The Book and the Authors

© JOHN ABBOTT © JOHN ABBOTT

Prof Chan Kim Prof Renee

Mauborgne

© Kim and Mauborgne 1

All rights reserved.

 Accolades
 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
© Kim and Mauborgne 2

All rights reserved.

 What is the Blue Ocean?
 High profit growth at low risk

 Industries not in existence today

 Untapped market demand

 Unknown market space

© Kim and Mauborgne 3

All rights reserved.

 Example: A highly
competitive Industry

The American
Wine Industry
© Kim and Mauborgne 4

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What the industry offers
Premium Wines Budget Wines
Polarised
Strategic Groups

Massive Choice

© Kim and Mauborgne 5

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 American Wine Industry
 3rd largest in world: worth $20 billion

 Californian makes 66% - the rest is from Italy,

France, Spain, Chile, Argentina, Australia

 Exploding number of new wines – new

vineyards in Oregon, Washington, New York
 Customer base stagnant

 31st in the world in per capita consumption!

© Kim and Mauborgne 6

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 American Wine Industry
 Top 8 producers had 75% of the market; 1600
had the remaining 25%

 $ millions spent in marketing - Titanic battles –

intense competition

 Sever price pressure

 The dominant growth strategy was towards

premium wines – more complexity, better image,
more prestigious vineyards, number of medals
won at wine festivals.
© Kim and Mauborgne 7

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 Offering Level versus Wine
Drinkers’ Expectations
Us
t eo

Normal

Low
Very high

Very low
High

existent
Non-
dis erm f en
tin ino olo
co cti log gic

All rights reserved.

mm on y a al
un s in nd

© Kim and Mauborgne

ica wi
tio ne
n
Ab
o
ma ve-th
r k e-
eti lin
ng e
Ag
ing
qu
Vi a li
ne
ya ty
an d r
d l pr
eg es
ac tig
W y e
ine
co
mp
lex
it y
W
ine
Premium Wines

ra
ng
e

Pr
ice
8
 Offering Level versus Wine
Drinkers’ Expectations
Us
t eo

Normal

Low
Very high

Very low
High

existent
Non-
dis erm f en
tin ino olo
co cti log gic

All rights reserved.

mm on y a al
un s in nd

© Kim and Mauborgne

ica wi
tio ne
n
Ab
ov
ma e-th
rk e-l
eti in
ng e-
Ag
ing
qu
Vi al i
ne
ya ty
an d r
d l pr
eg es
ac tig
W y e
ine
co
mp
lex
it y
W
ine
ra
ng
e
Premium and Budget Wines

Pr
ic e
9
 What people said …
 “It is too confusing and complex”
• Wine descriptions and terminology

• The shopping experience

• The lack of clear guidance on what to buy and

drink

 Thus, massively intimidating for

‘noncustomers’ (the large majority of the US
population who were not wine drinkers)

© Kim and Mauborgne 10

All rights reserved.

 Yellow Tail created a Blue
Ocean
Creating
Premium a Blue Ocean Budget

© Kim and Mauborgne 11

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 Yellow Tail
 Only 2 types initially – Chardonnay and Shiraz
 Fruity, soft on palette, sweet-ish – great for those who
had not drunk wine before
 Same bottle for red and white – low logistics costs
 Simple vibrant packaging – lower case letters/kangaroo
 Un-intimidating
 They were selling “The essence of a great land …
Australia” – ie they were not selling the wine
 Australian clothing for the retail staff – they
enthusiastically promoted a wine they could understand.

© Kim and Mauborgne 12

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 Yellow Tail Strategy
 Eliminated: Oenological terminology and distinctions,
Aging qualities, Above the line marketing

 Reduced: Wine complexity, Wine range, Vineyard

prestige

 Raised: Price versus Budget Wines, Simplicity of

retail store environment, Enthusiasm of Sales People

 Created: Easy drinking, Ease of selection, Sense of

fun and adventure

© Kim and Mauborgne 13

All rights reserved.

 Us
ter e of

Normal

Low
Very high

Very low
High

existent
Non-
dis m en
tin ino olo
co cti log gic

All rights reserved.

mm on y a al
un s in nd

© Kim and Mauborgne

ica wi
tio ne
n
Ab
ov
ma e-th
rk e-l
eti in
ng e-
Ag
ing
qu
Vi a li
ne
ya ty
an d r
d l pr
eg es
ac tig
W y e
ine
co
mp
l ex
it y
W
ine
ra
ng
e
2) Divergent
1) Focussed

Ea
sy
Three Tests of a

dr
“The Essence of a Great Land”

in kin
Ea g
se
Blue Ocean Strategy:

3) Compelling Tagline

of
s el e
cti
on

ad Fun
ve a n
nt
ur d
Yellow Tail Value Curve

ou
s

Pr
ic e
14
 Results
 No 1 imported wine (outsells France and Italy)

 Fastest growing imported wine in the history of the

USA industry
• New consumers of wine

• Jug drinkers trade up

• Premium wine drinkers trade down

 Industry criticizes them mercilessly at first

 Now wine press blurb gives it a “best buy” for value;
winning wine awards.
© Kim and Mauborgne 15

All rights reserved.

 Summary
Conventional Logic
Industry Industry conditions are
Assumption given
Strategic Build competitive advantages
Focus to beat the competition.
Customers Retain and expand the
customer base through further
segmentation and
customization.
Think in terms of embracing
customer differences.
© Kim and Mauborgne
All rights reserved.
Blue Ocean Logic
Industry condition can be
shaped.
Create a quantum leap in
buyer value to dominate the
market.
Go for the mass of buyers
and willingly let some
existing customers go. Think
in terms of embracing key
customer value
commonalities.
16
 Summary
Conventional Logic
Assets & Think in terms of a
Capabilities company’s existing assets
and capabilities.
Build on what it has.
Product/ Think in terms of
Service products/services offered by
offerings the industry. Seek to
maximize the value of these
offerings.
© Kim and Mauborgne
All rights reserved.
Blue Ocean Logic
Think free from a company’s
existing assets and
capabilities.
Ask, what if we start anew?
Think in terms of buyers’
solution even if that transcends
the industry. Seek to solve
buyers’ major bottlenecks/chief
compromises in using the
products/services of the
industry.
17
 Four Actions to create a Blue
Ocean 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?

© Kim and Mauborgne 18

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