In their book “Blue Ocean Strategy” first published in 2015, business theorists and professors of strategic management W. Chan Kim and Renée Mauborgne introduced a concept that serves as a strategical framework for establishing business opportunities and surviving in the future. They called this the Blue Ocean Strategy
Defining Blue Ocean Strategy: Red Ocean Versus Blue Ocean
The strategy is specifically a marketing theory and thus, a marketing strategy. It asserts that for businesses to win in the future, they must stop competing. To explain further, W. Chan Kim and Renée Mauborgne introduced the difference between a red ocean and a blue ocean, both of which are metaphors for market spaces.
A red ocean is a realm that represents all industries in existence or the known market space. In this market space, industry boundaries are defined and competition rules are known, thereby making it high-pressure and volatile.
On the other hand, the blue ocean corresponds to industries not in existence today. It includes all possible market spaces that can be created. Moreover, it includes untapped market spaces that offer prospects for higher profitability.
Kim and Mauborgne noted the Canadian circus company Cirque du Soleil as an example. Established in the 1980s, particularly when the audience for circus was diminishing due to urban live entertainment, sporting events, and home entertainment, the company marketed its show to adults, business people, and corporate clients.
Specific Arguments: The Six Principles of Blue Ocean Strategy
There are six principles governing the Blue Ocean Strategy. Take note of the following:
Principle 1. Reconstructing Market Boundaries
In the reconstruction of market boundaries, there is a need to find new opportunities and possibilities beyond the established conventions or outside the norms of existing industry and market. What this principle asserts is that for an organization to explore new opportunities and find new markets, it must break away from conventions and ignore boundaries.
Principle 2. Focusing on the Big Picture instead of Numbers
The second principle also speaks of breaking away from conventionality. Most of the time, leaders are too cautious about exploring new opportunities. They think that the best way to survive is to stick to conventions or rules commonly prescribed in the red ocean. They become too attached to numbers and results instead of exploring the bigger picture.
Principle 3. Reaching Beyond Existing Demand
Creating a blue ocean also entails the maximization of its size. Note that there are three tiers of noncustomers that can be transformed into actual customers. These tiers can be likened to a concentric circle with the inner-to-outer levels representing the distance of noncustomers.
The first-level tier merely buys for a company out of necessity while the second-level tier is completely adamant about buying because of loyalty to an alternative. The third-level tier is completely unaware of the product.
When it comes to tapping each tier, it is important to understand its unique characteristics. For example, tapping the noncustomers from the first level would require making the product irresistible while those in the second level would need presenting the product as if it is the best choice. Customers in the third level need convincing about the necessity of the product.
Principle 4. Getting the Strategic Sequence Right
Of course, the Blue Ocean Strategy is a systematical process. This means that it follows an established blueprint composed of four elements that also correspond to strategic and sequential steps. These are buyer utility, price, cost, and adoption.
The buyer utility is about creating an irresistible or exceptional offer that will generate z realization of utility while price is about determining if the product is accessible to the mass consumers. On the other hand, cost is about setting a cost target without changing the strategic price to attain the desired level of profitability. Lastly, adoption points to addressing the adoption hurdles in actualizing the business idea.
Note that all of these four are steps and as such, one cannot simply jump from the first step to the third or fourth step. This also means that failure within a particular step would call for a rethinking and repositioning of the steps it preceded. For example, failure in cost will require a reconsideration of the established pricing strategy.
Principle 5. Overcoming Key Organizational Hurdles
Strategies are often hard to translate into action because of hurdles and barriers. The first known hurdle in Blue Ocean Strategy is cognitive, in which, the need to subject members of the organization under stress somehow discourages decision-makers.
The second hurdle is limited resources. Of course, the need to generate and utilize resources can be troubling due to limited capabilities. It also relates to the third hurdle, motivation, which keeps decision-makers from moving past beyond the conventions.
Politics is the fourth hurdle. The lack of will from the leaders, disagreements among critical decision-makers, and a chaotic workplace environment would certainly prevent an organization from going beyond the convention.
Principle 6. Building Execution into Strategies
The execution makes or breaks the strategy. Hence, the sixth principle of the Blue Ocean Strategy asserts the need to build execution into the strategy itself. Doing entails acknowledging the fact that an organization is not just about the top-level management, middle management, or the employees. The organization is about the whole thing and as such, a strategy should be executed across all levels and in the different organizational facets.
Summaries and Takeaways from the Blue Ocean Strategy
While it is true that competition prevails across industries, sectors, and markets, especially within free-market capitalist economies, the Blue Ocean Strategy argues that the key to true success is to make such competition irrelevant. Doing so entails redefining the industry or creating a new market.
The theory conveys the fact that all of the existing industries today emerged as original and unique. For instance, the automobile industry emerges from an effort of a company to make a new kind of product. Soon, different companies followed suit and competition emerged. Yet, competition can be stressful especially when a specific industry and market have become too overcrowded.
Surviving further requires innovating to provide the society with new products. The goal is to create new markets and become a pioneer. New markets, because of the absence of competition, are certainly more profitable. The strategy is arguably one of the ways to gain competitive advantage or for organizations to address specific barriers to entry.
FURTHER READINGS AND REFERENCES
- Kim, Chan W. and Renée Mauborgne. 2005. Blue Ocean Strategy. Boston, MA: Harvard Business School Press.
- Konsyse Staff. 2019. “The Strategy and Success of Cirque du Soleil.” Available online