created by offering unique value to customers.
Step 2: Identify the current state of the market
The second step is to identify the current state of the market. This requires a thorough analysis of the market trends, consumer needs, and the strengths and weaknesses of the existing players.
Step 3: Identify the potential market opportunities
The third step is to identify the potential market opportunities that are untapped or underserved by the existing players. This requires creativity and innovation in identifying new customer segments, new product or service offerings, and new delivery channels.
Step 4: Create a strategic canvas
The fourth step is to create a strategic canvas, which is a visual representation of the current state of the market and the potential market opportunities. This canvas helps in identifying the key factors that differentiate the existing players and the potential market opportunities.
Step 5: Develop a value curve
The fifth step is to develop a value curve, which is a visual representation of the value proposition of the new offering compared to the existing players. This helps in identifying the key areas where the new offering can create value for customers.
Step 6: Develop a business model
The sixth step is to develop a business model that aligns with the value proposition of the new offering. This requires a thorough analysis of the cost structure, revenue streams, and key partnerships that are needed for the new offering to be successful.
Step 7: Test and refine the strategy
The seventh step is to test and refine the strategy through a series of experiments and feedback loops. This requires a willingness to adapt and iterate the strategy based on the results of the experiments.
The first step in implementing a Blue Ocean Strategy is to understand its fundamental concept. Blue Ocean refers to a new market space, where there is no competition, and the market demand is created by offering unique value to customers.
Step 2: Identify the current state of the market
The second step is to identify the current state of the market. This requires a thorough analysis of the market trends, consumer needs, and the strengths and weaknesses of the existing players.
Step 3: Identify the potential market opportunities
The third step is to identify the potential market opportunities that are untapped or underserved by the existing players. This requires creativity and innovation in identifying new customer segments, new product or service offerings, and new delivery channels.
Step 4: Create a strategic canvas
The fourth step is to create a strategic canvas, which is a visual representation of the current state of the market and the potential market opportunities. This canvas helps in identifying the key factors that differentiate the existing players and the potential market opportunities.
Step 5: Develop a value curve
The fifth step is to develop a value curve, which is a visual representation of the value proposition of the new offering compared to the existing players. This helps in identifying the key areas where the new offering can create value for customers.
Step 6: Develop a business model
The sixth step is to develop a business model that aligns with the value proposition of the new offering. This requires a thorough analysis of the cost structure, revenue streams, and key partnerships that are needed for the new offering to be successful.
Step 7: Test and refine the strategy
The seventh step is to test and refine the strategy through a series of experiments and feedback loops. This requires a willingness to adapt and iterate the strategy based on the results of the experiments.