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

~ (Author), (Author) "A ONE TIME ACCORDION PLAYER, stilt-walker, and fire-eater, Guy Laliberte is now CEO of Cirque du Soleil, one of Canada's largest cultural exports..." (more)
Key Phrases: key organizational hurdles, strategic sequence right, creating blue oceans, Cirque du Soleil, United States, Reconstruct Market Boundaries (more...)

Editorial Reviews

From Publishers Weekly

Kim and Mauborgne's blue ocean metaphor elegantly summarizes their vision of the kind of expanding, competitor-free markets that innovative companies can navigate. Unlike "red oceans," which are well explored and crowded with competitors, "blue oceans" represent "untapped market space" and the "opportunity for highly profitable growth." The only reason more big companies don't set sail for them, they suggest, is that "the dominant focus of strategy work over the past twenty-five years has been on competition-based red ocean strategies"-i.e., finding new ways to cut costs and grow revenue by taking away market share from the competition. With this groundbreaking book, Kim and Mauborgne-both professors at France's INSEAD, the second largest business school in the world-aim to repair that bias. Using dozens of examples-from Southwest Airlines and the Cirque du Soleil to Curves and Starbucks-they present the tools and frameworks they've developed specifically for the task of analyzing blue oceans. They urge companies to "value innovation" that focuses on "utility, price, and cost positions," to "create and capture new demand" and to "focus on the big picture, not the numbers." And while their heavyweight analytical tools may be of real use only to serious strategy planners, their overall vision will inspire entrepreneurs of all stripes, and most of their ideas are presented in a direct, jargon-free manner. Theirs is not the typical business management book's vague call to action; it is a precise, actionable plan for changing the way companies do business with one resounding piece of advice: swim for open waters.
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Review

"Blue Ocean Strategy will have you wondering why companies need so much persuasion to stay out of shark-infested waters." -- BusinessWeek, April 4th 2005

"Blue Ocean raises pertinent questions… and delivers valuable answers." -- American Way, March 2005

"Companies struggling to stay afloat in the market's...red oceans would do well to look into Blue Ocean Strategy." -- Fort Worth Star Telegram, 14 February 2005

"The book is clearly written, offering many examples of blue-ocean strategies and the techniques to develop such a scheme." -- Globe and Mail, June 8, 2005

See all Editorial Reviews

Product Details

• Hardcover: 256 pages
• Publisher: Harvard Business Press; 1 edition (February 3, 2005)
• Language: English
• ISBN-10: 1591396190
• ISBN-13: 978-1591396192
• Product Dimensions: 9.4 x 6.1 x 1.2 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.1 out of 5 stars  See all reviews (204 customer reviews)
• Amazon.com Sales Rank: #1,391 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

426 of 456 people found the following review helpful:

5.0 out of 5 stars Value Innovation - strategy book of the year 2005?, January 10, 2005

By	Peter Leerskov "The Strategist, www.lace.dk" (Denmark) - See all my reviews (REAL NAME)

The authors have published many articles over the last decade on Value Innovation. This is their first book. It summarizes their extensive knowledge on out-of-the-box strategic thinking.

What is a BLUE OCEAN STRATEGY? The authors explain it by comparing it to a red ocean strategy (traditional strategic thinking):
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company's activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company's activities in pursuit of both differentiation and low cost.

A red ocean strategy is based on traditional strategic thinking - e.g. Harvard's strategy guru Michael Porter.

Some cases:
* Airline industry price wars result in bankruptcies and low profit margins. Southwest Airlines creates a new market by offering the speed of air travel with the low cost and flexibility of driving.
* Golf equipment industry competes to win a greater share of existing golf customers. Callaway Golf creates "Big Bertha", a golf club with a large head that attracted new customers to golf that had been frustrated by the difficulty of hitting the ball.
* The cosmetic industry creates a red ocean with models, expensive advertising, and promises of youth and beauty. The Body Shop creates a blue ocean that lasts more than a decade by creating functional cosmetics that defied the industry which sold emotionally appealing cosmetics.
* The wine industry gluts the market with a red ocean of thousands of brands competing on the finest oaks and tannins and legacy winey names. Casella wines creates [yellow tail], a blue ocean wine that succeeded by eliminating complexity, elitism and consumer confusion and creating a fun simple image that non-wine drinkers could enjoy.

A blue ocean is created in the region where a company's actions favourably affect both its cost structure and it value proposition to buyers. Cost savings are made from eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.

Examples of strategic moves that created blue oceans of new, untapped demand:
- NetJets (fractional Jet ownership)
- Cirque du Soleil (the circus reinvented for the entertainment market)
- Starbucks (coffee as low-cost luxury for high-end consumers)
- Ebay (online auctioning)
- Sony (the Walkman - personal portable stereos)
- Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan (1984)
- Computers: Apple personal computer (1978) and Dell's built-to-order computers (mid-1990s).

The INSEAD professors Kim and Mauborgne have written regularly on the subject of Value Innovation since 1997 in Harvard Business Review. Being a business development manager, their thought leadership on strategic innovation has inspired me tremendously over the years. Their articles have been standard texts for many MBA students for some time (e.g. "Value Innovation", "Creating New Market Space", "Charting your Company's Future"). I expect their first book to be just as dominant in any strategy library as Michael Porter's books (the guru behind the classic red ocean strategies).

Peter Leerskov,
M.Sc. in International Business (Marketing & Management) and Graduate Diploma in E-business

148 of 160 people found the following review helpful:

1.0 out of 5 stars I thought oceans were deep..., January 11, 2006

By	B. Gilad (USA) - See all my reviews (REAL NAME)

This book is mostly "fluff". Its basic argument is that companies who find themselves in hotly contested markets ("red oceans") should look for uncontested markets ("blue oceans"). They should do it in such a way as to ensure revenues (so go for mass), and profit (so watch the cost). Wow. I guess if the authors said: go for high-cost-small-markets, at least it will be original! The problem with this book is that it is a mishmash of old ideas, and its mortal sin is that it is trivial. It looks at successful products and service offerings, and in retrospect identifies the characteristics that made them succeed (at least revenue wise, there is no real financial analysis in this book). Naturally, finding those characteristics is the real issue, and it is the realm of entrepreneurial vision. Beyond some trivial labels placed on common sense planning activities, Blue Ocean does not help one iota in finding uncontested markets with large profit potential. Anyone who seriously tries to apply the ideas in the book will find they are either trivial or fluff.

The lack of originality is everywhere. Let's look closer: The book main point is that companies must do different things than competitors to be in uncontested markets. Fans of Michael Porter will immediately recognize this as the theme of his seminal 1996 article "What is Strategy" (go to www.hbsp.harvard.edu to buy this article). Interestingly enough, Kim and Mauborgne published their first work on value innovation in...yes, 1997. Porter identified three bases for successful strategies: need-based, variety-based, and access-based. Unlike the authors of Blue Ocean, he did not pretend to have an a priori formula for finding success. All he did was to show what makes a superior strategy, and why superior strategies are sustainable over a long period of time. Kim and Mauborge wrote a "formula" type prescription to finding quick success (by avoiding competition), but they neither truly give any tools to do so, nor prove that the companies they feature have created a sustainable profitable advantage. What the authors say is: focus, diverge and have a great marketing tagline. In other words - you want to be different? Be different. And how do you know which different to be? Ahhh, that's simple. Look at what customers and noncustomers need but do not get from the existing offering of the incumbents in the industry. Wow. Who would have thought about that?

The main tool of this book, the strategy canvas, is nothing more than an after the fact simplified two dimension graphical presentation of product or services' characteristics that make some products better than others. Do you remember the Quality Deployment Function, a product/service design matrix that came out of Japan, developed in the 80s by the Japanese consultant Yoji Akao? The QFD framework has been used by Japanese companies for decades now to translate "true" (and often unmet and unstated) customer needs into actions and designs to build and deliver a quality product. QDF also came with a little graphic help, but more sophisticated than the one in this book. Finding which characteristics will be the wining ones is an old market research goal, and it is much easier in retrospect.

The authors are not beyond copying any once popular simple concept. In chapter 4 they introduce with a big fanfare a revolutionary new concept, classifying businesses as Pioneers, Migrators, or Settlers. Anyone recognizing Boston Consulting Group's portfolio matrix of cash cow, question mark and star companies is not wrong. This simplistic labeling is what made BCG so popular (and destroyed many companies and made Wall Street discount conglomerates in the US) and probably why this book has attracted people desperately looking for simple solutions in complicated contested markets. But anyone actually responsible for charting strategy and managing competition in real contestable markets (i.e., business managers and executives) will quickly realize this book has no practical substance. It is all fluff. And if you are lucky to create a less contested market, this book will tell you nothing about how to KEEP it that way!

Finally, as a strategy professional, I realized quickly that this book is not really about strategy, which as Porter shows is a whole chain of operational activities geared toward the different positioning. This book is better titled "a book of lists of some successful products and services in the past 20 years, plus some trivial labels of where they were unique" because once you see beyond the superficial façade of the "value innovation process", this is what the book is all about: a list of some successful new products, created by companies and entrepreneurs who had the insight of how to be different. An insight as enigmatic after reading the book as it is before...

To apply the book's measure of "blue ocean innovation", it is not divergent from past books, nor focused on the real issues to justify its price. It does have a catchy tagline though, and like all quick fads, tagline is everything... I feel sorry for my hassled executive friends who are under severe pressure to compete and are hoping this book will help. It will not.

122 of 136 people found the following review helpful:

5.0 out of 5 stars "To strive, to seek, to find....", January 31, 2005

By	Robert Morris (Dallas, Texas) - See all my reviews (TOP 50 REVIEWER)    (REAL NAME)

This is an especially thought-provoking book which, as have so many others, evolved from an article published in the Harvard Business Review. According to Kim and Mauborgne, "[in italics] Blue ocean strategy [end italics] challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant...This book not only challenges companies but also shows them how to achieve this. We first introduce a set of analytical tools and frameworks that show you how to systematically act on this challenge, and, second, we elaborate the principles that define and separate blue ocean strategy from competition-based strategic thought." There are six principles which are introduced and then discussed on pages 49, 82, 102, 117, 143, and 172, respectively.

Frankly, I was somewhat skeptical that this book could deliver on the promises made in its subtitle. In fact, the material provided by Kim and Mauborgne is essentially worthless unless and until decision-makers in a given organization accept the challenge, are guided and informed by the six principles, and effectively use the tools within appropriate frameworks. The responsibility is theirs, not Kim and Mauborgne's. To assist their efforts, Kim and Mauborgne focus on several exemplary companies which have dominated (if not rendered irrelevant) their competition by penetrating previously neglected market space. They include the Body Shop, Callaway Golf, Cirque du Soleil, Dell, NetJets, the SONY Walkman, Southwest Airlines, Starbucks, the Swatch watch, and Yellow Tail wine.

Of greatest interest to me is Kim and Mauborgne's assertion that the innovations which enabled these companies to succeed with a Blue Ocean strategy did NOT depend upon a new technology. Rather, each company pursued a strategy which enabled it to free itself from industry boundaries. For Dell, that meant mass production of computers sold directly to consumers per each customer's specifications. Quite literally, each sale is "customized." For Callaway, creating an enlarged sweet spot to increase the frequency of solid contact for new or infrequent golfers just as, years ago, the enlarged Head racquet did so for new or infrequent tennis players. For Starbucks, creating a congenial environment within which to socialize, go online, or read while consuming coffee. All of these Blue Ocean strategies created new or much greater value for customers. Their emphasis is on the quality of experience, not on the benefits of a new technology.

According to Kim and Mauborgne, their research indicates that "the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering." The cornerstone of a Blue Ocean strategy is value innovation which occurs "only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch." For Kim and Mauborgne, value innovation is about strategy that embraces the entire system of a company's activities. It requires companies to orient the whole system toward achieving a "leap" in value for both buyers and themselves. Kim and Mauborgne explain HOW to create uncontested market space wherein competition is essentially irrelevant.

To paraphrase Henry Ford, whether decision-makers think they can or think they can't do that, they're right.