Blue Ocean

BOOK REVIEW

The book, 'Blue Ocean Strategy -How to create Uncontested Market Space and Make competition Irrelevant ', authored by W. Chan Kim and Renne Mauborgne is the best seller of its time. It is a widely accepted book for strategy professionals. The title indicates the theme of the book .This book promises to achieve the uncontested market space and make competition irrelevant by making the use of Blue ocean strategy. The book argues that companies in existence today should not try to beat the competition but follow the blue ocean strategy approach to succeed in today's hyper competitive market space.

The book defines the Red oceans as the industries that are in existence today .The boundaries of companies in Red Ocean are well defined and rules of competition are well known. These companies try to grab each other's market share .But the increasing competition resulting from globalization, virtually constant demand and ever increasing supply has given hard time to the red ocean companies leading to commoditization of products and services which further causes price wars and lower profit margins .The red ocean strategy offers limited growth for the companies. To overcome the challenges of red oceans, companies operating today should look beyond its current environments and boundaries to grab new growth opportunities.

Blue oceans are the industries nonexistent today (unknown market space) and have no well defined rules and almost no competition. Blue oceans lead to new demand creation and offer huge growth potential.

The key feature of the blue ocean strategy is what authors call as 'value innovation'. The value innovation leads to a leap in value for buyers and companies. Buyers are benefit by increased value and companies benefit by reduced cost structure .This contradicts with Porter's generic framework of cost leadership and differentiation .Value innovation also nullifies the traditional value cost tradeoff. Value innovation enables companies to follow cost leadership and differentiation simultaneously.

The author describes the analytical tools and frameworks needed to create and capture blue oceans. The blue ocean strategy formulation for a company starts with creation of strategy canvas which shows where competitors are investing and what customers get .Value curve of a company depicts its performance across various identified factors of competition. After analyzing Status Quo Company should act to create a new value curve different from its competitors by making use of four action framework of reduce (cost), eliminate (high cost features), raise(certain factors) and create . Strategy canvas enables companies to see future. Authors suggest that the new value curve of a company should have focus, divergence and compelling tagline.

Book suggests that Blue ocean strategy can be created by any of the six different approaches (six path framework). All these approaches help companies to reconstruct market boundaries. The different approaches companies can use are - looking across alternative industries, looking across strategic groups, redefining buyer group, considering offering complementary product or services, changing functional/emotional orientation of industry and adapting to external trends before time. After knowing the path to follow for the blue ocean strategy creation, authors feel there is need for visualization of the strategy to make it a success .The visualization of blue ocean strategy explains the action plan for the company to follow from the status quo. To visualize the blue ocean strategy company should draw their current and future value curves on the strategy canvas .The companies should focus on projects and moves that help move the company to new value curve.

Unlike traditional strategy practices focusing on finer segmentation and existing customers the blue ocean strategy approach focuses on non customers and commonalities of these non customer groups.

The book outlines a strategic sequence that helps validate the commercial viability of blue ocean ideas .A commercially viable blue ocean idea -should provide exceptional buyer utility , should be easily available to mass of buyers ,should attain cost target to provide profit at strategic price and should not face any adoption hurdles .Unlike red ocean approach ,blue ocean companies determine their strategic price and then arrive at target cost .Then to achieve their cost target, company should look out for cost innovations , partnering with other companies or pricing innovation.

The authors claim the execution of blue ocean strategy amounts to huge change in the status quo, hence execution requires great effort in terms of tipping point leadership that helps overcome cognitive, resource, motivational and political hurdles. Book stresses on a fair process for execution of blue ocean strategy .The strategy execution process should involve all the affected individuals, explain everyone involved the need for change, and specify clear expectations from all involved .The fair process leads to intellectual/emotional recognition, commitment and voluntary cooperation which lead to successful execution of a blue ocean strategy .

Blue Ocean VS Other Strategic approaches:

Porter's generic strategies: Blue ocean strategy follows the traditional sequence of strategy - strategic analysis, strategy formulation and strategy execution .Porter's generic framework stated that to be successful any company needs to focus on differentiation or cost leadership. The book attempts to argue against Porter's generic strategies concept stating that company following blue ocean strategy can be successful following cost minimization and differentiation simultaneously making use of Value Innovation. However, Porter said any company trying to follow both will be stuck in middle and will not be successful in the long run. The blue ocean strategy argues that in Porter's framework there is too much stress on existing competition and rivalry. The companies should break from this competition and compete in uncontested market space by creating new demand. Porter believes in segmentation, but blue ocean strategy believes in de segmentation of the market space.

Porter (96) , What is Strategy

In 1996, Porter(What is Strategy) said that strategic competition involves looking for new positions and new customers and Competitive strategy means doing different things or doing things differently. The strategy of a company aims to achieve new positions to attract customers from established market or from the new markets. Comparing Porter's views about strategy with Blue ocean strategy approach I find some similarities .As Porter said strategy is all about new positions; Blue ocean