The basic premise of the authors Kim and Mauborgne is that many
companies that win in the marketplace do so in ways that make their
if managers focus only to competition are likely to don’t
see blue oceans…
The Red Oceans represent the fiercely competitive arena
where most companies compete.
Red Oceans are all the
industries in existence
today—the known market
space In the red oceans,
industry boundaries are
defined and accepted,
and the competitive rules
of the game are known.
Here companies try to
outperform their rivals
to grab a greater share
of product or service
demand. As the market
space gets crowded,
prospects for profits and
growth are reduced.
The Blue Oceans are open and not filled with
competitors, uncontested market space!
Blue oceans, in contrast,
denote all the industries
not in existence today—
the unknown market space,
untainted by competition. In
blue oceans, demand is
created rather than fought
over. There is ample
opportunity for growth that is
both profitable and rapid. In
blue oceans, competition
is irrelevant because the
rules of the game are
waiting to be set. Blue
ocean is market space not
Red Ocean Vs Blue Ocean
Difference between two oceans:
The corner-stone of Blue Ocean Strategy is
“Value Innovation“. The Company must:
Reduce or eliminate
features or services
that are less valued
by the current or
both the buyer and the
1. A blue ocean is created when a
company achieves value innovation
that creates value simultaneously
for both the buyer and the
2. The innovation (in product, service, or
delivery) must raise and create value
for the market, while
simultaneously reducing or
eliminating features or services
that are less valued by the current
or future market.
3. Instead, they propose finding value
that crosses conventional market
segmentation and offering
value and lower cost.
Cirque du Soleil - an example of
creating a new market space, by
blending opera and ballet with the
circus format while eliminating star
performer and animals
Instead, they propose finding value that crosses conventional market
segmentation and offering value and lower cost.
What factors can be eliminated that the industry has taken for granted?
What factors can be reduced well below the industry’s standard?
What factors can be raised well above the industry’s standard?
What factors can be created that the industry has never offered?
Apple’s value innovations
So, what has Apple done in the last decade?
The horizontal axis captures the range of factors that the industry
competes on and invests in, and the vertical axis captures the offering
level that buyers receive across all these key competing factors.
The strategy canvas serves two purposes:
• Firstly, it captures the current state of play in the known market
space. This allows you to understand where the competition is currently
investing and the factors that the industry competes on.
• Secondly, it propels you to action by reorienting your focus from
competitors to alternatives and from customers to noncustomers
of the industry.
The value curve is the basic component of the strategy canvas. It is a graphic
depiction of a company's relative performance across its industry's factors of
As you can see on the diagram above, what makes a good value curve
is focus, divergence as well as a compelling tagline.
Value Curve - Yellow Tail Wine
Australian Casella wines created a blue ocean strategy that, in just two years, caused its
[yellow tail] wine to become the fastest growing brand in the histories of both the Australian
and the U.S. wine industries and the number one imported wine into the United States,
surpassing the wines of France and Italy.
Eliminate: Casella Wines recognized that
most wineries touted aging and tannin
qualities, two factors that intimidated
customers. Casella decided to focus their
efforts on different qualities.
Reduce: To avoid customer confusion,
Casella Wines limited their offerings to just
one white wine and one red wine.
Raise: Casella Wines raised the
involvement of retailers with [yellow
tail]’s success by giving retail employees
Australian outback clothing that made
[yellow tail} seem friendly instead
intimidating like other wines.
Create: Casella wines created new
customer experiences for wine drinking:
easy drinking, ease of selection, and a
sense of fun and adventure.
Create a new value curve
To reconstruct buyer value
elements in crafting a new
value curve, we use the Four
Actions Framework. As
shown in the diagram, to
break the trade-off between
differentiation and low cost
and to create a new value
curve, there are four key
questions to challenge an
industry's strategic logic
and business model.
Create Grid (ERRC) is
complementary with the four
4 Actions Framework
Settlers: the company has a
low growth trajectory, is
largely confined to red
oceans, and needs to push for
value innovation. it may well
have fallen into the trap of
benchmarking, imitation, and
intense price competition.
Migrators: They can be strong
potential, if you know how to
lead them. But the company is
not exploiting its potential for
growth, and risks being
marginalized by a company that
A useful exercise for a corporate management team pursuing profitable growth
is to plot the company's current and planned portfolios on the pioneer-
migrator-settler (PMS) map.
The more an industry is populated by settlers, the greater the
opportunity to value-innovate and create a blue ocean of new market
This exercise is especially valuable for managers who want to see beyond
today's performance. Revenue, profitability, market share, and customer
satisfaction are all measures of a company's current position.
Pioneers: They bring what
we call “unprecedent
value”, while they really
new, able to seduce
consumers, and lead them
to new needs, or new ways
to feed them. They create
value innovation, recognized
and valuable by the
3 Tiers of Noncustomers
Typically, to grow their share of a market, companies strive to retain
and expand existing customers. This often leads to finer segmentation and
greater tailoring of offerings to better meet customer preferences. That allows
companies to reach beyond existing demand to unlock a new mass of
customers that did not exist before.
Noncustomers typically offers big blue ocean opportunities, few companies
have keen insight into who noncustomers are and how to unlock them.
It outlines all the levers
companies can pull to
deliver utility to buyers as
well as the different
experiences buyers can
have of a product or service.
Managers can clearly see
how the new idea
creates a different utility
Buyer Utility Map
The six stages of the buyer experience cycle. A buyer’s experience can usually
be broken down into a cycle of six distinct stages, running more or less sequentially
from purchase to disposal. Each stage encompasses a wide variety of specific
The six utility levers. Cutting across the stages of the buyer’s experience are
what we call the utility levers – the ways in which companies unlock utility for their
Companies need to build their Blue Ocean Strategy in the sequence of buyer
utility, price, cost, and adoption.
Sequence of Blue Ocean Strategy
4 Hurdles to Execution
Cognitive hurdle. waking
employees up to the need for a
strategic shift. So, why rock the
The challenge of execution exists, of course, for any strategy. Companies, like
individuals, often have a tough time translating thought into action whether in
red or blue oceans. They face four hurdles:
Build a Blue Ocean
Limited resources. The greater
the shift in strategy, the greater it
is assumed are the resources
needed to execute it.
Motivation. How do you motivate
key players to move fast and
tenaciously to carry out a break
from the status quo?
Politics. As one manager put
it, “In our organization you get
shot down before you stand up.”
Fair process builds execution into strategy by creating people's buy-in
There are three mutually reinforcing elements that define fair process:
engagement, explanation, and clarity of expectation.
3 “E” Principles of Fair Process
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.
By transforming the extremes, tipping point leaders are able to change
the core fast and at low cost to execute their new strategy.
Tipping Point Leadership
The sharks (competitors) could enter in your Blue Ocean………
………and the Blue Ocean become a Red Ocean.
You must always thinking to create a new Blue Ocean!
Build a Blue Ocean
How Blue is your Ocean?
• Is your company facing heightened competition from domestic and international rivals?
• Do your sales representatives increasingly argue they need to offer deeper and deeper
price discounts to make sales?
• Are you finding you need to advertise more to get noticed in the marketplace, yet the
impact of each advertising money spent is falling?
• Is your company focused more on cost cutting, quality control, and brand management
at the expense of growth, innovation, and brand creation?
• Do you blame your slow growth on your market?
• Do you see outsourcing to low cost companies or countries as a principal prerequisite to
• Are mergers and acquisitions the principal means your company sees to grow?
• Is it easier to get funding to match a strategic move made by your competitor than it is
to get internal funding to support a strategic move that allows you to break away from
• Is commoditization of offerings a frequent worry of your company?
• List your key competitive factors; now list your competition’s. Are they largely the
If you answered yes to a majority of these questions, then your
company is stuck in the red ocean.