Blue Ocean Strategy was first published in 2005 to explain how organizations can successfully make the leap from cut-throat “red oceans” to wide-open “blue oceans”. In Blue Ocean Shift, Professors Renée Mauborgne and W. Chan Kim organize the blue ocean tools and framework into a systematic 5-step process and explains how to mobilize your people for a smooth transition. In this Blue Ocean Shift summary, we’ll outline the key principles and the 5 steps that any organization—be it profit, non-profit or public sectors—can use to make the shift from an existing, crowded market to a new, uncontested one. For the full details, examples and tips, do get a copy of the book, or get a detailed overview with our complete book summary bundle.
Overview: Blue Ocean Shift
Today, every industry faces the challenges of rising costs, intense competition, and rapid changes. A “red ocean” is a saturated market where organizations must compete to survive. A “blue ocean” is a market with little/no competition.
To move from red to blue oceans, you must create a new frontier where you can deliver both lower costs and higher value. This requires 3 key ingredients:
• Embracing a blue ocean perspective and fundamentally change your thinking. Stop focusing on competition within existing markets. Instead, expand your horizons and consider fresh perspectives to create real breakthroughs.
• Equipping your people with the practical tools/approaches from this book so they can create and implement the strategic shift.
• Embracing “humanness”. A strategic shift can only happen if people follow willingly. Don’t treat strategy formation and implementation as 2 separate processes, nor try to push people to change using structural changes or carrot-and-stick methods. Instead, (i) involve people from the onset, and (ii) win them over by giving them the inspiration and confidence to take action.
Blue Ocean Shift is a strategy guide built on 30 years of extensive research. In this article, we’ll give a brief overview of the key concepts and the 5 steps for applying them. Do get our full 16-page summary for a detailed explanation of each of these areas.
Blue Ocean Shift Concepts
1. Understanding Market Creation
Market creation does not have to mean a disruption or destruction of existing markets. In our complete Blue Ocean Shift summary, we elaborate on 3 key market-creation approaches, each with a different mix of disruptive vs non-disruptive creation.
The key is to focus on value innovation, not technological innovation or entrepreneurship. A blue ocean comes from unparalleled buyer value, not new technology. Starbucks and the Grameen Bank are examples of new markets created without new technology. You don’t need to be an entrepreneur to create a new market. All you need are the proper tools and processes to (i) translate innovation into buyer value and (ii) help people to overcome their fears and inertia.
2. The Blue Ocean Mindset
Use these 4 guiding principles to break free from a red ocean mindset and open up new blue ocean possibilities:
• Your existing industry boundaries and conditions aren’t fixed. You can shape and transform the boundaries—you’re only limited by your imagination.
• Don’t focus on beating your rivals. Seek to make your competition irrelevant by delivering a quantum leap in value. Ask yourself: how can we deliver such a compelling offering that we’d win masses of buyers even without marketing? This forces you to rethink the bases of your competition and investment.
• Don’t fight over existing customers. Focus on creating and capturing new customers, which unlocks a much larger untapped demand or market.
• Don’t choose between low cost or differentiation. Create superior value by offering both low cost and differentiation.
People want to make an impact, yet they’re afraid to fail. Adopt a humanistic approach: give people inspiration, confidence and direct their creative energy with 3 elements.
• Atomization: A big leap to a blue ocean can seem daunting. Instead, break it down into tiny, specific steps that people can grasp and execute to achieve quick wins.
• Firsthand discovery: If you tell people to change, they’ll resist. Instead, create the conditions where people will discover for themselves the need for change. Give them the tools to arrive at the conclusions themselves, and get them out on the field so they can see/experience the buyers’ pain points and alternatives.
• Fair Process: This involves 3 principles to develop trust and cooperation: (i) engagement (actively involving people in the process), (ii) explanation (helping people to understand the rationale for each step) and (iii) clear expectations (giving clarity on roles, responsibilities and what to expect).
Equip people with specific tools and frameworks (using the 5-step process below) to direct their creative competence.
The 5 Steps of a Blue Ocean Shift
Here’s a quick overview of the 5 steps to make the shift. In our full Blue Ocean Shift summary (click here for full 16-page summary), we’ll elaborate more on each of the 5 steps, the tools/frameworks involved, and how to apply them.
1. Get Started
The first step is to identify the area with the biggest potential gain and put together the right team for your blue ocean initiative. Plot your Pioneer-Migrator-Settler map to get a visual overview of your organization’s value innovation pipeline and select 1 best offering. Then, put together the right team to drive your blue ocean initiative and involve them from the onset. Get specific insights on how to select the ideal team members and plot the Pioneer-Migrator-Settler from our full summary bundle.
2. Establish the Current State of Play
The next step is to capture your strategy clearly so everyone’s aligned on the strategic landscape and exactly where you stand. The Strategy Canvas provides a 1-page picture that helps you to crystallize your strategy and put everyone on the same page. Learn what a good strategic profile should look like and how to draw your “as-is” strategy canvas.
3. Explore What Could Be
Next, help the team to envisage how to shift from the current red ocean into a new blue ocean by (i) uncovering buyer “pain points” (caused by your industry’s hidden constraints) and (ii) identifying how new demand can be unlocked.
Here, you’ll be using 2 separate tools: the Buyer Utility Map (to uncover hidden value) and exploring 3 tiers of noncustomers.
4. Define How to Get There
This step is about translating the big picture into practical blue ocean strategic moves by reconstructing your market boundaries (using the 6 Paths Framework) and identifying factors you can eliminate, reduce, raise and create (using the Four Actions Framework and ERRC Grid).
In our full Blue Ocean Shift summary (get complete summary here), you can get details on the 6 paths (industry, strategic group, buyer group, scope of offering, nature of appeal and time), as well as the questions/process to identify what to eliminate, reduce, raise and create to concurrently create value and reduce costs. By the end of Step 4, you should have 3 key outputs for each of the 6 Paths: an ERRC Grid, a “to-be” Strategy Canvas and a succinct tagline for each proposed offering.
5. Make your Blue Ocean Move
The final step is to select and launch your strategic move, testing and refining your business model quickly to maximize its potential. Use the Blue Ocean Fair to bring your stakeholders together and decide which strategic offering to pursue. Then quickly market-test a prototype and formalize a viable business model (define your strategic price, profit margin and target costing) and implement it progressively.
Putting it Together
In our full Blue Ocean Shift summary, we explain the 5 steps above in more detail, and wrap up with an example of how Group SEB created a blue ocean from the saturated red ocean for French-fry makers.
Other Details in Blue Ocean Shift
This is a step-by-step guide to creating and executing a Blue Ocean Shift. In our full summary, we’ll cover the key concepts and steps, with illustrations of all the major tools and frameworks. The book also includes many detailed case studies, ranging from prisons to hotels, consumer goods, software, and charity fund-raising. Each of the 5 steps also come with specific implementation tips and nuances, e.g. how to brief your team and what to include in your Blue Ocean Fair presentations. Do get a copy of the book for the full details, get our Blue Ocean Shift full summary for an overview of the various steps and tools, or download your free templates at www.blueoceanshift.com.
Do also check out our Blue Ocean Strategy summary here.
Use these 5 steps to systematically shift from a cut-throat red ocean to a wide-open blue ocean!