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Blue Ocean Strategy

Kim & Mauborgne


Kim & Mauborgne
Red Ocean vs Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy


Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value-cost trade-off Break the value-cost trade-off

Align the whole system of a firms Align the whole system of a firms
activities with its strategic choice of activities in pursuit of
differentiation or low cost 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 Blue Oceans


Market-Competing Business Launches 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
Use of enological Above-the- Aging Vineyard Wine Wine
Price terminology and line quality prestige complexity range
distinctions marketing and legacy

Kim & Mauborgne


The To Be Strategy Canvas
of [yellow tail]
hi
Premium Wines
offering level

[yellow tail]

Budget Wines

lo
Use of enological
Use and Above-the-
of enological
terminology Aging
Aging Vineyard
Vineyard Wine Wine Easy Ease of Fun &
Price terminologyin
distinctions wine line
and quality
quality prestige
prestige complexity range drinking selection Adventure
communication marketing
distinctions and legacy
and legacy Kim & Mauborgne
The Four Actions Framework

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

Eliminate Create
Which of the
A New Which factors
factors that the Value should be created
industry takes for Curve that the industry
granted should be has never offered?
eliminated ?

Raise
Which factors
should be raised
well above the
industrys
standard?
Kim & Mauborgne
Eliminate-Reduce-Raise-Create Grid:

The case of [yellow tail]

Eliminate Raise
Enological terminology Price versus budget
and distinctions wines
Aging qualities Retail store involvement
Above-the-line marketing

Reduce Create
Wine complexity Easy drinking
Wine range Ease of selection
Vineyard prestige Fun and adventure

Kim & Mauborgne


Value Innovation: the simultaneous
pursuit of differentiation and low cost

Eliminate
Cost
Reduce
Blue
Ocean

Raise
Buyer
Create Value

Kim & Mauborgne


Six Paths to Blue Ocean Strategy

The six conventional boundaries of competition

Industry

Strategic group

Buyer group
From To
Competing Creating
Within Scope of product or service Across
offering
Functional-emotional
orientation of an industry

Time

Kim & Mauborgne


Shifting the Strategic Focus
Conventional Logic Blue Ocean Strategy Logic

Industry focus on rivals within its industry looks across alternative industries

Strategic group focuses on competitive position looks across strategic groups


within strategic group within industry

focuses on better serving the


Buyer group buyer group
redefines the industry buyer group

focuses on maximizing the


Scope of product or value of product and service looks across to complementary
service offering offerings within the bound of its product and service offerings
industry

focuses on improving price-


Functional-emotional performance within the rethinks the functional-
orientation functional -emotional orientation emotional orientation of its
if its industry industry

Time focuses on adapting to external participates in shaping external


trends as they occur 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 Formulation Risks

Reconstruct market boundaries Search Risk

Focus on the big picture, not the numbers Planning Risk

Reach beyond existing demand Scale Risk

Get the strategic sequence right Business Model Risk

Execution Principles Execution Risks


Overcome key organizational hurdles Organizational Risk

Build execution into strategy Management Risk

Kim & Mauborgne


www.blueoceanstrategy.com

Kim & Mauborgne