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Blue Ocean Strategy's Fatal Flaw

By W a yn e E. Polla r d

I n t heir int ernat ional best seller, Blu e Oce a n St r a t e gy, W.Chan Kim and Renee Mauborgne
provide t ools and fram eworks for creat ing " blue oceans" —t heir t erm for " all t he indust ries not in
exist ence t oday. This is t he unknown m arket space." However, t he aut hors fail t o discuss ( at any
significant lengt h, anyway) t he key fact or t hat det erm ines t he success of any blue ocean st rat egy:
m ar ket ing. Wit hout an effect ive m arket ing st rat egy, and it s execut ion, t here can be no successful
blue ocean st rat egy.

Out of 240 pages, Kim and Mauborgne devot e approxim at ely one paragraph t o t he im port ance of
m ar ket ing. This m inut e discussion appears in t he chapt er " Analyt ical Tools and Fram eworks." The
lone paragraph st art s wit h, " A good st rat egy has a clear- cut and com pelling t agline." By only
devot ing one paragraph t o t he im port ance of m arket ing and t hen only focusing on creat ing
t aglines, t he aut hors dim inish t he role m arket ing plays in t he execut ion of blue ocean st rat egy.
They also t rivialize t he difficult y in creat ing t hat " clear - cut and com pelling t agline."

Writ ing a book about a st rat egy for creat ing " uncont est ed m arket space" wit hout st ressing t he
crit ical role m arket ing plays in execut ing t hat st rat egy is like writ ing about t he Chicago Bulls' six
cham pionship seasons and only m ent ioning Michael Jordan's nam e in a foot not e. Just as t he Bulls
needed Michael Jordan t o win, blue ocean st rat egy needs m arket ing t o win.

Kim and Mauborgne writ e, "When a com pany offers a leap in value, it rapidly earns brand buzz
and a loyal following in t he m arket place." The only value t hat m at t ers is t he m arket 's perceived
value, which exist s in t he m ind of t he m arket . Perceived value is creat ed by m arket ing. Market ing
has t o m ake people aware of t he " value innovat ion." Likewise, brand buzz is t he product of t he
successful execut ion of m arket ing st rat egy, not a leap in value. Kim and Mauborgne use Casella
Wines' Yellow Tail line of wines as an exam ple of a successful blue ocean st rat egy. Yet , t o what
ext ent can Casella Wines' success be at t ribut ed t o t he com pany's m aking ret ail em ployees
"am bassadors of Yellow Tail" by giving t hem Aust ralian out back clot hing? This effect ive m arket ing
st rat egy cont r ibut ed t o Yellow Tail's success.

The aut hors st at e t hat blue oceans are defined by " unt apped m arket space, dem and creat ion, and
t he opport unit y for highly profit able growt h." Dem and creat ion defines blue oceans, yet t he
aut hors don't discuss in det ail how t o creat e dem and, which is a funct ion of m arket ing.

There are, in m y j udgm ent , only t wo reasons for t he aut hors' failure t o discuss t he im port ance of
m ar ket ing t o blue ocean st rat egy execut ion. First , Kim and Mauborgne m ay have assum ed t hat
readers know and underst and m arket ing's im port ance t o effect ive blue ocean st rat egy execut ion.
Effect ive m arket ing is a given, t hey m ay t hink.

I f Kim and Mauborgne do believe t hat m arket ing execut ion is key t o t he success of blue ocean
st rat egy, t hey should have writ t en a chapt er on it , as t hey did wit h t he discussion on overcom ing
organizat ional hurdles. I do not believe, however, t hat t he aut hors see effect ive m arket ing as a
given because t hey present Blue Ocean St rat egy as an all- inclusive book t hat t ells com panies how
t o creat e uncont est ed m arket space.

The second possible reason Kim and Mauborgne m ight have failed t o discuss t he im port ance of
m ar ket ing is t hat t hey j ust m ight believe t hat m arket ing plays lit t le role in successful blue ocean
st rat egy execut ion. They seem t o believe t hat wit h " value innovat ion" and " unprecedent ed value"
cust om ers will com e. Yet business hist ory is replet e wit h exam ples t hat cont radict t his.

Fir st in M in d vs. Fir st in M a r k e t

Coca- Cola wouldn't be # 1 on I nt erbrand's 100 Top Brands if it were not for m arket ing. I t wasn't
even t he first soft drink. Dr. Pepper was being m ade in Morrison's Old Corner Drug St ore in Texas
back in 1885, about a year before Coca- Cola. From t he very beginning, t he com pany had
m ar ket ing in m ind. Frank M. Robinson, t he part ner and bookkeeper of Dr. John St it h Pem bert on,
t he At lant a- based pharm acist who produced t he syrup for Coca- Cola, designed t he fam ous "Coca-
Cola" t radem ark t hinking t hat " t he t wo Cs would look well in advert ising."

Few would disput e t hat Coca- Cola creat ed an uncont est ed m arket space; t he brand is st ill
dom inant . Yet , in it s first year, sales only averaged a m ere nine drinks per day. Dr. Pem ber t on
didn't appear t o realize t hat he had winner in his hand; he sold his int erest in t he business. Asa G.
Candler, a local businessm an, event ually acquired com plet e cont rol and it was Candler who built
t he brand. According t o t he Coca- Cola com pany, Candler was a " firm believer" in advert ising. He
expanded on Dr. Pem bert on's " m arket ing effort s" by dist ribut ing t housands of coupons for free
glasses of Coca- Cola, am ong ot her t hings. Candler "prom ot ed t he product incessant ly" and his
" flair for m erchandising" increased sales of Coca- Cola syrup t enfold. I t wasn't Coca- Cola's
unprecedent ed value t hat built t he brand and creat ed dem and, it was t he m arket er.

Few would disput e t hat McDonald's creat ed a blue ocean. Yet , McDonalds wasn't t he first
ham burger chain. Whit e Cast le was founded in 1921. The McDonald brot hers didn't open t heir
California ham burger st and unt il 1948. Despit e how good t heir burgers and shakes were, Dick and
Mac McDonald probably would have kept selling food from t heir st and in California if it was not for
a m ilk shake salesm an nam ed Ray Kroc.

Kroc m et t he brot hers in 1954. I t t ook his plan t o franchise t o m ake t he com pany grow. Wit hin
five years of Kroc becom ing a franshisee t here were 200 McDonald's rest aurant s. This aggressive
plan for at t acking t he m arket led t o McDonald's being first in m ind, which is why, t oday,
McDonald's is what com es t o people's m inds when t hey t hink of fast food and ham burgers. Whit e
Cast le, which has no franchisees in t he Unit ed St at es, has approxim at ely 390 rest aurant s.
McDonald's has over 30,000.

What m at t ers m ost is not being first t o m arket but first in t he m ind of t he m arket . And t he bat t le
for first in m ind is won by t he best m arket er—period.

Maybe Kim and Mauborgne don't consider Coca- Cola or McDonald's t o be exam ples of blue ocean
st rat egy in act ion. Maybe t hey consider effect ive m arket ing t o be a " red ocean" skill, t hat is, one
t hat applies t o indust ries already in exist ence t oday, t he known m arket space.

Ta k in g M a r k e t ing for Gr a n t e d

Kim and Mauborgne appear t o t ake key m arket ing decisions, such as t he decision t o franchise or
t o provide Aust ralian out back clot hing, for grant ed. As a business j ournalist I int erviewed over 200
ent repreneurs. I cam e across com panies t hat , as t heir cust om ers would argue, creat ed
uncont est ed value. So why haven't you heard of t hem ? The owners were cont ent and didn't want
t o expand. Expansion is a choice m ade by a m arket er wit h a vision and it is effect ively execut ed
by a m arket er wit h chops.

Anit a Roddick did not originally int end on building a business em pire. She could have rem ained
com fort able wit h t he business she was doing. I nst ead, she chose t o franchise The Body Shop, a
com pany t hat t he aut hors use as an exam ple of blue ocean st rat egy.

Kim and Mauborgne also use Curves as an exam ple and st at e t hat , " Since franchising began in
1995, Curves has grown like wild fire…." Curves did not have t o franchise; it chose t o. What if
Curves and The Body Shop had chosen a different m arket ing st rat egy for expansion, such as
com pany- owned st ores, would t hey have had t rem endous growt h and becom e blue oceans? I
doubt it . How a business chooses t o expand is an im port ant m arket ing decision.

Everyone knows t hat Bill Gat es and Microsoft ( # 2 on I nt erbrands' list ) didn't creat e DOS; Tim
Pat erson at Seat t le Com put er Product s did. I n a great m arket ing m ove, Microsoft acquired t he
right s t o DOS and licensed it t o I BM. To quot e Pat erson in a 1997 Forbes art icle, " DOS becam e big
only because of Microsoft 's m uscle. I t wouldn't have been anyt hing if Seat t le Com put er had
ret ained ownership."

The founders of t he original St arbucks ( # 99 on I nt erbrand's list ) were not t he ones who execut ed
t he vision of t he com pany as it is t oday; t hat was Howard Schult z, t he com pany's direct or of ret ail
operat ions and m arket ing. He int roduced t he coffeehouse concept t o t he com pany and in 1987
acquired t he nam e " St arbucks" and t he com pany's asset s from t he owners. Schult z had an
aggressive plan for at t acking t he m arket and in t hree years he had 84 locat ions.

You cannot separ at e t he m arket er from t he blue ocean st rat egy.

I t is clear t hat wit hout an effect ive m arket ing st rat egy, t here would be no blue oceans. There
would be blue lakes at best . There has t o be a st rat egy for reaching t he m arket on a large scale.
Kim and Mauborgne fail t o explain t his.

Value alone doesn't build brands; m arket ing builds and sust ains brands. St rat egist s oft en forget
t he m ind of t he m arket . The m arket det erm ines who wins and loses, not t he st rat egist s. A plan
t hat doesn't t ake t he m ind of t he m arket int o heavy considerat ion is flawed.

Market space is only cont est ed or uncont est ed in people's m inds. Thus, a discussion on creat ing
" uncont est ed m arket space" t hat does not discuss in great det ail how t o reach t he m ind of t he
m ar ket is at best incom plet e and at worst m isleading.

I n t he 2003 m ovie, Open Wat er, a couple get s st randed scuba diving aft er t heir t our boat
accident ally leaves wit hout t hem . As you wat ch it , t here's one t hing t hat you know for sure: The
sharks are com ing. Likewise, when you begin t o execut e on a blue ocean opport unit y, t here is one
t hing you know for sure: Your com pet it ors are com ing. However, an effect ive m arket ing st rat egy
helps you increase your m arket share and defend it from your com pet it ors. Wit hout a m arket ing
st rat egy, sure, you will creat e a blue ocean, but while you're out t here, all by yourself in t hat open
wat er, you won't be t he m arket leader; you'll be chum .

Wayne E. Pollard is t he aut hor of Minds Before Market Share and t he president of Hunt er- Pollard,
a m anagem ent consult ing firm based in Sout h Orange, NJ. He can be reached at
wepollard@hunt erpollard.com .

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