Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

Blue Ocean Strategy was first published in 2005, at a time when the forces of globalization increasingly broke down traditional market barriers and promoted breakneck competition. Industries that had previously operated within national frontiers now had to contend with international players who could remain relevant by offering similar products at a cheaper production cost. Outsourcing production to overseas factories became an increasingly popular method to keep costs down, but this also opened the opportunity for competitors to imitate their practices. Most importantly, oceans everywhere were turning red from bloody competition, saturated markets, and stagnant demand.

At the time, the dominating market strategy theory assumed the inevitability of market competition and focused its efforts on teaching businesses how to remain afloat, even as products become increasingly undifferentiated and profit margins continue shrinking. The Porter model, for example, stipulates that companies in these situations could only pursue either differentiation or low costs. On one hand, if they sought to create a product that is a significant departure from their competitors, then the extra costs they incur for research and development would offset that advantage. This is because bloody competition forces out subpar products and leaves only the best standing, so any attempt at adding value is assumed to be costly. On the other hand, companies that do not seek to differentiate their product from competitors can gain an advantage by reducing price—since the customer perceives no difference between either product, they are more likely to pick the cheaper option.

Blue Ocean Strategy’s greatest contribution to market strategy theory is that it challenges the very idea of competition. It does not presume from the start that companies must survive in red oceans but proposes a reorientation of strategy to target uncontested market spaces. While many theories about innovation existed prior to W. Chan Kim & Renée Mauborgne’s publication, they tended to be high risk and very costly. By contrast, blue ocean strategy presents a new approach that reduces risk and costs through the key concept of value innovation. It argues that by reaching beyond traditional industry boundaries, businesses can innovate on their product’s value. Then, by targeting noncustomers or customers in adjacent markets, they can generate new demand and attract nontraditional customers to the industry.

Blue ocean strategy also stipulates that businesses can achieve this type of value innovation at a low cost by reducing or eliminating aspects of their production that are unnecessary to their product’s new strategic orientation. For example, a wine brand that targets a casual audience might emphasize the “fun” and “social” aspect of the drink while eliminating costs related to wine aging or taste complexity. By striking a balance between old and new value curves, targeting noncustomers, and extending market boundaries, companies can equally pursue differentiation and low cost. This is key to reaching uncontested blue waters, and it is crucial for companies to consider this alternative when globalization forces more and more waters to turn red. In sum, at a time where globalization encourages rapid market saturation, Blue Ocean Strategy proposes businesses to reevaluate traditional market theories and consider the possibility of using value innovation to break toward uncontested ocean spaces.