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5.0 out of 5 stars Value Innovation - strategy book of the year 2005?, January 10, 2005
This review is from: Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant (Hardcover)
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
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Showing 1-5 of 5 posts in this discussion
Initial post: Feb 14, 2008 3:16:03 PM PST
Carms says:
See Edward de Bono's Surpetition and Marketing Without Money.

In reply to an earlier post on Jan 29, 2009 8:58:44 PM PST
Paul Beaird says:
Thanks!!! I thought I had all Edward de Bono's books, but I never even heard of that title. I'll go get it.

Posted on Jan 29, 2009 9:00:23 PM PST
Paul Beaird says:
This is exactly the kind of review Amazon is about. It tells me enough about the contents and ideas in the book that I know whether or not I want to buy it. I do!

Posted on Jun 25, 2009 12:00:59 PM PDT
Nintendo is another high-profile example. Satoru Iwata, Nintendo's CEO, has referred to the Blue Ocean Strategy in interviews.

In reply to an earlier post on Sep 24, 2011 6:21:51 PM PDT
I know that was a good review right. Only, I may not have to get the book now

LoL
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