Blue Ocean Strategy

Review
This best-selling business breakthrough by INSEAD strategy and international management
professor W. Chan Kim and INSEAD distinguished fellow and World Economic Forum fellow
Reneé Mauborgne provides an organized framework for identifying and implementing out-of-the-
box “blue ocean strategies” for all industries. The book dates to 2005 (latest edition 2015), but the
fresh research Kim and Mauborgne provide about the impact of innovative ideas on old industries
continues to resonate. Their compelling business examples will inspire you. Their appendices
contain further useful case histories on the evolution of the Model T car, the personal computer and
the modern multiplex movie theater. The authors provide clear, implementable rules and principles,
albeit somewhat academically drafted. getAbstract recommends their innovative approach to
strategists or entrepreneurs seeking to move out of the competitive waters of the “red ocean” and
into the relative tranquility of the open blue ocean.

Professorial Prose

Kim and Mauborgne describe a typical strategic approach as “a smorgasbord of tactics” that appear
viable, one by one, but “collectively don’t add up to a clear unified direction that sets a company
apart.” They advise drawing a “strategy canvas” that assures that everyone involved can see and
understand what your company’s strategy will involve.

The authors are professors and analysts first and writers second. Their prose is basic and
straightforward with little rhythmic variation or literary flair, but dedicated readers of business texts
will find their style remarkably articulate and easy to follow. They use language to get ideas across,
not to entertain or even engage. Yet they convey considerable intelligence and downright joy when
parsing business strategies. As the size of their audience shows, the professors offer a rare mix of
insightful business analysis and astute, practical strategy. Most business authors are lucky if they
can offer one or the other. Very few combine both with such precision and utility. Those less versed
in following strategic narratives may have to make some effort to focus, but they can ingest Kim
and Mauborgne’s ideas in segments and take a few breaks. While the authors salt their principles
for intrepid strategists with their theory’s jargon, managers easily can navigate right to the
important strategic counsel. The potential positive effects of following this advice make the effort
of reading every single word worthwhile.

Six Tenets
Kim and Mauborgne describe the six principles underlying the blue ocean strategy:

1. “Reconstruct Market Boundaries”

Strategically examine your industry’s main competitive drivers – such as customer preferences,
product qualities, pricing and industry standards. “Red ocean” strategies imagine finite markets. To
expand your market boundaries into the wide blue ocean, consider your main competitors and think
through their limitations. For instance, Curves – the women-only health club that offers a zippy
half-hour exercise program – exploited price, location and ease of use to create a new market and
compete against full-service health clubs. For a time, a new Curves mini-gym opened every four
hours worldwide. Casella Wines of Australia applied this analytical process to make its Yellow Tail
brand the fastest-growing label in the history of US and Australian vintners and the best-selling red
wine in the United States in August 2003. Casella streamlined its wine’s taste, making it fruitier and
sweeter. It reached out to beer and cocktail drinkers by promoting its wine as fun. Breaking its
industry’s early-2000s marketing habits, Casella jettisoned wine’s traditional elitist appeal.

The book’s abundant case histories show readers how to reach your consumers’ emotions while
promoting your end-user benefits. QB House, a Japanese barbershop chain, touts cheap, sanitary
haircuts. Cemex, a Mexican cement producer, promotes affordable room additions.

2. “Focus on the Big Picture, Not the Numbers”

The professors warn you to avoid getting lost in statistics. Many strategists bog down in data, so
they often misread their – and their rivals’ – future. To maintain your sense of direction, Kim and
Mauborgne suggest creating your strategy canvas – a graphic representation of your competitor’s
products, prices and industry position. The canvas reveals your “value curve” and clarifies possible
opportunities. This helps you consider your competitive environment through your customers’ eyes,
so you improve the factors that matter most to them. It can blunt the risk of investing time and effort
in the wrong direction. For instance, Kim and Mauborgne warn that if you want to exploit a trend,
be sure it pertains to your business and has irreversible momentum.

3. “Reach Beyond Existing Demand”

The authors believe a company’s natural focus on its current customers invariably leads to better
market segmentation analysis. One of their more revolutionary yet commonsense ideas is that real
growth lies beyond existing demand. To get to the open blue water, focus on potential future
customers. The French firm JCDecaux recognized that municipalities would embrace outdoor
advertising space if it was free and came with maintenance. JCDecaux built durable ad-bearing
street furniture and signed long-term contracts with numerous cities. By generating future demand,
the firm profitably dominates this specialized sector in many countries.

4. “Get the Strategic Sequence Right”

The authors insist that you must execute your strategy sequentially to achieve “value innovation.”
Just having new technology doesn’t mean that you have a blue ocean product. Chart the experience
you want buyers to have at several stages. Assess your product’s usefulness, ease, handiness, safety,
entertainment value and “environmental friendliness” based on how each factor affects the
customers buying it, bringing it home, using it, adding to it, keeping it working and, eventually,
disposing of it. To develop your blue ocean strategy, ask these questions in this order:

1. Why should anyone buy your product? Does it have “exceptional utility”?
 2. Is it priced to appeal to a large audience?

3. Can you create it at the right cost to earn a profit?

4. Do any impediments discourage the market from accepting your product?

5. “Overcome Key Organizational Hurdles”

Before you can achieve a blue ocean strategy, Kim and Mauborgne advise resolving any internal
departmental differences. Managers may fret about significant change, what problems will arise
from reallocating resources, whether new practices will work and if the transition will upset the
existing social hierarchy. For minimal disruption, the authors suggest using “tipping point
leadership.” Malcolm Gladwell’s The Tipping Point says certain actions gain a disproportionate
influence if they happen at exactly the right time. The key is using resources when they are most
powerful. For example, Bill Bratton, then New York City’s police commissioner, and other police
officers began riding subways at popular times so people would recognize a unified police presence.
The result was less turnstile jumping, graffiti, passenger harassment and panhandling.

6. “Build Execution into Strategy”

A successful blue ocean launch requires extra effort from a cohesive crew. Link the three “E
Principles of Fair Process” – “engagement, explanation” and clear “expectation” – with the process
of developing the strategy and acting on it at all levels of your organization. Since building a blue
ocean strategy involves uncertainty and risk, the professors warn that creating trust among all
participants is essential.

Despite a few islands of dryness in their oceanic prose, Kim and Mauborgne show a great
understanding of human nature and how it manifests in business. They aren’t writing for robots;
they expect peoples’ foibles to undermine even the best strategies and they tell you how to realize
when your foibles are making you do just that. They make it clear that sailing into the blue ocean
isn’t risk-free, but that great adventure awaits the intrepid executive who makes the voyage.

About the Authors

INSEAD strategy and international management professor W. Chan Kim previously taught at the
University of Michigan Business School. An adviser to international corporations, he has written
for the Financial Times, The Wall Street Journal and The New York Times. INSEAD distinguished
fellow and World Economic Forum fellow Reneé Mauborgne teaches and publishes on strategy
and management.