Blue Ocean Strategy


Handling competition effectively to get appreciable market share and achieve profitability has always been a great challenge to most companies. This is why I want us to examine this book entitled "Blue Ocean Strategy". It is co-authored by Chan Kim and Renee Mauborgne. Kim is the Boston Consulting Group Bruce D. Henderson chair professor of Strategy and International Management at INSEAD; while Renee Mauborgne is the INSEAD distinguished fellow and professor of Strategy and Management.

According to Kim and Mauborgne, companies have long engaged in head-to-head competition in search of sustained and profitable growth. They add that companies have fought for competitive advantage, battled over market share and struggled for differentiation. The authors say yet in today's overcrowded industries, competing head-on results in nothing but a "red ocean" of rivals fighting over a shrinking profit pool. Kim and Mauborgne challenge everything one may know about the requirements for strategic success and contend that while most companies compete within such red oceans, the strategy is increasingly unlikely to create profitable growth in the future.

These authors say based on a study of 150 strategic moves spanning more than a hundred and thirty industries, tomorrow's leading companies will succeed not by battling competitors, but by creating "blue oceans" of uncontested market space ripe for growth. Kim and Mauborgne submit that such strategic moves tagged "Value innovation", create powerful leaps in value for both a firm and its buyers, and unleash new demand. These authors assure that this text offers you a systematic approach to staying ahead of competition. They present a proven analytical framework and the tools for successfully creating and capturing blue oceans. The text highlights the six principles that every company can adopt to successfully formulate and execute blue ocean strategies.

Kim and Mauborgne say these six principles guide on how to reconstruct market boundaries, focus on the big picture, reach beyond existing demand, get the strategic right, overcome organisational hurdles and build execution into strategy. The text has three parts of nine chapters. Part one is entitled "Blue ocean strategy" and contains two chapters. Chapter one is tagged "Creating blue oceans". According to Kim and Mauborgne here, it will always be important to swim successfully in the red ocean by out-competing rivals. They expatiate that red oceans will always matter and will always be a fact of business life. These authors say but with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance.

In their words, "Companies need to go beyond competing. To seize new profit and growth opportunities, they also need to create blue oceans. Unfortunately, blue oceans are largely uncharted." These authors say although the term "Blue ocean" is new, its existence is not and it is a feature of business life, past and present. Kim and Mauborgne educate that despite the fact that economic conditions indicate the rising imperative of blue oceans, there is a general belief that the odds of success are lower when companies venture beyond existing industry space. They add that the issue now is how to succeed in blue oceans, stressing that if one lacks understanding of the opportunity-maximising and risk-minimising principles driving the creation and capturing of blue oceans, the odds will be lengthened against one's blue ocean initiative.

Chapter two is based on the subject matter of analytical tools and frameworks. These authors say we have spent the past decade developing a set of analytical tools and frameworks in an attempt to make the formulation and execution of blue ocean strategy as systematic and actionable as competing in the red waters of known market space. Kim and Mauborgne stress that these analytics fill a central void in the field of strategy that has developed an impressive array of tools and frameworks to compete in red oceans, but has remained virtually silent on practical tools to excel in blue oceans. "Instead, executives have received calls to be brave and entrepreneurial, to learn from failure, and to seek out revolutionaries. Although thought-provoking, these are not substitutes for analytics to navigate successfully in blue waters," disclose these authors.

Kim and Mauborgne add that in the absence of analytics, executives cannot be expected to act on the call to break out of existing competition. They stress that effective blue ocean strategy should be about risk minimisation and not risk-taking. Part two is summarily tagged "Formulating blue ocean strategy" and covers four chapters, that is, chapters three to six. Chapter three is entitled "Reconstruct market boundaries". According to these experts here, the first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans. They say this principle addresses the search risk many companies struggle with. Kim and Mauborgne submit that the challenge is to successfully identify, out of the haystack of possibilities that exist, commercially-compelling blue ocean opportunities.

In chapters four to six, these authors discuss the concepts of focusing on the big picture, not the numbers; reaching beyond existing demand; and getting the strategic sequence right. Part three is generically christened "Executing blue ocean strategy" and contains three chapters. According to these authors in chapter seven entitled "Overcome key organisational hurdles", once a company has developed a blue ocean strategy with a profitable business model, it must execute it. They add that the challenge of execution exists, of course, for any strategy.