BLUE OCEAN STRATEGY 1

History and Background

Blue Oceandiscipline has been developed by W. Chan Kim and Renee Mauborgne,

professors at INSEAD, who are co-authors of the book, Blue Ocean Strategy, and are co-

directors of the Blue Ocean Institute in 2005. It is based on a study of 150 strategic moves

spanning more than 100 (1880 – 2000) years and 30 industries. Such industries include hotel,

cinema, retail, airline, energy, computer, broadcasting, home construction, automobile, steel

manufacturing, chemicals, cosmetics, software, etc. The variables considered in the study are

industrial, organizational and the strategic operations of the participant industries.Blue Ocean

Strategy (BOS) is the simultaneous pursuit of differentiation and low cost. The aim of Blue

Ocean Strategy is not to out-perform the competition in the existing industry, but to create new

market space or a blue ocean, thereby making the competition irrelevant. Blue Ocean Strategy

offers systematic and reproducible methodologies and processes in pursuit of innovation by both

new and existing firms. Blue Ocean Strategy frameworks and tools are designed to be visual in

order to not only effectively build the collective wisdom of the company but also to effectively

execute through easy communication. (Harvard Business School Club of Washington DC, 2009).

Concepts

Industry history teaches us that blue oceans are not about technology innovation per se. It

also teaches us that incumbents often create blue oceans – and usually within their core

businesses. It also further teaches us that company and industry are the wrong units of analysis

and creating blue oceans builds brands (Kim &Mauborgne, 2005). Kim &Mauborgne

differentiates Blue Ocean Strategy from Red Ocean Strategy:

BLUE OCEAN STRATEGY 2

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space
Beat the competition
Exploit existing demand
Make the value-cost trade off
Align the whole system of a firm’s activities
Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Break the value-cost trade-off
Align the whole system of a firm’s activities

with its strategic choice of differentiation or with its strategic choice of differentiation and

low cost low cost

Six Principles of Blue Ocean Strategy

Formulation Principles 1. Reach beyond existing demand

2. Reconstruct market boundaries

3. Focus on the big picture, not the numbers

4. Get the strategic sequence right

Execution Principles 5. Overcome key organizational hurdles

6. Build execution into strategy