Blue Ocean Strategy

© Kim & Mauborgne

Red Ocean vs Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value-cost trade-off Break the value-cost trade-off

Align the whole system of a firm’s Align the whole system of a firm’s
activities with its strategic choice of activities in pursuit of
differentiation or low cost differentiation and low cost

© Kim & Mauborgne

 Researching the History of
Blue Ocean Creation

Data: 150 blue ocean creations, more than 30

industries, over 100 years (1880-2000)
hotel, cinema, retailing, airline, energy, computer, broadcasting,
home
construction, automobile, steel manufacturing, chemicals,
cosmetics, software, etc.

Variables considered: industrial, organizational,

strategic

© Kim & Mauborgne

Substantially Higher Returns from
Investments in Blue Oceans

Red Oceans Blue Oceans

Market-Competing Business Launches Market-Creating Business Launches

© Kim & Mauborgne

How do you create a
Blue Ocean
in your industry?

© Kim & Mauborgne

 The “As Is” Strategy Canvas
for the US Wine Industry
hi
Premium
offering level

Budget Wines

lo
Use of enological Above-the- Aging Vineyard Wine Wine
Price terminology and line quality prestige complexity range
distinctions marketing and legacy

© Kim & Mauborgne

 The “To Be” Strategy Canvas
of [yellow tail]
hi
Premium Wines

[yellow tail]
offering level

Budget Wines

lo
Use of enological
Use and Above-the-
of enological
terminology Above-the- Aging
Aging Vineyard
prestige Wine Wine Easy Ease of Fun &
Price terminologyinand
distinctions wine line
line quality
quality complexity range drinking selection Adventure
distinctions marketing
marketing and legacy
and legacy
communication © Kim & Mauborgne
The Four Actions Framework

Reduce
Which factors
should be reduced
well below the
industry’s
standard?

Eliminate Create
Which of the
A New Which factors
factors that the Value should be created
industry takes for Curve that the industry
granted should be has never offered?
eliminated ?

Raise
Which factors
should be raised
well above the
industry’s
standard?
© Kim & Mauborgne
Eliminate-Reduce-Raise-Create Grid:

The case of [yellow tail]

Eliminate Raise
Enological Price versus
terminology and budget wines
distinctions Retail store involvement
Aging qualities
Above-the-line marketing
Reduce Create
Wine complexity Easy drinking
Wine range Ease of selection
Vineyard Fun and
prestige adventure

© Kim & Mauborgne

 Value Innovation: the simultaneous
pursuit of differentiation and low cost

Eliminate
Cost
Reduce
Blue
Ocean

Raise
Buyer
Create Value

© Kim & Mauborgne

 Six Paths to Blue Ocean Strategy

The six conventional boundaries of competition

Industry

Strategic group

Buyer group
From To
Competing Scope of product or
Creating
Within Across
service offering
Functional-emotional
orientation of an
industry

Time

© Kim & Mauborgne

 Shifting the Strategic Focus
Conventional Logic Blue Ocean Strategy Logic
Industry focus on rivals within its industry € looks across alternative industries

Strategic group focuses on competitive position € looks across strategic groups

within strategic group within industry

focuses on better serving the €

Buyer group buyer group
redefines the industry buyer group

focuses on maximizing the

Scope of product or value of product and service € looks across to complementary
service offering offerings within the bound of its product and service offerings
industry

focuses on improving price-

Functional-emotional performance within the € rethinks the functional-
orientation functional -emotional orientation emotional orientation of its
if its industry industry

Time focuses on adapting to external € participates in shaping external

trends as they occur trends over time
© Kim & Mauborgne
 Pioneer-Migrator-Settler Map

Pioneers
The only ones with a
mass following

Migrators
Best in the crowd

Settlers
Me-toos

Today?
© Kim & Mauborgne
 Pioneer-Migrator-Settler Map

Pioneers
The only ones with a
mass following

Migrators
Best in the crowd

Settlers
Me-toos

Today Tomorrow
© Kim & Mauborgne
 Minimizing Risks and Maximizing
Opportunities in Formulating and
Executing Blue Ocean Strategy
Formulation Principles Formulation Risks

Reconstruct market boundaries Search Risk

Focus on the big picture, not the numbers Planning Risk

Reach beyond existing demand Scale Risk

Get the strategic sequence right

Business Model Risk

Execution Principles Execution Risks

Overcome key organizational hurdles Organizational Risk

Build execution into strategy Management Risk

© Kim & Mauborgne

www.blueoceanstrategy.com

© Kim & Mauborgne