The ´How to´ book
No. 2,3 & 7 in Amazon.de (Foreign language books)
No. 1,1 & 8 in Amazon.com
W.Chan Kim Renée Mauborgne
• What is Blue Ocean Strategy?
• What are the steps prescribed?
• How does it relate to practice?
• Difficulties and appraisal
• Based on a study of 150 strategic moves spanning more than 100 years and 30
• BOS is the simultaneous pursuit of differentiation and low cost.
• The aim of BOS is not to out-perform the competition in the existing industry, but
to create new market space or a blue ocean, thereby making the competition
• BOS claims to offer systematic and reproducible methodologies and processes in
pursuit of value innovation by both new and existing firms.
What is Blue Ocean Strategy?
• Blue Ocean Strategy is a preconceived way to maximise the chances to open new
competition-free markets that boost firm income (and thus survival).
• Red oceans are competition intensive markets where firms ´struggle´ to survive
(the oceans are red from the blood of fish biting each other)
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
Focus on ´normal´ strategic choices Focus on ´both-and´ choices
Value innovation as cornerstone
• Value innovation places equal emphasis on value and innovation.
• Value innovation is a new way of thinking about and executing strategy
that results in the creation of a blue ocean.
• The creation of blue oceans is about driving costs down while
simultaneously driving value up for buyers.
The 6 Principles of a Blue Ocean Strategy
• Reconstruct market boundaries
• Focus on the big picture
• Reach beyond existing demand
• Get the strategic sequence right
• Overcome the four key organizational hurdles
• Build execution into strategy
Analytical tools and frameworks
• The strategy canvas
• The four actions framework and grid (Eliminate, Reduce, Raise, Create)
• The three characterisics of a good strategy
The strategy canvas: Benefits
Industry profile by
showing the factors
Shows the strategic profile for
incumbents, identifying which
factors they invest in.
profile and how it
invests in the
and possible future
factors to create a
The Strategy Canvas: Components
Component Graphical depiction Description
Key competive factors Horizontal axis 1. Factors the industry
invests in (red), and
2. Factors that are added
(to create a blue ocean
Vertical axis Captures the offering
levels buyers receive
across all the competitive
Strategic profile Value curve Visualises the strategic
position vis à vis the
The power of visualization: perceptual
• taste: 1.000 b/s
• smell: 100 kb/s
• hearing: 100 kb/s
• touch: 1Mb/s
• sight: 10 Mb/s
(That´s why a picture tells more than a thousand words.)
The ERRC framework
A consistent way to
analyse factors that could
increase value for the
In a later stage to help
setting the price right.
1. Reconstructing Market Boundaries:
The 6 Paths
• Path 1. Look across alternative
• Path 2. Look across strategic groups
• Path 3. Look across the chain of
• Path 4. Look across complementary
product and service offerings
• Path 5. Look across functional or
emotional appeal to buyers
• Path 6. Look across time
Path Head to head
1 Industry Focuses on rivals within the industry Looks across alternative industries
2 Strategic Group Focuses on competitive position within
Across strategic groups
3 Buyer Group Focuses on better serving the buyer
Redefines the buyer group
Maximizing the value of product and
service offerings within the bounds of
Complementary product and service
Improving price-performance within the
functional-emotional orientation of its
6 Time Adapting to trends Co-creates trends over time
2. Focus on the big picture, not the numbers
(aligning the strategy process)
• Strategy fair
3. Reach beyond existing demand
Three groups (tiers) of non-customers
1. Soon to be customers
2. Refusing customers
3. unexplored customers
Expansion instead of
4. Get the strategic sequence right
1. Buyer utility? (Buyer utility map)
2. Price? (Price corridor)
3. Cost? (target costing)
4. Adoption hurdles? (educating the fearful)
Characteristics of a BOS
Price Ease of use Disposal Variety `espresso
Senseo Coffee Nespresso
• Value for customers
• The customer doesn`t know
what he wants
• looking for leverage points
• Challenge conventional
The main challenge is thus
more entrepreneurial in
• Puts forward the focus of value innovation: what can we do to increase customer
value in a divergent way (not only cost or diversification).
• Blue Ocean Strategy is a well written account of what creative entrepreneurs and
value innovation can accomplish.
• It offers templates and procedures of which the strategy canvas and the ERRC grid
are an addition to the literature.
• They describe cases and promise success (success bias). From descriptive theory
to prescriptive (pretty common in economic sciences).
• Little is known of firms that consciously addapted BOS –AND were successful.
• Finding and appraising the strategic values is the hard work that asks for out of the
box thinking. Mostly market entrants shake up the industry rules, not the
• For the execution of strategy and accompanying change, better books are
• The strategy canvas and ERRC Grid are valuable tools for analysis, visualisation
• It´s difficult to see what we cannot see (paradigms and mental models)
• The customer doesn´t know on forehand what he wants –what is it that we
• The customer is the central focus: how to increase value.
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