Blue Ocean

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value/cost

trade-off Break the value/cost trade-off

Align the whole system of a company's activities with its strategic choice of differentiation or low cost Align the whole system of a company's activities with its strategic choice of differentiation and low cost

Assumes Structuralist or Environmental determinism. Industry structural conditions are given and firms are forced to compete within them. Companies are at the mercy of economic forces greater than themselves Reconstructionist view.

Assumes market boundaries and industries can be reconstructed by actions and beliefs of industry players.

Creating a Blue Ocean of Innovation Part One:

Blue Ocean Strategy: Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market space.

Step one: Find a Blue Ocean. A Blue Ocean can be created (1) by creating all

new industries (eBay) or (2) when a firm alters the boundaries of an

existing industry (Cirque du Soleil)

Step Two: Exploit and protect Blue Oceans

Value: offering something not offered before.

Value Pioneering: Cost savings are made from eliminating and reducing 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.

Technological Pioneering is not a necessary ingredient in business strategy.

Creating a Blue Ocean of Innovation Part Two:

Water, water, everywhere: You don't have to compete in a red ocean of bloody competition. Even exhausted industries- like the circus - can be reinvented.

Don't swim with the school: Quit benchmarking the competition or setting your strategic agenda in the context of theirs.

Find new ponds to fish: Don't assume your current customers have the insights you need to rethink your strategy. Look to noncustomers instead.

Cut bait on costs: Put as much emphasis on what you can eliminate as on what you create.

Blue Ocean Strategy

Four factor Framework

Reduce: