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

“The reality is that industries never stand still. They continuously evolve. Operations improve, markets expand, and players come and go. History teaches us that we have a hugely underestimated capacity to create new industries and re-create existing ones.”

The authors are attempting to dispel the idea that blue ocean strategies are risky and high cost. Historically, businesses who saw an opportunity to innovate have inadvertently broken into blue waters without there having been a term for it. Blue ocean strategies can therefore be seen as part of a natural cycle of market evolution.

“To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry.”

This quote underlines the difference between red and blue ocean strategies. Since red oceans force companies to focus on outcompeting rivals for marginal profit gains, breaking toward blue oceans requires a fundamental shift in mentality. Instead of pouring resources to benchmark the opponent, businesses should redefine their product’s value to extend beyond the traditional industry standard, thus allowing them to reach noncustomers and expand demand.

“It is the intersection between these analytic techniques and the eight principles of formulating and executing blue oceans that allow companies to break from the competition and unlock uncontested market space.”

This quote evidences the effort required for a successful implementation of blue ocean strategies, from formulation to execution. It highlights that each subsequent chapter’s content (with the notable exception of Chapter 11), is a crucial building block toward breaking out of red ocean spaces.

“Often, however, the space between alternative industries provides opportunities for value innovation.”

The first method to reconstruct or expand existing market boundaries is to look at spaces between alternative industries. Rather than compete within defined industry borders, reaching toward alternative industries may provide for a good opportunity for value innovation.

“Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of a new blue ocean.”

Another method to break free from existing industry boundaries is to target a different stage of the buyer chain. Industries that target users, for example, can significantly expand the demand by catering to purchasers or influencers and providing them with buyer value.

“And a closer look reveals that most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart—let alone makes the competition irrelevant.”

A common mistake businesses make in blue and red oceans alike is to have disjointed or nonexistent marketing strategies. For example, the digital marketing team might be pursuing a completely different growth plan to the physical team. This must be addressed before attempting to break into blue oceans.

“A company should never outsource its eyes. […] The same is true for great strategists.”

The authors highlight the importance for executives or managers to assess the state of the industry on their own, by personally stepping out of the office, viewing their product on shelves, or directly speaking with customers. This is a crucial step to take before formulating a blue ocean plan because good analytical data is essential to reducing risk and cost.

“To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value.”

Blue ocean strategies can potentially generate great profit because they specifically target uncontested markets with the potentiality of creating high demand. They do so by shifting their product’s value curve to break free from the competition and offering new value to people who are not traditionally part of their customer base.

“The point here is not to argue that it’s wrong to focus on existing customers or segmentation but rather to challenge these existing, taken-for-granted strategic orientations.”

This quote underlines that there is a balance to be struck between pursuing blue oceans and retaining existing customer bases. While blue oceans can potentially be very profitable, this does not render red oceans obsolete, as they can still provide a small but stable revenue. Businesses should keep in mind that breaking into blue ocean spaces requires a fundamental shift in orientation and strategic approach.

“You should not let costs drive prices. Nor should you scale down utility because high costs block your ability to profit at the strategic price.”

At the core of a successful blue ocean strategy is being able to innovate on value without incurring high costs. In other words, to provide buyers with the best value and attract the greatest number possible, price must be kept at a reasonable level. To make a profit, then, businesses must also find ways to innovate on the production side to lower costs.

“The formulation of blue ocean strategy is complete only when you can address adoption hurdles in the beginning to ensure the successful actualization of your idea.”

Adoption hurdles are barriers that prevent partners or employees from wanting to help with executing the blue ocean strategy. These hurdles often occur when there is a lack of transparent communication or when employees and partners feel threatened or shunned by the new direction the company has taken. Without smoothing out these internal problems, the strategy is bound to be short-lived or outright unsuccessful.

“Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, it will not attract the masses no matter how many awards it wins. Value innovation is not the same as technology innovation.”

The authors highlight the difference between technology innovation and value innovation at multiple instances throughout the book. Whereas technology innovation is defined by a leap in the technology itself, it does not necessarily mean that this new functionality is accessible, marketable, or profitable. Value innovation, on the other hand, directly targets customers’ needs, and by definition it does so without the company incurring high costs.

“Tipping point leadership builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise a disproportionate influence on performance.”

Tipping point leadership is one of the fundamental pillars that supports the proper executing of blue ocean strategies. It asks companies to target and fix their most problematic areas to create a leap in performance without incurring high costs.

“For a new strategy to become a movement, people must not only recognize what needs to be done, but they must also act on that insight in a sustained and meaningful way.”

While blue ocean strategies can initially be very profitable, they can also fail equally quickly if the execution is unsustainable. Businesses that wish to remain relevant in the long term must therefore find ways to engage their partners and employees in a meaningful way. By considering their opinions and treating them fairly, businesses can ensure their commitment to the blue ocean strategy in the long term.

“People’s minds and hearts must align with the new strategy so that at the level of the individual, people embrace it of their own accord and willingly go beyond compulsory execution to voluntary cooperation in carrying it out.”

This quote warns businesses that, without fair process, transparency, and communication, their own employees or partners may sabotage the successful execution of blue ocean strategies. Breaking away from red oceans and into new spaces requires the cooperation of personnel at all levels of the organization. It is therefore crucial to make sure all objectives are aligned and that all efforts work toward the same direction.

“To build people’s trust and commitment deep in the ranks and inspire their voluntary cooperation, companies need to build execution into strategy from the start.”

The authors caution that blue ocean strategies are not only about planning or market analysis. Rather, they are also characterized by how they are executed, and successful businesses that enjoy long-term dominance consider implementation as a fundamental aspect of their organizational model.

“When fair process is exercised in the strategy-making process, people trust that a level playing field exists. This inspires them to cooperate voluntarily in executing the resulting strategic decisions.”

Blue ocean strategy at its core encourages executives and managers to consider the opinions of their personnel and partners at all levels of the organization. This not only helps with cooperation and motivation but allows them to anticipate adoption hurdles that might occur later.

“Strategic alignment is the responsibility of an organization’s top executives versus those in charge of marketing, manufacturing, human resources, or other functions.”

An organization’s top executives tend to have a greater understanding of the big picture, whereas heads of departments tend to have a functional bias that favors their own area of responsibility. Since strategic alignment requires a business to balance the value, profit, and people propositions, which operate across departments, it is a task best handled by people who have a grasp of the entire company’s overall direction.

“Under red ocean strategy, an organization’s three strategy propositions need to be aligned with the distinctive choice of pursuing either differentiation or low cost within given industry conditions. […] In contrast, under blue ocean strategy, an organization achieves high performance when all three strategy propositions pursue both differentiation and low cost.”

Blue oceans are profitable because they break into uncontested spaces by providing a product with unbeatable net buyer value. They can only do so if they manage to break free from the competition in a significant manner, without incurring high costs. If they cannot keep costs down, then they risk increasing the price of their product, which in turn affects the net buyer value and the quantity of customers they can reach.

“Creating a blue ocean is not a static achievement but a dynamic process. Once a company creates a blue ocean and its powerful performance consequences are known, sooner or later imitators appear on the horizon.”

This quote warns companies that blue oceans will not remain uncontested forever. To enjoy their monopoly of these uncontested waters for longer, they must create a product whose buyer value and execution plan are difficult to imitate. Then, they must plan for the future eventuality of breaking into new blue oceans once the previous market becomes saturated.

“To maximize growth prospects then, a company’s portfolio should have a healthy balance between pioneers for future growth and migrators and settlers for cash flow at any given point in time.”

The authors emphasize that striking a balance between operating in red oceans and blue oceans is key to a company’s long-term success. Since blue oceans will eventually turn red as imitators appear, efforts should be made to know when to create blue oceans anew without completely disregarding red oceans in the short term.

“Value innovation, not innovation per se, is the singular focus of blue ocean strategy.”

Whereas innovation is simply the creation of something new, without necessarily striving for profitability or sustainability, value innovation is at the core of blue ocean strategies because it generates profit by targeting a mass of consumers while keeping costs low.

“The essential point here is that blue ocean strategy is not about finding a better or lower-cost solution to the existing problem of an industry […]. Instead, blue ocean strategy is about redefining the problem itself.”

Businesses are often under the wrong impression that blue ocean strategy is simply a better way of competing in red oceans, because it focuses on keeping costs low while innovating on value. Rather, blue oceans are a fundamental departure from traditional marketing strategy: They shift the focus away from existing industry standards. In other words, they do not attempt to solve the same problems that competitors encounter but rather redefine the problem itself.