Blue Ocean Strategy

Kim & Mauborgne Kim & Mauborgne

Red Ocean vs Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Beat the competition Exploit existing demand Make the value-cost trade-off Align the whole system of a firms activities with its strategic choice of differentiation or low cost Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of a firms activities in pursuit of differentiation and low cost

Kim & Mauborgne

Researching the History of Blue Ocean Creation

Data: 150 blue ocean creations, more than 30 industries, over 100 years (1880-2000)
hotel, cinema, retailing, airline, energy, computer, broadcasting, home construction, automobile, steel manufacturing, chemicals, cosmetics, software, etc.

Variables considered: industrial, organizational, strategic

Kim & Mauborgne

Substantially Higher Returns from Investments in Blue Oceans

Red Oceans Market-Competing Business Launches

Blue Oceans Market-Creating Business Launches

Kim & Mauborgne

How do you create a Blue Ocean in your industry?

Kim & Mauborgne Kim & Mauborgne

The As Is Strategy Canvas for the US Wine Industry

hi Premium

offering level

Budget Wines

lo
Price Use of enological terminology and distinctions Above-theline marketing Aging quality Vineyard prestige and legacy Wine complexity Wine range

Kim & Mauborgne

The To Be Strategy Canvas of [yellow tail]

hi Premium Wines

offering level

[yellow tail]

Budget Wines

lo
Price

Use of enological Use of enological terminology and Above-theterminologyin and distinctions wine line marketing distinctions communication

Aging Aging quality quality

Vineyard Vineyard Wine prestige prestige complexity and legacy legacy and

Wine range

Fun & Easy Ease of drinking selection Adventure

Kim & Mauborgne

The Four Actions Framework

Reduce
Which factors should be reduced well below the industrys standard?

Eliminate
Which of the factors that the industry takes for granted should be eliminated ?

Create
A New Value Curve
Which factors should be created that the industry has never offered?

Raise
Which factors should be raised well above the industrys standard?

Kim & Mauborgne

Eliminate-Reduce-Raise-Create Grid:
The case of [yellow tail]
Eliminate
Enological terminology and distinctions Aging qualities Above-the-line marketing

Raise
Price versus budget wines Retail store involvement

Reduce
Wine complexity Wine range Vineyard prestige

Create
Easy drinking Ease of selection Fun and adventure

Kim & Mauborgne

Value Innovation: the simultaneous pursuit of differentiation and low cost

Eliminate

Cost
Reduce
Blue Ocean

Raise Create

Buyer Value
Kim & Mauborgne

Six Paths to Blue Ocean Strategy

The six conventional boundaries of competition
Industry Strategic group

From Competing Within

Buyer group Scope of product or service offering Functional-emotional orientation of an industry Time

To Creating Across

Kim & Mauborgne

Shifting the Strategic Focus

Conventional Logic
Industry Strategic group
focus on rivals within its industry

Blue Ocean Strategy Logic

looks across alternative industries

focuses on competitive position within strategic group

looks across strategic groups within industry

Buyer group Scope of product or service offering Functional-emotional orientation Time

focuses on better serving the buyer group focuses on maximizing the value of product and service offerings within the bound of its industry focuses on improving priceperformance within the functional -emotional orientation if its industry focuses on adapting to external trends as they occur

redefines the industry buyer group

looks across to complementary product and service offerings

rethinks the functionalemotional orientation of its industry participates in shaping external trends over time Kim & Mauborgne

Pioneer-Migrator-Settler Map
Pioneers
The only ones with a mass following

Migrators
Best in the crowd

Settlers
Me-toos

Today?
Kim & Mauborgne

Pioneer-Migrator-Settler Map
Pioneers
The only ones with a mass following

Migrators
Best in the crowd

Settlers
Me-toos

Today

Tomorrow
Kim & Mauborgne

Minimizing Risks and Maximizing Opportunities in Formulating and Executing Blue Ocean Strategy
Formulation Principles
Reconstruct market boundaries
Focus on the big picture, not the numbers

Formulation Risks
Search Risk Planning Risk Scale Risk Business Model Risk

Reach beyond existing demand Get the strategic sequence right

Execution Principles
Overcome key organizational hurdles Build execution into strategy

Execution Risks
Organizational Risk Management Risk

Kim & Mauborgne

www.blueoceanstrategy.com

Kim & Mauborgne