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

Rating:
Summary: A Must Read for the Business Leader
Review: If the five worldwide best selling Harvard Business Review (HBR) articles of the two academics are an indication, this book will be a must read for the executive. INSEAD Professors W. Chan Kim's and Renée Mauborgne's extensive school of work published in Harvard Business Review over the past few years have driven strategic analysis tools into an insightful framework to help you make innovative but well informed choices and drive them into implementation.

I had the pleasure to work with some of the early concepts as part of a global team of early practitioners. As part of that work, Professor Kim stated the premise of their work with great clarity: "Why compete the same way everyone else is for the same customers on the same terms." This body of work gives practical ways to find the elusive "Blue Oceans" - the uncontested white space in the market - and understand how to position yourself to exploit it.

I have no doubt this will be a must read and a valuable addition to any business library.

Mark H. Friedman
President
Real Time Strategy, LLC
www.RealTimeStrategy.com


Rating:
Summary: Insightful reading for every business leader
Review: If you haven't already recognized that spending time worrying about your competition means you have taken the eye off your own company -- this book will drive that message home.

Focus on your own space, your own customers and your own employees -- that's where growth and stability come from.

This book is going to rocket to the top of the best seller list -- and stay there.

Rating:
Summary: Going Beyond Competition
Review: In ''Blue Ocean Strategy", Renée Mauborgne and W. Chan Kim, professors of strategy and management at the INSEAD business school in France offer business leaders a blueprint for creating uncontested market space and making the competition irrelevant. This book, based on extensive research by the professors, offers important and fresh insights into business strategy that challenges the widely accepted wisdom of competitive advantage and competitive benchmarking.

In this significant book, Kim and Mauborgne clearly articulate the theory of "Blue Ocean Strategy" and elegantly bring the theory to life with entertaining and educational examples. These examples show how companies in mature and unattractive industries have created new market space by following what the professors refer to as "value innovation" strategies.

In contrast to competion-based red ocean strategies, value innovation blue ocean strategies are created through the actions and beliefs of business leaders who do not accept the existing boundaries of their markets and industries. Kim and Mauborgne show how companies within existing industries have created new market space by reconstructing their market boundaries and going beyond competing according to the traditional rules of their industries. These strategies have resulted in the creation of new untapped demand and profitable growth that have reached beyond existing customers and have turned non-customers into customers.

While competition-based red ocean strategies see either differentiation or low cost as a strategic choice, companies following the logic of blue ocean strategy seek to break the value-cost trade-off by pursuing differentiation and low-cost simultaneously. This is just one of several key insights developed in this book.

Up to this point, it has been taken for granted that creating new growth strategies was risky, left to entrepreneurs, and serendipitous. Kim and Mauborgne show that this need not be the case. Through their 15 years of research spanning over 100 years of business, Kim and Mauborgne have succeeded in formulating a comprehensive and systematic set of analytical frameworks to guide management teams in discovering new blue oceans while simultaneously reducing the risk that is typically assumed with growth.

Kim and Mauborgne articulate six principles for creating blue oceans, explain an associated framework to support implementation of each principle, and demonstrate how each principle will help business leaders to minimize each specific risk factor that is typically encountered during growth strategy formulation and execution efforts.

"Blue Ocean Strategy" is a must read for all business leaders who are responsible for charting their companies' future. It will provide a roadmap to help business leaders guide their teams to discover strategic options which create new blue oceans by aggregating the largest possible mass of buyers for their ideas. Additionally the principles in this book will help business leaders to think through how to sequence their strategic moves, tune their business models and engage their organizations in the blue ocean strategy process so that they can not only create new ideas, but more importantly realize healthy profits from them.

Ralph G. Trombetta
Value Innovation Network
NYC Metro Area

Rating:
Summary: A Milestone in Strategy Development
Review: Over the years, I have with the greatest interest followed professors Kim & Mauborgne's strategy development ideas in several HBR-articles, during their seminars, as a practitioner of the BOS concept and as a member of their Value Innovation Network. There book "Blue Ocean Strategy - How to Create Uncontested Market Space and Make the Competition Irrelevant" is a milestone not only in business strategy, but also in management literature as a whole. I strongly believe that the Blue Ocean Strategy concept already has created a new platform for future strategy development and execution - both in research and for practitioners of strategy development and execution. The Blue Ocean Strategy book should be on every manager's desk!

A very strong point with this book is the fact that it covers both the conceptual level of creating blue oceans as well as a proven methodology and a set of analytical tools for creating and executing the Blue Ocean Strategy. There are some good examples of blue ocean companies today, but in the past there has not been any proven methodology that companies can use in practice.

Blue Ocean Strategy focuses on creating new market space and inventing new industries from so far unmet value of buyers - and not from analysing the competition like companies in Red Oceans. Furthermore, it focuses on delivering product & services at lower costs by simultaneously considering differentiation and low cost.

A cornerstone in Blue Ocean Strategy is Value Innovation with its Strategy canvas, Value curves and Six paths framework. Those analytical tools, tools that also are useful in the idea creation mode, have proven to be very practical, structured and easy to understand for clients - and challenging to management teams as they force management to break out of the box and stop "following" competition and instead create unique value propositions.

Except for the strong methodology and analytical tools, I do find Kim & Mauborgne's research very interesting as regards profit and growth consequences of creating blue oceans. They found that only 14% of today's business launches are blue oceans but they generated 38% of total revenues and 61% of total profits! So there are massive line extensions out there that in fact create losses and no or limited value to buyers. Furthermore it is interesting to observe that a blue ocean company keeps its strong brand even if former competitors or new entrants are trying to copy the quantum leap in buyer value and the push for a sharp drop in the industry's cost structure.

I recommend all managers to read the book, consider what's in it for us and apply the analytical framework. Welcome to a new world of strategy development and execution - Welcome to Blue Ocean Strategy!


Rating:
Summary: Buy it or Perish
Review: The authors have published many articles over the last decade on Value Innovation. This is their first book. It summarizes their extensive knowledge on out-of-the-box strategic thinking. This review is based on an advance reader's copy.

What is a BLUE OCEAN STRATEGY? The authors explain it by comparing it to a red ocean strategy (traditional strategic thinking):
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company's activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company's activities in pursuit of both differentiation and low cost.

A red ocean strategy is based on traditional strategic thinking - e.g. Harvard's strategy guru Michael Porter - and is what the authors believe you should not do.

A blue ocean is created in the region where a company's actions favourably affect both its cost structure and it value proposition to buyers. Cost savings are made from eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.

There are two ways to create blue oceans. In a few cases, firms can give rise to completely new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.

The authors have studied more than 150 blue ocean creations in over 30 industries. Examples include:
- Japanese fuel-efficient autos (mid-70s) and Chrysler minivan (1984)
- Apple personal computer (1978) and Dell's built-to-order computers (mid-1990s).

The INSEAD professors Kim and Mauborgne have written regularly on the subject of Value Innovation since 1997 in Harvard Business Review. Being a business development manager, their thought leadership on strategic innovation has inspired me tremendously over the years. Their articles have been standard texts for many MBA students for some time (e.g. "Value Innovation", "Creating New Market Space", "Charting your Company's Future"). I expect their first book to be just as dominant in any strategy library as Michael Porter's books (the guru behind the classic red ocean strategies).

Peter Leerskov,
M.Sc. in International Business (Marketing & Management) and Graduate Diploma in E-business


Rating:
Summary: Give freedom back to strategy,
Review: The book which is due Feb 2005 will be a must read for executives who are in search of strategic excellence.

The two INSEAD academics offer button down help to break the ghetto boundaries of todays mainstream strategy paradigm.

Those of you who entertained the string of articles (HBR and the like) the two researchers published over the last half a dozen years will like the convenient comprehensiveness offered now by the book.

Kim and Mauborgne offer a rich set of tools for management education and strategic moves to conquer "blue oceans" i.e. uncontested market space which competitors addictive to the mantra of bench marking will not even identify.

A global team of practitioners ( including myself ) have prototyped succesfully the offered approaches.They are rock solid and actionable which is more one is able to say about other hipped frameworks .

This new set of grammar to strategy creation and communication will change senior management teams strategic mindset fundamentally.

The reader will be encouraged to finish the abuse of bench marking. Managers will demonstrate their new mindset and source aggressively strategy development back inside ( currently provided from outside by consulting networks which study irrelevant topics for that matter i.e. industry and competition).

Advanced readers will happily update their canon of books about strategy which encompass among others Sun-Tzu,Clausewitz,Drucker,M.Porter,G. Hamel,C.K.Prahalad,von Hippel and Christensen.

Enjoy the reading experience and act.



Rating:
Summary: "To strive, to seek, to find...."
Review: This is an especially thought-provoking book which, as have so many others, evolved from an article published in the Harvard Business Review. According to Kim and Mauborgne, "[in italics] Blue ocean strategy [end italics] challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant...This book not only challenges companies but also shows them how to achieve this. We first introduce a set of analytical tools and frameworks that show you how to systematically act on this challenge, and, second, we elaborate the principles that define and separate blue ocean strategy from competition-based strategic thought." There are six principles which are introduced and then discussed on pages 49, 82, 102, 117, 143, and 172, respectively.

Frankly, I was somewhat skeptical that this book could deliver on the promises made in its subtitle. In fact, the material provided by Kim and Mauborgne is essentially worthless unless and until decision-makers in a given organization accept the challenge, are guided and informed by the six principles, and effectively use the tools within appropriate frameworks. The responsibility is theirs, not Kim and Mauborgne's. To assist their efforts, Kim and Mauborgne focus on several exemplary companies which have dominated (if not rendered irrelevant) their competition by penetrating previously neglected market space. They include the Body Shop, Callaway Golf, Cirque du Soleil, Dell, NetJets, the SONY Walkman, Southwest Airlines, Starbucks, the Swatch watch, and Yellow Tail wine.

Of greatest interest to me is Kim and Mauborgne's assertion that the innovations which enabled these companies to succeed with a Blue Ocean strategy did NOT depend upon a new technology. Rather, each company pursued a strategy which enabled it to free itself from industry boundaries. For Dell, that meant mass production of computers sold directly to consumers per each customer's specifications. Quite literally, each sale is "customized." For Callaway, creating an enlarged sweet spot to increase the frequency of solid contact for new or infrequent golfers just as, years ago, the enlarged Head racquet did so for new or infrequent tennis players. For Starbucks, creating a congenial environment within which to socialize, go online, or read while consuming coffee. All of these Blue Ocean strategies created new or much greater value for customers. Their emphasis is on the quality of experience, not on the benefits of a new technology.

According to Kim and Mauborgne, their research indicates that "the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering." The cornerstone of a Blue Ocean strategy is value innovation which occurs "only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch." For Kim and Mauborgne, value innovation is about strategy that embraces the entire system of a company's activities. It requires companies to orient the whole system toward achieving a "leap" in value for both buyers and themselves. Kim and Mauborgne explain HOW to create uncontested market space wherein competition is essentially irrelevant.

To paraphrase Henry Ford, whether decision-makers think they can or think they can't do that, they're right.


Rating:
Summary: Value Innovation - strategy book of the year 2005?
Review: Why are some companies able to sustain high growth in revenues and profits ... and others are not? To answer that question, the authors spent ten years studying more than 150 companies in 30 industries around the world. They found that the difference between the high-growth companies and their less successful competitors was in each group's assumptions about strategy. Managers of the less successful companies followed conventional strategic logic (e.g. Michael Porter's ideas). Managers of the high-growth companies followed what the authors call the logic of the blue ocean strategy.

MAKE RIVALS IRRELEVANT!
What are the differences between a blue ocean strategy and the traditional strategic logic?
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company's activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company's activities in pursuit of both differentiation and low cost.

A blue ocean is created in the region where a company's actions favourably affect both its cost structure and its value proposition to buyers. Cost savings are made from eliminating and reducing the product/service elements an industry competes on. Buyer value is lifted by raising and creating product/service elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.

There are two ways to create blue oceans. In a few cases, firms can give rise to completely new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.

A STORY OF A BLUE OCEAN HOTEL CONCEPT
One of the interesting stories the authors tell is about the French hotelier Accor, which discarded the notion of what a hotel is supposed to look like in order to offer what most customers want: a good night's sleep at a low price. I must admit that Accor is undeniably my favourite case story, since I have used their service so often when visiting France.

Accor's discount hotel concept - Formule 1 - has redefined its industry. It eliminated such standard hotel features as costly restaurant and lounges. And it reduced the service hours. Receptionists are only available during check-in and checkout hours. At all other times, customers use an automated teller for payment and electronic key code. Rooms are small but functional with a bed and stripped of unnecessary furniture and equipment. Just like a ship cabin. The rooms themselves are modular blocks manufactured in a factory ... resulting in huge economies of scale. All this gives Accor considerable cost savings. The company cut in half the average cost of building a room, and its personnel costs dropped about 25%.

Those cost savings have allowed Accor to improve the customer's perceived value, e.g. bed quality, hygiene, room quietness (via wall insulation), free satellite television, and parking surveillance. The price is about €28 a night in 2005. With such a low price, Accor has attracted new demand from both truck and car drivers who previously slept in their vehicles. In only 20 years Accor has established 370 hotels.

The INSEAD professors Kim and Mauborgne have written regularly on the subject of Value Innovation since 1997 in Harvard Business Review. Being a business development manager, their thought leadership on strategic innovation has inspired me tremendously over the years. Their articles have been standard texts for many MBA students for some time (e.g. "Value Innovation", "Creating New Market Space", "Charting your Company's Future"). I expect their first book to be just as dominant in any strategy library as Michael Porter's books (the guru behind the classic red ocean strategies).

Peter Leerskov,
M.Sc. in International Business (Marketing & Management) and Graduate Diploma in E-business