. Instaread - Summary of Blue Ocean Strategy: by W. Chan Kim and Renée A. Mauborgne

Guide to

W. Chan Kims & et al

Blue Ocean Strategy

How to Create Uncontested Market Space and Make the Competition Irrelevant

by

Instaread

Please Note

This is a companion to the original book.

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Table of Contents

Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant is the 2015 update to the classic business strategy text of the same name originally published in 2005. The text offers a practical handbook to business students and entrepreneurs who wish to rise above the fray of the competition, become pioneers in previously uncharted market territory, and gain access to impressive growth opportunities and an untapped customer base.

Most businesses make the mistake of focusing on their competitors when developing strategies. A blue ocean business, on the other hand, focuses on how to create new value for customers, the base of which may be people who are not yet customers of this business core industry. The term blue ocean is derived from the idea that an area of unexplored market space is like the clear, blue waters of an undisturbed portion of ocean. The opposite of the blue ocean would be the red ocean, where excessive competition has churned the waters bloody with rivalry.

Simply creating a new product or service is not enough. It is vital to the success and growth of the would-be blue ocean company that it innovate a concept that is useful to the consumer, target-priced for maximum profitability, and able to be executed without encountering resistance or confusion from all involved. Even then, however, blue ocean entrepreneurs cannot rest on their laurels. No industry and no company can survive off the success of a single idea. Instead, the blue ocean entrepreneur must constantly seek new areas in which to innovate and grow.

W. Chan Kim is the co-author of Blue Ocean Strategy. He is the co-director of the Blue Ocean Strategy Institute at INSEAD, an international business school, as well as a fellow of the World Economic Forum.

Rene A. Mauborgne is the co-author of Blue Ocean Strategy and is the co-director of the Blue Ocean Strategy Institute at INSEAD. She is also a fellow of the World Economic Forum and is a member of President Barack Obamas Board of Advisors on Historically Black Colleges and Universities.

Guy Lalibert is the CEO of Cirque du Soleil. He created an entirely new type of entertainment experience for people who were never customers of traditional circuses.

William Bratton was the commissioner of the NYPD from 1994 to 1996 and from 2014 to 2016. He is an example of an effective blue ocean strategist who was able to overhaul the New York City police force during his first tenure as commissioner.

1. The blue ocean strategy empowers organizations to create entirely new markets for themselves instead of battling competitors in increasingly crowded territory.
2. A red ocean business typically focuses its strategy on beating the competition.
3. When creating a blue ocean strategy, decision makers must consider four questions, each relating to improvements or eliminations that can be made in comparison to others in the industry.
4. Blue ocean businesses do not allow themselves to be stymied by industry conventions and structure.
5. Execution is critical to a successful blue ocean strategy.
6. A blue ocean strategy can only be successful when optimized for profitability.
7. Good blue ocean leaders are able to overcome the main obstacles to execution inside their organization.
8. The ability to construct a blue ocean strategy has never been more important than it is now because users and consumers are increasingly causing industries to shift and change.
9. No company can permanently remain in the blue ocean without renewing and revising its long-term vision.

The blue ocean strategy empowers organizations to create entirely new markets for themselves instead of battling competitors in increasingly crowded territory.

Analysis

Developing new and previously unforeseen value is at the heart of building a blue ocean business because it involves innovating new market space instead of fighting the same old battles with competitors. A blue ocean business is successful when the company can ensure that the price, usefulness, and relative cost of its product or service all are in alignment. To align these factors, a blue ocean company must have a total, systematic, and holistic approach to keeping its own costs down and enhancing consumer value while creating the highest possible number of opportunities and allowing the lowest possible number of risks. Not every company needs to be a blue ocean company; there will always be some value in being the best amid a field of competitors.

Tesla Motors is a prime example of a blue ocean business. In 2003, rather than attempt to beat the large, well-established automakers including Ford, GM, and Chrysler, Tesla co-founder and CEO Elon Musk chose to develop value in an entirely innovative area, electric vehicles, where the competition had yet to wholeheartedly invest. At that time, most car companies built electric and hybrid vehicles to be what the industry calls compliance cars developed merely to satisfy government regulations that they invest in green technologies as opposed to vehicles that are designed to arouse consumer interest. Tesla, although not the first company to build electric vehicles, was the first to build one that satisfied a desire for a zero-emissions car while generating aesthetic appeal and harnessing the allure of a sports car. In fact, the Tesla has outperformed its gas-guzzling competitors; it has demonstrated speedier acceleration than Ferrari, Lamborghini, and Bugatti in 2015 road tests. [1]

A red ocean business typically focuses its strategy on beating the competition.

Analysis

When a business invests too many of its strategic efforts into beating the competition, it often begins to resemble its rivals in spite of itself. A blue ocean company simply renders the competition obsolete, redundant, or otherwise irrelevant. Unlike a red ocean business, blue ocean organizations are able to successfully rebuild and transcend the previously accepted boundaries of their market to escape the competition. In order to do so, the companys decision makers should examine the typical alternatives to their industry that consumers are choosingand determine when and why these alternatives are sought. Blue ocean leaders can position their company to face a different set of consumers or clients; for example, to shift from being a business-facing company to being a consumer-facing company. They can also examine current industry trends to try to find hints of future preferences and habits already being expressed by some consumers.