W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy
Kim (pictured on the left) and Mauborgne (pictured right) are strategy professors at the INSEAD Business School
W. Chan Kim and Renée
Mauborgne in the Management Gurus section.
How to win with a blue ocean strategy
1. Focus on change not competition
a) don’t play by competitors’ rules
Change them by creating blue oceans which give:
- a superior new product in...
- new and existing customers.
See point 2.
b) make competitors irrelevant
(by changing the rules of the game).
c) don’t compete in your existing industry in red oceans
(where competition is high).
2. Maximize customer creation through value
Value innovation is the foundation of blue ocean strategy, because it creates
customers through a “leap in value” for them.
Value innovation is achieved through:
a) re-defining your business and industry
- Cirque Soleil (pictured right) turned circus into theatre.
- Pfizer’s Viagra became a lifestyle enhancement product.
b) finding new customer benefits
- Pret à Manger providing healthy fast food.
- Southwest Airlines giving great service at low cost/price.
Creating superior new products.
d) changing industry boundaries
For example, Casella Wines successfully turned wine into a fun leisure activity.
e) low cost differentiation
- differentiation (providing something unique to customers)
- low costs (with affordable prices)
This contradicts Michael Porter who says you must choose
between the two.
f) change and continuous improvement
(to avoid imitation by competitors).
Acceptance of the new blue ocean idea by:
h) focusing on the big strategic picture
(without paralysis by numbers and detail).
3. The Four Actions Framework
There are four key actions to increase customer value:
- eliminating competitive factors in the industry that no longer contribute to
- reducing product features that increase costs without
- introducing factors that need to be raised well above the industry standard.
- finding new ways of increasing customer value.
4. Tipping point leadership
Effective leadership must overcome four key obstacles to introducing a blue ocean strategy:
- cognitive - persuading people that change is necessary.
- limited resources - more change requires more resources.
- motivation - motivating people to change and break from the status quo.
- politics - overcoming internal political opposition to change.
How to overcome these obstacles is explained in point 5.
5. Implementing the ocean blue strategy
Successful implementation depends on employee trust and motivation resulting from the 3 E’s of “fair
- Engagement - involving people in strategic decisions affecting them.
- Explanation - explaining strategic decisions.
- Expectation clarity - clarifying performance standards.
Special attention must be given to:
- the most influential employees (kingpins).
- supporters and opponents of introducing a blue ocean strategy (angels and
Key quotes on business success and strategy
Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating
uncontested market space that makes the competition irrelevant.
The only way to beat the competition is to stop trying to beat the competition.
The creators of blue oceans...focus on making the competition irrelevant by creating a leap in value for buyers
and your company.
Value innovation occurs only when companies align innovation with utility, price and cost positions.