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BLUE OCEAN STRATEGY
Authors: W. Chan Kim – Renee Mauborgne
How to Create Uncontested Market Space and
Make the Competition Irrelevant
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I. THE STRATEGY
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New Market Space
RED OCEAN
Represent all the industries in existence today Æ known market space
BLUE OCEAN
Denote all the industries not in existence today Æ unknown market
space
Circus Industry
Traditional Circus:
• Target Market : Children
• Dependent to : Star performance,
animal shows
• High fun & humor
• High Thrills & dangers
High Cost, Low Price
Cirque du Soleil:
• Target Market : Adults
• Not Dependent to Star
performance & animal shows
• Reduce fun & humor
• Reduce Thrills & dangers
• Unique Venue
• Theme & Theater
Low Cost, High Price
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The Cornerstone of Blue Ocean Strategy
• Value innovation is created in the region where a company’s actions favorably
affect both its cost structure and its value proportion to buyers
• Cost savings are made by eliminating and reducing the factors an industry
competes on
• Buyer values is lifted by raising & 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
The Simultaneous Pursuit of Differentiation and Low Cost
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Red Ocean vs Blue Ocean
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The Six Principles of Blue Ocean Strategy
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Four Actions Framework
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The Case of Cirque du Soleil
Eliminate
Star Performers
Animal Shows
Aisle concession sales
Multiple show arenas
Raise
Unique venue
Reduce
Fun and humor
Thrill and danger
Create
Theme
Refined environment
Multiple productions
Artistic music and dance
The Strategy Canvas of Cirque du Soleil
High
Ringling Bros
Smaller Reg Circuses
e
wa
tc
h
M
in
g
ul
tip
en
le
vi
p
ro
Ar
du
t is
ct
t ic
io
m
ns
us
ic
&
da
nc
e
Th
em
Re
fin
ed
ho
w
s
co
nc
M
es
ul
sio
tip
ns
le
sh
ow
ar
en
as
Fu
na
&
hu
m
or
Th
r il
l&
da
ng
er
Un
iq
ue
ve
nu
e
sle
al
s
Ai
rm
an
ce
An
im
St
ar
Pe
r fo
Pr
ice
Low
Cirque du Soleil
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II. FORMULATING BLUE
OCEAN STRATEGY
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Six Path to Blue Ocean Strategy
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Net Jets Case Study
1: 16 Ownership Aircraft
The Strategy Canvas of NetJets
Price
Need for
customers to
manage
aircraft
Deadhead
costs
Private Jet
Speed of travel Ease of travel
time
Commercial Airlines
Flexibility &
reability
NetJets
in-flight service
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Curves Case Study
Collective Exercise method
Traditional Health Club
W
om
an
ly
Home Exercise
os
ph
er
e
at
m
fu
n
Co
nv
en
ie
nc
e
ng
n
M
ot
iv
&
Di
s
cip
l in
e
No
nt
hr
ea
te
ni
at
io
ct
or
s
In
st
ru
en
itie
W
s
or
ko
ut
eq
ui
pm
en
t
W
or
ko
ut
t im
e
Am
Pr
ice
The Strategy Canvas of Curves
Curves
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Novo Nordisk Case Study
Insulin Producer
Diabetes Care Company
By producing NovoPen
Focus on Doctors
Direct to Patients
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NABI Case Study
Fiberglass BUS
The Strategy Canvas of NABI
Initial Price
Corrotion
Maintanance
Cost
Fuel
Consumpsion
Ordinary Transit Bus
Environment
Friendly
NABI
Aesthetic
design
Customer
friendly
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QB House Case Study
Speedy Barbershop
The Strategy Canvas of QB
Price
Reservation
Desk
Extra
Services
Range of
Hair
treatments
Hygiene
Ave. Jap Barbershop
Time
Savings on
waiting
QB House
Time
savings on
haircut
"air wash"
system
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From the value a market delivers today to
the value it might deliver tomorrow
CISCO Æ Growing demand for high speed
data exchange Æ focus on high speed data
technology
CNN Æ the rising tide of globalization Æ the
first real time 24hours global network
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III. VISUALIZING STRATEGY
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Four Steps of Visualizing Strategy
Visual Awakening
• Compare your
business with your
competitors’ by
drawing your “as is”
strategy canvas.
• See where your
strategy needs to
change
Visual
Exploration
Visual
Strategy Fair
Visual
Communication
• Distribute your before• Draw your “to be”
• Go into the field to
and-after strategic
strategy canvas based
explore the six paths
profiles on one page
on insights from field
to creating blue
for easy comparison
observations
oceans
• Support only those
• Observe the distinctive • Get feedback on
projects and
alternative strategy
advantages of
operational moves that
canvases from
alternative products or
allow your company to
customers,
services
close the gaps to
competitors’
• See which factors you
actualize the new
customers, and
should eliminate,
strategy
noncustomers
create or change
• Use feedback to build
the best “to be” future
strategy
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The Three Tiers of Noncustomers
Third
Tier
Second
Tier
First
Tier
Your
Market
First Tier: “Soon-to-be” noncustomers who are on the edge of your
market, waiting to jump ship
Second Tier: “Refusing” noncustomers who consciously choose
against your market
Third Tier: “Unexplored” noncustomers who are in markets distant
from yours
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The Sequence of Blue Ocean Strategy
Buyer Utility
Is there exceptional buyer utility in your
business idea?
No - Rethink
Yes
Price
Is your price easily accessible to the mass
of buyers?
No - Rethink
Yes
Cost
Can you attain your cost target to profit at
your strategic price?
No - Rethink
Yes
Adoption
What are the adoption hurdles in actualizing
your business idea? Are you addressing
them up front?
Yes
A Commercially Viable Blue
Ocean Idea
No - Rethink
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IV. EXECUTING BLUE
OCEAN STRATEGY
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The Four Organizational Hurdles to Strategy
Execution
Cognitive Hurdle
An Organization
wedded to the status
quo
Political Hurdle
Resource Hurdle
Opposition from
powerful vested
interests
Limited Resource
Motivational Hurdle
Unmotivated staff
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Break through the Cognitive Hurdle Æ face to face with worst operational
problem
Ride the “Electric Sewer”
Meet the Disgruntled Customers
Jump the Resource Hurdle Æ Strategic shift with fewer resources
Low resources input but
Redistribute Resources to the Hot Spots
high potential gains
Redirect Resources from the Cold Spots
Trading your unit’s excess resources in one area
Engage in Horse Trading
for another unit’s excess resources to fill remaining
resources gap
Jump the Motivational Hurdle Æ Motivate employees fast & low cost
Influencer in Organization
Zoom in on Kingpins
Transparency, inclusion & fair process
Place Kingpins in a Fishbowl
Atomize to Get the Organization to Change itself
Framing the strategic challenge,
actionable to all levels
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Knock Over the Political Hurdle Æ overcome political forces
Who the most to gain from
Leveraging Angles
the strategic shift
Silencing Devils
Getting a consigliore on the top management team
Who knows in advance all the land mines Æ who
will fight you, who will support you
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V. CONCLUSION: Blue
Ocean Sustainability
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Imitation Barriers to Blue Ocean Strategy
• Value innovation does not make sense to a company’s conventional
logic
• Blue ocean strategy may conflict with other companies’ brand image
• Natural monopoly: The market often cannot support a second player
• Patents or legal permits block imitation
• High volume leads to rapid cost advantage for the value innovator,
discouraging followers from entering the market
• Network externalities discourage imitation
• Imitation often requires significant political, operational and cultural
changes
• Companies that value-innovate earn brand buzz and a loyal
customer following that tend to avoid imitators
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The END - THANKS