Instead of fighting head-on with your competitors, how do you create uncontested market space and make the competition totally irrelevant? Based on a study of 150 strategic moves spanning more than 100 years and 30 industries, Blue Ocean Strategy by Renee Mauborgne and W. Chan Kim addresses this question and provides a systematic approach to creating your own uncontested market space. In this free Blue Ocean Strategy summary, we’ll give a synopsis of the key concepts, tools and tips from the book.
BLUE OCEAN VS RED OCEAN
Why bother with Blue Oceans to begin with? Essentially, they create new demand, leading to easy uncontested growth in sales and profits, and wider and deeper market opportunities in the unexplored space.
VALUE INNOVATION
A cornerstone of the BOS is Value Innovation, which is essentially the area where a company’s actions concurrently reduce costs and increases its value offering to buyers. It is about creating a quantum leap in value for your buyers, thereby creating new and uncontested market place. This strategy needs to span across the entire system of a company’s activities.
Formulating your Blue Ocean Strategy
ANALYSING THE MARKET: TOOLS AND FRAMEWORKS
Here’s a brief overview of some of the tools and frameworks used in the formulation and execution of the Blue Ocean Strategy. Do get more details in our full 12-page Blue Ocean Strategy summary.
The Strategy Canvas
This is a tool to capture the current state of play in the marketplace, so you can understand: where the competition is currently investing, how the industry currently competes, and what customers receive from existing competitors in the market.
(C) W. Chan Kim & Renee Mauborgne, graphics by ReadinGraphics
Four Action Framework
This framework is used to break the trade-off between differentiation and low cost to create a new value curve, using 4 key questions to challenge an industry’s logic and business model.
Eliminate-Reduce-Raise-Create (ERRC) Grid
The ERRC pushes companies to specify the actions that they can eliminate and reduce, so they can communicate their strategy internally and take concrete action.
The Pioneer-Migrator-Settler (PMS) Map
Use this map to plot your company’s current and planned portfolios gives you perspective on your potential for growth, grouping your offerings into 3 categories: Settlers (me-too offerings/ businesses), Migrators (offerings/businesses above market average), and Pioneers (offerings/businesses of unprecedented value).
Buyer Utility Map
This map shifts the focus to buyers, helping to identify the utility spaces that a product or service can potentially fill. The Buyer Experience Cycle (BEC) outlines the 6 stages of buyers’ experience, with a range of experiences within each stage. The utility levers cut across stages of the buyers’ experience.
(C) W. Chan Kim & Renee Mauborgne, Graphics by ReadinGraphics
FORMULATING BLUE OCEAN STRATEGY: 4 KEY PRINCIPLES
How do you pull the tools above together to formulate your Blue Ocean Strategy? Here’s a quick overview on what’s involved in formulating and executing your BOS:
1) Reconstruct Market Boundaries
Examine how the market is currently performing and competing, then create a strategy that is drastically different from the rest of the players. The book details 6 paths you can take to identify blue ocean opportunities and reconstruct your market boundaries. You can read more from our full summary.
2) Reach Beyond Existing Demand
To maximize the size of the blue ocean, you need to look to 3 tiers of non-consumers: “Soon-to-be” non-consumers, “Refusing” non-consumers and “Unexplored” non-consumers. Focus on the tier that represents the biggest catchment at the time, but also explore and build on overlapping commonalities that applies to different tiers of non-consumers.
3) Getting The Strategic Sequence Right
There are 4 key steps that must be covered, to develop a robust strategy. Each of the criteria below must be addressed in sequence before a commercially-viable blue-ocean strategy can be borne.
Exceptional Buyer Utility => Accessible Price=> Viable Cost => overcome Adoption Hurdles
4) Focus On The Big Picture
Visualize your Strategy to unlock the creativity of people within your organization, help them see the blue oceans, and communicate the strategy for effective execution. This includes 4 components: Visual Awakening, Visual Exploration, Visual Strategy Fair, Visual Communication.
Check out our full Blue Ocean Strategy summary for more information on each of these steps above. Now, we are ready to move into the BOS execution.
Executing the Blue Ocean Strategy
1) Overcome Key Organizational Hurdles
Because BOS represents a huge shift from status quo, the challenge of execution is amplified. The authors recommend using the approach of “tipping point leadership” to overcome the 4 key hurdles to change: Cognitive, Resource, Motivational, and Political.
2. Build Execution into Strategy
There will always be resistance to change, and much more so with BOS, as it pushes people out of their comfort zones and challenges past practices. To minimize the risk of distrust, non-cooperation and even sabotage, the book recommends a “fair process” in making and executing strategy, which involves Engagement, Explanation and Expectation Clarity.
These execution details are covered in more detail in our full book summary.
Other Details in “Blue Ocean Strategy”
Ready to start applying the BOS frameworks and tools in your organization? You can get more detailed insights, tips and examples in our full summary bundle. This includes a one-page infographic summary in pdf, a 12-page text summary in pdf, and a 19-min audio summary in mp3.
The book is packed full of great ideas, tools and frameworks, but the real-life examples and case-studies are what really brings them to life. The book covers examples of [yellow tail], SouthWest Airlines, Cirque du Soleil, NetJets, Curves, NTT DoCoMo, Home Depot, Ralph Lauren, Toyota, Novo Nordisk, Bloomberg, QB House, Apple, European Financial Services , Pret a Manger, IKEA, Swatch, and many more. If you’re interested in learning about all this and more, get a copy of purchase the book here or visit the BOS official website for more resources.
Check out our Blue Ocean Shift summary for more practical insights on how to apply the Blue Ocean Strategy. You may also enjoy the Playing to Win summary which provides a step-by-step guide developing a robust strategies in large businesses. Or, check out Good Strategy Bad Strategy summary for the dos and don’ts of strategy.
About the Authors of Blue Ocean Strategy
Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant is written by W. Chan Kim and Renée Mauborgne.
Professor W. Chan Kim (born 1952) is a Korean-born business theorist, a professor of Strategy and Management at INSEAD, and co-director of the INSEAD Blue Ocean Strategy Institute in Fontainebleau, France. Kim was educated at the Ross School of Business, starting his academic career in the late 1970s. Prior to joining INSEAD in 1992, he was a professor at the University of Michigan Business School, USA. He has served as a board member and an advisor of several multinational corporations, and is also an advisory member for the European Union and a Fellow of the World Economic Forum.
Professor Renée Mauborgne is a Distinguished Fellow and a professor of strategy at INSEAD. She is also Co-Director of the INSEAD Blue Ocean Strategy Institute. She was born in the United States. Mauborgne is a member of President Barack Obama’s Board of Advisors on Historically Black Colleges and Universities (HBCUs). She is also a Fellow of the World Economic Forum. Both Kim and Mauborgne have received several accolades for their work, including the Nobels Colloquia Prize for Leadership on Business and Economic Thinking in 2008, and the Carl S. Sloane Award for Excellence from the Association of Management Consulting Firms in 2014.
Blue Ocean Strategy Quotes
“The only way to beat the competition is to stop trying to beat the competition.”
“Instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space”
“To break out of red oceans, companies must break out of accepted boundaries that define how they compete.”
“To build people’s trust and commitment deep in the ranks and inspire their voluntary cooperation, companies need to build execution into strategy from the start.”
“Senior Managers’ goal here should be to manage their portfolio of businesses to wisely balance between profitable growth and cash flow at a give point in time”.
Start creating your own blue ocean today and win in the marketplace!
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