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Analysis and Summary of Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne | PDF | Free
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posted on APRIL 7, 2021

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Contents  hide 

1 Synopsis
2 About W. Chan Kim

3 About Renée Mauborgne

4 The Eight Principles of the Blue Ocean Strategy

4.1 Formulation Principles

4.2 Execution Principles

5 Why the Blue Ocean Strategy is Required

6 Red Oceans

7 Blue Oceans

8 The Four Actions Framework

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

8.2 Which Factors Should Be Reduced Well Below Industry Standard?

8.3 Which Factors Should You Raise Above Industry Standard?

8.4 Which Factors Should Be Created That Have Never Been Offered?

9 Value Innovation

10 Where to Look For Your Blue Ocean

10.1 Path 1: Look Across Alternative Industries

10.2 Path 2: Look Across Strategic Groups Within Industries

10.3 Path 3: Look Across the Chain of Buyers

10.4 Path 4: Look Across Complementary Product and Service Offerings

10.5 Path 5: Look Across Functional or Emotional Appeal to Buyers

10.6 Path 6: Look Across Time

11 Related Book Summaries

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Synopsis

Blue Ocean Strategy challenges the common belief that you have to outcompete your business rivals to
achieve sustained profitability. Plus, it offers an alternative. The alternative is to make your competitors
irrelevant through innovation and creating your own market. This new market is called your blue ocean.
Being able to innovate is becoming increasingly important, with markets becoming saturated and profit
margins being squeezed due to competition. Kim and Mauborgne argue that tomorrow’s leading
companies need to change and adapt. This is based on a study of 150 strategic moves spanning more
than a hundred years and thirty industries.

About W. Chan Kim

W. Chan Kim is The Boston Consulting Group Bruce D. Henderson Chair Professor of Strategy and
International Management at INSEAD business school and Co-Director of the INSEAD Blue Ocean
Strategy Institute. Before joining INSEAD, he was a professor at the University of Michigan Business
School, USA. Kim has served as a board member and an advisor for several multinational corporations in
Europe, the U.S., and Asia. He is an advisory member for the European Union and serves as an advisor to
several countries. Along with his colleague Renée Mauborgne, he was named the #1 Management
Thinker in the World by Thinkers50. He was also named among the world’s top 5 best business school
professors by MBA Rankings.

About Renée Mauborgne

Renée Mauborgne is The INSEAD Distinguished Fellow and a professor of strategy at INSEAD, one of the
world’s top business schools. She is also Co-Director of the INSEAD Blue Ocean Strategy Institute. Renée
Mauborgne and her colleague Chan Kim were named the #1 Management Thinkers in the World by
Thinkers50. She is the first woman ever to secure the top spot on the Thinkers list of global thought
leaders. Renée Mauborgne was also named among the world’s top 5 best business school professors by
MBA Rankings.

The Eight Principles of the Blue Ocean Strategy

Formulation Principles

1. Reconstruct Market Boundaries

2. Focus on the Big Picture

3. Reach Beyond Existing Demands

4. Get the Strategies Sequence Right

Execution Principles

1. Overcoming Key Organizational Hurdles

2. Build Execution Into Your Strategies

3. Align the Value, Profit, and People Propositions

4. Renew Blue Oceans

Why the Blue Ocean Strategy is Required

The authors explain that the current economic markets are flooded with competition. There are more
companies today than there has ever been. Hence, companies are having to compete for smaller and
smaller profit margins. Blue Ocean Strategy describes this increasingly tough competition as a cut-throat
battle. This battle produces blood and leaves the waters bloody. Hence, the authors describe our current
business climate as the Red Ocean.

Red Oceans include every single industry in existence. This is the known market space. In contrast, the
Blue Oceans are unknown market spaces filled with non-existent industries.

Red Oceans

The industry boundaries are known and accepted by all within Red Oceans. Essentially, every company
understands that they have to outperform their competitors to obtain a more significant share of the
market’s existing demand. Crucially, due to the distribution of demand between several companies,
crowded markets will lead to profit and growth reductions.

Within red oceans, there is limited potential for growth and the development of substantial profits.
Navigating as a company within red oceans will always be nerve-wracking. Although you might learn
how to outcompete one of your competitors, you still have to remain wary. There is always the chance
that another company could be sneaking up behind you, ready to slit your throat and take your
customers. Subsequently, the authors explain that you should never solely focus on red oceans. In doing
so, you would be accepting the constraining factors of war rather than the growth potential of
economics. 

Blue Oceans

“Blue oceans are right next to you in every industry.” – W. Chan Kim and Renée Mauborgne

Blue Oceans are considerably different from red oceans. Specifically, blue oceans are defined by
untapped market space and demand creation. Subsequently, blue oceans have more significant
potential and opportunity for highly profitable growth. The authors do not identify blue oceans as being
incredibly difficult to find. Instead, blue oceans can be easily hidden in plain sight. For example, your
blue ocean could be immediately adjacent to the red ocean your current company is residing in. 

When you are in the midst of competition within a red ocean, it can be difficult to look elsewhere.
However, it is crucial that you take time away from fighting and competing. Look around you and decide
if there is a blue ocean opportunity. While others are busy fighting over limited industry space, you
could be creating your own prosperous market. Occasionally you will find a blue ocean by sailing
somewhere completely new. However, more often than not, your blue ocean is just beyond the
boundaries of your current industry. 

The modern-day business has become increasingly obsessed with learning how to battle within red
oceans. Business strategies are based on how you can get better at combating your competition.
However, the authors of this book argue that it is more sustainable to avoid competing altogether.
Instead, spend your time and energy on innovating. Importantly, the authors are not suggesting that you
never focus on combating competition. The skills associated with red oceans will always be useful. There
are certain circumstances where others will try to make your blue ocean red. For example, being
successful through making your own blue ocean will often lead to copycats attempting to outcompete
you. Red oceans will always be a fact of business life. However, try to focus on innovating through
creating blue oceans. If you can maintain this focus, then you will be successful despite the copycats.
“While good strategy content is based on a compelling value proposition for buyers with a robust profit
proposition for the organization, sustainable strategy execution is based largely on a motivating-people
proposition.” – W. Chan Kim and Renée Mauborgne

The Four Actions Framework

The authors provide a framework that they call their strategy canvas. This canvas should be used to
evaluate the different competitors in your industry. After understanding your competitors and the
market within which your company resides, you need to ask yourself four vital questions. Each of these
questions will help you identify what you need to do to get the upper hand over your competitors. The
outcome of this approach will be a prosperous blue ocean. 

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

This question will encourage you to consider the factors that companies in your industry have long been
competing over. Aim to eliminate the factors that you believe the consumers do not care about.
Specifically, remove them from your strategy. By eliminating these unnecessary factors, you can
reallocate your focus and efforts to improving the more valuable things. Crucially, it is likely that your
competitors will be wasting their time and energy on the unnecessary factors you have eliminated.
Subsequently, you will obtain an organic advantage. The authors provide an example of this strategy by
talking about airports. Some airports asked themselves this question and decided that airport lounges
were surplus to requirements despite several airlines competing on this matter. Lower-cost airlines
decided to remove this factor and were able to make their margins bigger and their flights even more
frequent. These airlines created a blue ocean for the consumers who were more sensitive to the price
than to the lounge experience.

Which Factors Should Be Reduced Well Below Industry Standard?

Your company can’t be perfect on every criterion that characterizes a top quality company. Therefore,
you need to decide which areas you want to compromise to dominate the other criteria. The criteria you
want to dominate in are the things that can’t be eliminated. Instead, you can reduce them to the bare
minimum level required to pass.

Which Factors Should You Raise Above Industry Standard?

Certain criteria are generally valued more by the customers within your industry. Hence, by eliminating
some of your input for certain criteria and significantly reducing others, you can have spare resources
left over. These resources can then be utilized to make specific areas exceptional.

Which Factors Should Be Created That Have Never Been Offered?

This factor is all about innovation. Try to consider what no one else in your market is doing. Finding the
right answer to this question will help your company develop substantially in its own blue ocean.

Value Innovation

“Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because 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.
Value innovation places equal emphasis on value.” – W. Chan Kim and Renée Mauborgne
Value innovation is the cornerstone of creating a blue ocean strategy. As aforementioned, you should
avoid falling prey to the error of focussing all your attention on beating your competitors. Instead, you
should be aiming to make your competition irrelevant by creating a leap in value. This value should be
value for your buyers and for those working within your company. By introducing value innovation in
your company, you can open up a new and uncontested market space.

The authors explain that value innovation can be broken down into its two constituents. For example,
some companies may place significant effort into creating value without focusing on innovation. In
essence, these companies focus on value creation on an incremental scale. This approach will improve
their company’s value, but it will not stand out among its competitors in the marketplace. In contrast,
some companies will primarily focus on innovation without focussing enough on value. These companies
are generally technology-driven and will be obsessed with the future. However, as they are looking too
far ahead into the future, they are likely to overshoot where the buyers currently are in their
expectations. Both of these approaches will lead to ineffective growth within your company. True
economic growth relies on your company focusing equally on both value and innovation.

The example provided in this book of a company that effectively utilized value innovation was the Cirque
du Soleil. They created a blue ocean by avoiding the highly saturated market of standard circuses.

Where to Look For Your Blue Ocean

Identifying the best blue ocean for your company will require the reconstruction of market boundaries.
The authors provide six paths you can take to start reconstructing your company’s market boundaries.

Path 1: Look Across Alternative Industries

One way a company can start reconstructing market boundaries is to start considering the trade-offs
that its customers are likely making across alternative industries. The authors provide an example of
NetJets. This company started considering these trade-offs and identified that their customers were
most influenced by the price of flying. Instead of opting for a traditional approach to cutting their prices,
they chose to innovate. Specifically, they offered their customers one-sixteenth ownership of an aircraft.
Essentially, they were sharing the aircraft with 15 other people. Each of the owners would then be
entitled to fifty hours of flight time per year. By adopting this innovative pricing strategy, NetJets offered
private flights for the price of a commercial airline ticket.

Path 2: Look Across Strategic Groups Within Industries

There are examples of companies that do not adopt this path and are successful. Still, it is becoming
increasingly difficult for these companies to succeed. For example, Mercedes, BMW, and Jaguar focus on
out-competing one another in the same luxury care segment. However, there are exceptions to this who
have achieved significant success over a short period. For example, Curves is a fitness company in
America. Initially, Curves seemed set to join an oversaturated fitness market where they stood no
chance of competing. However, they took a different approach. They looked across the strategic fitness
group and identified an untapped market of women struggling to keep in shape. They moved into two
saturated markets, health clubs and home exercise programs, but still made their own blue ocean. 

Path 3: Look Across the Chain of Buyers

“As companies compete to embrace customer preferences through finer segmentation, they often risk
creating too-small target markets.” – W. Chan Kim and Renée Mauborgne

Most industries will identify a common definition of who their target buyer is. However, this book’s
authors argue that there should never be a common definition of one buyer. Instead, there is a chain of
buyers who are directly or indirectly involved in the buying decision. Focusing on an individual target is
not accurate and neglects the system behind somebody purchasing within a market. Hence, the authors
suggest you consider the purchasers, users, and influencers when deciding what product to introduce
and how to market it.

Path 4: Look Across Complementary Product and Service Offerings

Untapped value is often hidden in complementary products and services. The key is to define the total
solution buyers seek when they choose a product or service. A simple way to do so is to think about
what happens before, during, and after your product is used.

Path 5: Look Across Functional or Emotional Appeal to Buyers

Your business should be functional but also be appealing to the emotional side of buyers. Some
industries compete over function, while others compete over emotion. If you are currently competing
over functional features, then you should see how you can strip function back and dominate based on
emotion. Equally, suppose your industry involves competing over emotional features. In that case, you
should see how you can strip emotion back and dominate based on function.

Path 6: Look Across Time

iTunes broke a key customer annoyance factor: the need to purchase an entire CD when they wanted
only one or two songs on it. What trends have a high probability of impacting your industry, are
irreversible, and are evolving in a clear trajectory? How will these trends impact your industry? Given
this, how can you open up unprecedented customer utility?

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