BACHELOR OF

INNOVATION
™

Blue Ocean Strategy

 BACHELOR OF
INNOVATION
™

The Book and the Authors

© JOHN ABBOTT © JOHN ABBOTT

Prof Chan Kim Prof Renee

Mauborgne
 Accolades
BACHELOR OF
INNOVATION
™

Over 2 million copies sold

Translated into over 41 foreign

languages – a world record
Taught as the major theory of strategy at
leading business schools
Gives insights to CEOs, Executives,
Heads of State and Prime Ministers
BACHELOR OF
INNOVATION
™
BACHELOR OF
INNOVATION
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 New Market Space BACHELOR OF
INNOVATION
™

Red oceans and blue oceans make up market

universe
Red oceans: all industries in existence
= known market space
Blue oceans: all industries not in existence
= unknown market space
 Red Oceans vs. Blue Oceans BACHELOR OF
INNOVATION
™
Red oceans
Industry boundaries defined and accepted
Competitive rules of game known
Companies try to outperform rivals; cutthroat competition
As market space gets crowded, prospects for profit and growth reduced
Products become commodities
Red ocean strategy is a market-competing strategy
Blue oceans
Undefined market space, demand creation, opportunity for highly
profitable growth
Most are created from within red oceans by expanding existing industry
boundaries
Rules of game waiting to be set
Competition irrelevant
Blue ocean strategy is a market-creating strategy
 The Rising Imperative of
Creating Blue Oceans
BACHELOR OF
INNOVATION
™

Supply is exceeding demand in most industries

global competition is intensifying
Problems:
Accelerated commodization of products and
services
Increasing price wars
Shrinking profit margins
Red oceans becoming bloodier, need to be
concerned with creating blue oceans
 The Continuing Creation BACHELOR OF

of Blue Oceans
INNOVATION
™

Blue oceans have been around for some time;

a feature of business life
Industries never stand still, constantly evolving
Significant expansion of blue oceans over
years
 From Company and Industry BACHELOR OF
INNOVATION

to Strategic Move ™

Are there lasting visionary companies that

continuously outperform the market and
create blue oceans?
Found success of these model companies was
a result of industry sector performance, not
companies themselves
Strategic move used as unit of analysis (rather
than company or industry)
Strategic move: the set of managerial actions
and decisions involved in making a major
market-creating business offering
 Value Innovation: The BACHELOR OF
INNOVATION
™

Cornerstone of Blue Ocean Strategy

•Creators of blue oceans
follow value innovation
•Value Innovation
–Equal emphasis on value and
innovation
–Defies value-cost trade-off
of competition-based strategy
–Successful value innovation:
•Drives down costs while
driving up buyers’ value
•reconstructionist (demand)
point of view
 BACHELOR OF

Red Ocean Vs. Blue Ocean

INNOVATION
™

•Compete in existing • Create uncontested

market space
•Beat the competition
•Exploit existing demand
•Make the value-cost
trade-off
•Align the whole system
of a firm’s activities with
its strategic choice of
differentiation or low cost
market space
• Make the competition
irrelevant
• Create and capture new
demand
• Break the value-cost
trade-off
• Align the whole system of
a firm’s activities in
pursuit of differentiation
and low cost
 BACHELOR OF
INNOVATION
™

Red ocean strategy is a market-competing

strategy, while blue ocean strategy is a
market-creating strategy
As red oceans are becoming bloodier, we
need to create more blue oceans
“The only way to beat the competition is to
stop trying to beat the competition!”
 Points of view BACHELOR OF
INNOVATION
™

Business often look at the industry from a

structuralist (supply) point of view

What if we looked at the industry from a

reconstructionist (demand) point of view?

Market boundaries are not viewed as given,

but could be reconstructed to unlock new
demand
Four Actions to create a Blue Ocean
BACHELOR OF
INNOVATION
™
Raise
What factors
should be raised
well beyond the
industry standard?

Eliminate Create
What factors What factors should
should be be created that the
eliminated that the industry has never
industry has taken offered?
for granted?

Reduce
What factors
should be reduced
well below the
industry standard?
 The Case of Cirque du Soleil BACHELOR OF
INNOVATION
™

Cirque du Soleil achieved rapid growth in a

declining industry with low profit potential
Cirque du Soleil created uncontested new
market space that made the competition
irrelevant
If you don’t know them you can see some at
http://www.youtube.com/watch?v=M4lAPI5BAuk
 Example: Cirque du Soleil BACHELOR OF
INNOVATION
™

Instead of simply trying to outpace the

competition, Cirque du Soleil offered people
both the fun and thrill of the circus and the
intellectual sophistication of the theater
Because of this, Cirque du Soleil appealed to
both circus customers and noncustomers
 Example: Cirque du Soleil BACHELOR OF
INNOVATION
™

Each show, like a theater production, had its

own unique theme and storyline
This allowed customers to return to the show
more frequently
They also did away with the traditional high-
priced concessions and vendors thereby
cutting costs
 Example: Cirque du Soleil BACHELOR OF
INNOVATION
™

Cirque du Soleil effectively combined the best

of both the circus and the theater while
eliminating everything else
This allowed them to achieve both
differentiation and low cost
 Eliminate-Reduce-Raise-Create BACHELOR OF
INNOVATION
™

Eliminate Raise
Star Performers Unique venues
Animal shows
Aisle concession sales
Multiple show arenas
Reduce Create
Fun and humor Theme
Thrill and danger Refined environment
Multiple productions
Artistic music and dance