Blue Ocean Strategy

Blue Ocean Strategy^[1] is a corporate strategy and bestselling business book written by Professors W. Chan Kim and Renée Mauborgne, of INSEAD. The book offers examples of how successful businesses captured uncontested market space, and thereby made competition irrelevant. This was formerly described as "Value Innovation," in 5 articles for the Harvard Business Review by Kim & Maubourgne before they released the book in 2005. Blue Ocean Strategy is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000).

Concept

The "ocean" refers to the market or industry. "Blue oceans" are untapped and uncontested markets, which provide little or no competition for anyone who would dive in, since the markets are not crowded. A "red ocean", on the other hand, refers to a saturated market where there is fierce competition, already crowded with people (companies) providing the same type of services or producing the same kind of goods.

Their idea is to do something different from everyone else, producing something that no one has yet seen, thereby creating a "blue ocean". An essential concept is that the innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The authors critique Michael Porter's idea that successful business are either low-cost providers or niche-players. Instead, they propose finding value that crosses conventional market segmentation and offering value and lower cost.

Examples

Some examples of companies that may have created new market spaces in the opinion of Kim and Mauborgne include Cirque du Soleil (unique circus format) and Home Depot (offering the prices and range of lumberyard, while offering consumers classes to help them with DIY projects). A current example of this strategy is the success of the Nintendo Wii, which Nintendo designed to target audiences not traditionally known to play videogames.

Criticisms

While the professors offer approaches to finding uncontested market space, at the present there are few if any success stories of companies that applied their theories. This hole in their data persists despite the publication of Value Innovation concepts since 1997. A critical question is whether this book and its related ideas are descriptive rather than prescriptive. Kim and Maubourgne take the marketing of a value innovation as a given, assuming the marketing success will come as a matter of course. ^[2] The authors present many examples of successful innovations, and then explain from their Blue Ocean perspective - essentially interpreting success through their lenses.^[3]