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Blue Ocean Strategy: How to Create Uncontest

Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant

W. Chan Kim, Renee Mauborgne
2005
T4 298 pages · about 4h 58m to read OL8980380Wgoodreads

Summary

Kim and Mauborgne distinguish red oceans, meaning existing industries where competitors fight over known demand, from blue oceans, meaning uncontested market space created by redefining the boundaries of an industry. Their argument is that competing on the existing terms produces margin compression, and that the alternative is what they call value innovation, meaning simultaneously raising buyer value and lowering cost by changing what the industry offers.

The analytical tools are the book's contribution. The strategy canvas plots the factors an industry competes on against the level offered, which makes an existing competitive convergence visible. The four actions framework asks which factors should be eliminated, reduced, raised and created, and the eliminate-reduce-raise-create grid forces answers to all four rather than only the additive ones. They also give the six paths framework for looking across industries, groups, buyer chains, complementary offerings, functional and emotional appeal, and time.

The cases include Cirque du Soleil, which removed animals and star performers while adding theatrical production, Southwest Airlines, Yellow Tail wine, Curves and Nintendo Wii.

The research base is the weak point. The authors studied one hundred and fifty strategic moves across thirty industries over a century, selecting successful cases and identifying common features, which cannot show how many failed attempts shared them. Several celebrated examples have since struggled. The framework does not explain how to identify a blue ocean in advance, only how to describe one after it exists. The strategy canvas remains genuinely useful as a diagnostic, because it makes competitive convergence visible in a way that most internal discussions do not.

Key takeaways 8

  1. Competing within an industry's existing terms compresses margins for everyone, because rivals converge on the same factors.
  2. Value innovation means raising buyer value and reducing cost at the same time, which requires changing what the industry offers rather than trading one against the other.
  3. Plotting the factors an industry competes on reveals that competitors have converged, which most internal strategy discussions never make visible.
  4. A company must decide what to eliminate and reduce, not only what to raise and create, and the removals are what make the cost reduction possible.
  5. Demand can be created rather than divided, by reaching people who currently do not buy from the industry at all.
  6. New market space is usually found by looking across industry boundaries, buyer groups or complementary offerings rather than within the existing definition.
  7. Execution requires overcoming organisational, resource, motivational and political barriers, which the authors treat as a distinct problem from strategy formulation.
  8. The framework describes successful moves after the fact and does not provide a method for identifying which new positions will work.

Who should read it

Founders and executives whose market has converged on the same competitive factors, who need a diagnostic for what to remove as well as what to add.

Where it sits in the reference 2

Business themes
Business themes

Who recommended it 8 · 2 direct

Chai with Pabrai bookshelf — Entrepreneurship, Management and Leadership
Book Notes & Reviews — nateliason.com
Aaron Leviereported
Superbook reading list
“Recommended in a YouTube interview as one of four books he'd "highly recommend reading."”
Superbook reading list
“A recommended business-strategy title on creating uncontested market space.”
Daymond Johnreported
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Drew Houstonreported
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Tim Ferrissreported
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