Blue Ocean Strategy – The Best Strategy For Innovation?

Back in 2005, Renee Mauborgne and W Chan Kim published a book called “Blue Ocean Strategy.” This book is on business strategy and the writers come from the Blue Ocean Strategy Institute. The authors wrote the book to illustrate how an organization can create a new demand within a market space that is uncontested to generate profit and growth. This uncontested market space is referred to as a “blue ocean” and allows business owners to find a way to avoid competing for customers in an industry that already exists.

The Concepts Behind the Book

Within the book, “Blue Ocean Strategy,” a metaphor of both red and blue oceans is used. This metaphor is designed to describe the marketing “world.” First, the red ocean is referring to all the current industries that exist. This is essentially the known or explored market space already out there. Within the read ocean strategy, companies work to compete with rivals to get more of the demand available. Since this ocean quickly becomes crowded, the ability to grow and increase profits becomes very limited. All the competition for this area of the market becomes bloody, bringing about the term, “red oceans.”

Next, you have the concept of the blue oceans. These oceans are significant of the industries today that do not exist. This is basically market space that is unknown or undiscovered. No competition has tainted this “ocean.” Instead of fighting over demand, demand can be created. This makes it possible to easily grow and increase profits in a short amount of time. Since the game rules are not even set, competition becomes irrelevant in the “blue oceans.” This analogy basically describes market space that has deeper potential and that has yet to be explored.

Value Innovation

One of the main cornerstones behind the “Blue Ocean Strategy” is referred to as “value innovation.” When a company creates value for the company and the buyer, value innovation is achieved and the company creating blue oceans. The actual “innovation” has to reduce or eliminate services or features that are not as valued by future or current markets while creating and raising value for this market. Instead of businesses that are niche players or providers at lower costs, this idea proposes that value should be found by offering value, lower cost, and by crossing the conventional market segmentation. By combining low cost and differentiation, businesses can achieve a competitive advantage that is truly sustainable.

Other Similar Strategies

Many other people have proposed strategies that are very similar to this one. Kjell Nordstrom and Jonas Ridderstrale were Swedish educators that came up with the book called, “Funky Business,” back in 1999. This book used reasoning that is very similar to that used in the book, “Blue Ocean Strategy.” Instead of referring to blue oceans, “Funky Business” talks about creating “sensational strategies.” It is very similar to the blue ocean strategy, focusing on playing a new game in the market. In a world where supply exceeds the demand, the blue oceans strategy definitely makes sense.

Studies Behind the Book

Both Mauborgne and Kim, the authors of “Blue Ocean Strategy,” based the book on a lot of research and studies that they conducted. More than 150 positions were studied in over 30 different industries. In each position, the business players that were relevant were closely examined. Not only did they analyze the business players that were winning, but they also analyzed those that were less successful. Some of the industries that they studied included retail stores, publishing, hotels, steel, construction, airlines, cinemas, energy, automotive, and more.

As they studied these players, they looked for common factors that would lead to growth and profit. They also looked closely at the differences between the losers, survivors, and the clear winners. As they began to see a common pattern among those who were truly successful, they came up with value innovation and then went on to call this the blue ocean strategy. They first published all their research results in an article called “Value Innovation: The Strategic Logic of High Growth.” They would then go on to publish more articles and eventually the book, “Blue Ocean Strategy.” The book takes all the strategies and findings they came across in their research and draws the ideas together to offer a good framework that helps entrepreneurs figure out how to create and then capture their own blue ocean.

The book includes helpful frameworks, methodologies, and practical tools that can be used to pursue success in any business.  The strategies behind the book “Blue Ocean Strategy” are definitely worthy of note for those who want to become successful entrepreneurs.