On Blue Ocean Strategy

I recently finished reading Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renee Mauborgne.

Below are key excerpts that I found particularly insightful:

1- “Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries, as Cirque du Soleil did. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.”

2- “However, there is little practical guidance on how to create them. Without analytic frameworks to create blue oceans and principles to effectively manage risk, creating blue oceans has remained wishful thinking that is seen as too risky for managers to pursue as strategy. This book provides practical frameworks and analytics for the systematic pursuit and capture of blue oceans.”

3- “Consistent with this observation, our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering.”

4- “The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.”

5- “To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry.^ To pursue both value and cost, you should resist the old logic of benchmarking competitors in the existing field and choosing between differentiation and cost leadership.”

6- “To reconstruct buyer value elements in crafting a new value curve, we have developed the four actions framework…Which of the factors that the industry takes for granted should be eliminated! Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered?”

7- “The first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans…Path 1: Look Across Alternative Industries…Path 2: Look Across Strategic Groups Within Industries…Path 3: Look Across the Chain of Buyers…Path 4: Look Across Complementary Product and Service Offerings…Path 5: Look Across Functional or Emotional Appeal to Buyers…Path 6: Look Across Time.”

8- “To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.”

9- “Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.”

10- “Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. But compared with red ocean strategy, blue ocean strategy represents a significant departure from the status quo. It hinges on a shift from convergence to divergence in value curves at lower costs. That raises the execution bar. Managers have assured us that the challenge is steep. They face four hurdles. One is cognitive: waking employees up to the need for a strategic shift. Red oceans may not be the paths to future profitable growth, but they feel comfortable to people and may have even served an organization well until now, so why rock the boat? The second hurdle is limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. But resources were being cut, and not raised, in many of the organizations we studied. Third is motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo? That will take years, and managers don’t have that kind of time. The final hurdle is politics. As one manager put it, “In our organization you get shot down before you stand up.””

11- “Key to winning over your detractors or devils is knowing all their likely angles of attack and building up counterarguments backed by irrefutable facts and reason.”

12- “To change the mass it focuses on transforming the extremes: the people, acts, and activities that exercise a disproportionate influence on performance. By transforming the extremes, tipping point leaders are able to change the core fast and at low cost to execute their new strategy.”

13- “Because blue and red oceans have always coexisted however, practical reality demands that companies succeed in both oceans and master the strategies for both. But because companies already understand how to compete in red oceans, what they need to 1 learn is how to make the competition irrelevant. This book aims too help balance the scales so that formulating and executing blue ocean strategy can become as systematic and actionable as competing in the red oceans of known market space.”

Regards,

Omar Halabieh

Blue Ocean Strategy

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