Blue Ocean Strategy is a book authored by Renee Mauborgne and W. Chan Kim that dwells on strategic business moves companies can make to tap into uncontested markets. The book, published in 2005, embodies the emergence of rapid change and innovation in recent years while at the same time injecting dynamism in business strategy. The book classifies businesses into two groups; Red Oceans and Blue Oceans. The former group, Kim and Mauborgne note comprises of static businesses that dwell on battling competitors. A strategy that is highly unlikely to bring forth a prospect of profit growth to companies that practice it. The authors advance the second group’s ideology where business success is achieved when a business redefines its competition terms to its advantage. This ultimately translates to a business shifting into the blue ocean where it has all the water to itself. The underlying objective for this strategic thinking is not to subdue competition but rather to rise above it consequently deeming it irrelevant. With their vast knowledge, Mauborgne and Chan present critical frameworks and mechanisms to tap systematically into the “blue oceans.”
The book is divided into three key parts. The first part captures vital concepts of the blue oceans strategy. Value innovation and analytical tools and frameworks are the main areas dwelled on. Value innovation, as a concept, focusses on making competition irrelevant rather than beating it. It operates by creating a “leap in value for buyers and your company thereby opening up new and uncontested market space” (Kim and Mauborgne 15). Kim and Mauborgne argue for a company to create blue oceans value and innovation must go hand in hand. Value without innovation, the book portends, will only seemingly concentrate on the creation of value on “incremental scale” that is not sufficient for a company to stand out in the market. Innovation, on the other hand, without value dwells on being technology-driven often rising above what the market expects and what it is ready to pay for (Grant 76). In this case, the book notes that value addition can take place when businesses link innovation with price, utility and cost positions.
This strategy follows a different approach where value innovation and low cost are pursued simultaneously. Using the Cirque du Soleil case, the authors note that the Canadian circus company pursued “differentiation and low cost simultaneously” (Kim and Mauborgne13). In a circus industry dominated by stars and animal shows, Cirque du Soleil created a new form of entertainment. It combined music, dance and athletic skill in order to attract and classy adult audience that was not into traditional circus. The company offered “the best of both circus and theater” without eliminating or reducing everything else (Kim and Mauborgne16). It also reduced its cost structure by “eliminating many of the most costly elements of the circus” at the same time achieving differentiation.
Analytical tools and frameworks, a subsection of part one, has three key elements: strategy canvas, four actions framework, and the eliminate-reduce-raise—create grid. Strategy canvas is a framework that allows a company to “understand where the competition is currently investing and the factors the industry currently competes on in products, service , and delivery and what customers receive from the existing competitive offerings on the market” (Kim and Mauborgne 26). It further enables a business to “reorient strategic focus” from rivals to alternatives, and from the current clientele base to noncustomers of the industry (Grant 82).
The four actions framework concentrates on reduction, elimination, raising and creation of various distinct factors with the sole aim of creating a new value curve for a business. On reduction, the framework, focusses on factors that ought to be decreased below the industry level (Siegemund 64). As for the elimination element, the strategy dwells on doing away with industrial factors that are taken for granted. Creation, on the other hand, offers a prospect into making new factors that are unavailable in the industry currently. The fourth element of this strategy, looks at factors that should be raised above the standards associated with the industry (Kim and Mauborgne29). The eliminate-reduce-raise-create grid as an analytical tool that not only raises the four questions but offers actions for the creation of blue oceans for companies. The grid enables companies critically to examine their operational options, incorporating new ones, changing and eliminating some (Kim and Mauborgne 36).
The second part of the book identifies the four tenets of the blue ocean strategy creation. The principles touch on how a firm can look into the six conventional competition boundaries (Six Paths Framework) in order to create blue oceans. The first principle identifies how businesses can create uncontested fields through market reconstruction. It addresses the risks associated with searching for blue ocean opportunities. The second principle, focus on the big picture not the numbers, guides businesses on how to look at the long-term benefits of the blue oceans approach. The principle accentuates the need to visualize the blue oceans via awakening, exploration, strategy fair and communication (Kim and Mauborgne 82).
The third principle, reaching beyond the existing market demand, advises on how best to venture beyond the red oceans or rather the conventional market and industrial frameworks. To achieve this effectively, Kim and Mauborgne advise a business ought to “challenge the two conventional strategy practices” (Kim and Mauborgne 101). The two ways of challenging conventional practices are the focus on existing market and push for finer market segmentation. The principle argues that businesses ought to focus on non-customers to achieve the blue oceans and further build on commonalities of what the customers’ value. The fourth principle of the strategy creation is the attainment of the right strategic sequence. The book has developed a sequence that ensures keen on attaining blue oceans. The sequence is as follows; buyer utility, price, cost, adoption and the eventual achievement of a commercially viable blue ocean idea.
Executing the blue ocean strategy is the third part of the book captures the critical aspects that influence the implementation of the blue ocean strategy. The first critical aspect is the overcoming of the hurdles that entails cognitive challenge, limited resources, motivation, and politics. The cognitive challenge dwells on the hurdles faced while trying take organization’s employees through the strategic shift. Limited resources, on the other hand, might hinder the implementation of the strategy. The shift may require additional resources for effective execution. Motivation dwells on the challenge faced managers in trying to motivate stakeholders to move fast in shifting from the status quo (red oceans) (Kim and Mauborgne161). Politics is a notable problem in the execution as there might be vested interests favoring the status quo hindering the effective shift to blue oceans.
All these challenges however can be mitigated through a tipping leadership style on the managers’ part. The tipping style authors’ note was perfectly effected by Bill Bratton the New York Police Department commissioner in 1994 (Kim and Mauborgne162). This leadership clears the cognitive hurdle by letting the personnel comprehend the adverse effects of the red oceans firsthand. The managers are also encouraged to meet and respond to their clients regarding the blue oceans shift. As for the resources, the authors suggest that the managers ought to be ambitious enough by seeking resources from all viable sources. The managers can further direct resources to the hot spots from cold spots while at the same time engaging in horse-trading resources from various departments. Lack of motivation can be solved through various initiatives targeted on various segments of employees. The authors cite kingpins or the influential employees should be wood and focused on in order to boost motivation levels among employees. The focus should also ensure these employees are highlighted in terms of performance at the workplace. To mitigate the political hurdle, a manager ought to have a senior ally in the top brass leadership (Kim and Mauborgne165). This will enable him, or her have prior information on the progress of the shift. The next mitigation approach is what the book dubs as “leverage your angels and silence your devils” (Kim and Mauborgne167). This translates to managers identifying their allies and enemies and comprehending how best to use them to their own advantage.
Overall the book is effective in addressing the need for companies to adopt modern competition-based strategies (blue ocean strategies). They challenge businesses to deviate from the structuralist view by having a bigger picture. Through the creation of the new demand, can tap in uncontested markets (Siegemund 92). With a focus on value innovation, companies can unlock new markets. It goes simultaneously with the pursuance of low-cost and differentiation by these companies. This eventually brings about a dynamic market structure deeming competition irrelevant. The book offers step by step guide that also helps the managers to acknowledge possible pitfalls and the sequential procedures in the quest to attain the “blue oceans”.
Works Cited
Grant, R. M. Contemporary strategy analysis: Text and cases. Hoboken, NJ: Wiley, 2010. Print.
Kim, W. C., and R. Mauborgne. Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Boston, MA: Harvard Business School Press, 2005. Print.
Siegemund, C. Blue ocean strategy for small and mid-sized companies in Germany: Development of a consulting approach. Hamburg: Diplomica-Verl, 2008. Print.
