Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne

Bybenmunoz

The Big Idea: Create uncontested market space through value innovation, simultaneously lowering costs and increasing customer value to make the competition irrelevant.

Chapter 1: Creating Blue Oceans

  • Red Oceans: Crowded, competitive markets with shrinking margins.
  • Blue Oceans: Uncontested markets that create new demand.
  • Value Innovation: Delivering leaps in value while lowering cost.
  • Strategic move, not companies or industries, is the focus of analysis,
  • Example: Cirque du Soleil removed animals, added storylines, targeted adults.
  • Competition becomes irrelevant when you shift the value frontier.
  • Strategy isn’t about being best, but being different in a new space.

Chapter 2: Analytical Tools and Frameworks

  • Strategy Canvas: Visualizes how competitors and you invest across key factors.
  • Four Actions Framework (ERRC): Eliminate, Reduce, Raise, Create.
  • Use ERRC grid to define your distinct value curve.
  • Good Strategy Curve Traits are Focus, Divergence, Compelling Tagline
  • Focus: limited key factors.
  • Divergence: clear difference from rivals.
  • Compelling tagline: resonates with customers and employees.
  • Example: Southwest Airlines eliminated meals and hubs; raised convenience.

Chapter 3: Reconstruct Market Boundaries

  • Six Paths Framework
    • 1. Alternative industries: NetJets vs commercial flights.
    • 2. Strategic groups: Toyota Lexus blurred economy vs luxury.
    • 3. Buyer groups: Novo Nordisk targeted patients, not just doctors.
    • 4. Complementary offerings: Barnes & Noble’s in-store cafés.
    • 5. Functional-emotional orientation: Cemex added emotional value to cement.
    • 6. Trends over time: Apple capitalized on music digitization.
  • Think across—not within—industry boundaries.
  • Question assumptions behind traditional segmentation.

Chapter 4: Focus on the Big Picture, Not the Numbers

  • Use Visual Awakening to map current strategy.
  • Use Visual Exploration: visit field, interview noncustomers.
  • Conduct Visual Fair: share and refine strategies with feedback.
  • Apply Visual Communication: reinforce alignment across org.
  • Build strategies based on real observations—not only internal beliefs.
  • Example: British Airways added emotional components (amenities, luxury) to business class.

Chapter 5: Reach Beyond Existing Demand

  • Focus on noncustomers
    • 1. First-tier: on the edge, about to leave or join.
    • 2. Second-tier: refusing—actively avoiding current offerings.
    • 3. Third-tier: never considered—new market.
  • Find commonalities across tiers for mass appeal.
  • Reframe market by understanding why people opt out.
  • Example: Callaway Golf targeted non-golfers with Big Bertha club.

Chapter 6: Get the Strategic Sequence Right

  • Sequence
    • 1. Buyer Utility
    • 2. Strategic Pricing
    • 3. Target Costing
    • 4. Adoption Barriers
  • Use Buyer Utility Map to find breakthrough utility.
  • Define “price corridor of the mass” to drive volume.
  • Work backwards from price to define allowable cost.
  • Identify adoption hurdles (emotional, resource, cognitive) early.
  • Example: Philips Light CD-i failed due to neglecting adoption barriers.

Chapter 7: Overcome Key Organizational Hurdles

  • Common hurdles
    • Cognitive: strategy misunderstood.
    • Resource: perceived lack of assets.
    • Motivational: lack of incentive.
    • Political: internal opposition.
  • Apply Tipping Point Leadership
    • Focus on key influencers.
    • Concentrate efforts on hot spots.
    • Leverage disproportionate impact.
  • Example: NYPD turnaround used tipping point changes—shifted focus from stats to street-level crime.

Chapter 8: Build Execution into Strategy

  • Use Fair Process
    • Engagement
    • Explanation
    • Expectation clarity
  • People support decisions they helped shape.
  • Strategy needs to be understood, not just designed.
  • Psychological ownership boosts commitment.
  • Build execution into every strategic move, not after.

Chapter 9: Renew Blue Oceans

  • Blue oceans aren’t permanent. Renew by:
    • Monitoring competition.
    • Revisiting noncustomers.
    • Adapting value curve.
  • Innovation becomes strategy when it’s sustained.
  • Avoid drifting back into red oceans.
  • Example: iTunes was refreshed repeatedly with iCloud, streaming, etc.

Chapter 10: Avoid Red Ocean Traps

  • 10 traps to avoid:
    • 1. Equating blue oceans with technology.
    • 2. Confusing innovation with creativity.
    • 3. Seeing differentiation and low cost as trade-offs.
    • 4. Thinking blue oceans = niche strategy.
    • 5. Believing blue oceans mean new-to-world industries.
    • 6. Assuming first-mover wins.
    • 7. Focusing only on existing customers.
    • 8. Driving strategy from customer preferences alone.
    • 9. Equating marketing with strategy.
    • 10. Seeing execution as follow-up, not part of strategy.
  • Return to core tools—Strategy Canvas, ERRC, Idea Index—when stuck.

Core Examples

  • Cirque du Soleil: circus + theater hybrid.
  • Southwest Airlines: stripped traditional airline features.
  • Callaway Golf: opened golf to amateurs.
  • Apple iTunes: monetized piracy through ease and pricing.
  • Pret A Manger: healthy fast food for busy professionals.