Blue Ocean Strategy

entreprenuership What if creativity could be cultivated systematically and failure associated with entrepreneurship minimized through the use of proven methodologies and frameworks? How can we create a more systematic way to help entrepreneurs succeed?

Blue Ocean Strategy is one theory that serves to answer some of these perplexing questions. The discipline has been developed by W.Chan Kim and Renée Mauborgne, professors at INSEAD, who are co-authors of the book, Blue Ocean Strategy, and are co-directors of the Blue Ocean Institute.

A distinctive aspect of Blue Ocean Strategy is that, instead of looking to serve existing prime customers in the existing marketplace, it is largely concerned with modifying a product or service offering.  For example, within any given industry, every firm seeks to raise value and cut costs in order to enhance value innovation and outperform the competitors. In turn, there is more competition.  Kim and Mauborgne argue that companies can succeed not by battling competitors, but rather by creating “blue oceans” of uncontested market space.

In an established industry, companies compete with each other for every piece of available market share. The competition is often so intense that some firms cannot sustain themselves and stop operating. This type of industry describes a red ocean, representing saturated market share, bloodied by competition. According to the Blue Ocean Strategy, organizations should find a way to work in a marketplace that is free of competitors.  This new thinking makes it possible for innovative entrepreneurs to increase their chances for success and the extent of potential success.

To discover an elusive blue ocean, Kim and Mauborgne argue that businesses and entrepreneurs should consider what the authors call the “Four Actions Framework.” This is used to reconstruct buyer value elements in crafting a new value curve. To break the trade-off between differentiation and low cost, and to create a new value curve, the framework poses four key questions:

1. Raise: What factors should be raised well above the industry’s standard? 2. Eliminate: Which factors that the industry has long competed on should be eliminated? 3. Reduce: Which factors should be reduced well below the industry’s standard? 4. Create: Which factors should be created that the industry has never offered?

Kim and Mauborgne said that this exercise forces companies to scrutinize every factor of competition, helping leaders discover the range of assumptions they unconsciously make while competing. This exercise also pushes leaders to simultaneously pursue differentiation and low cost in order to break the value-cost trade-off. The questions also spotlight companies that are focused only on raising and creating, in the process lifting the cost structure and often over-engineering products and services.

This global phenomenon has sold over 3.5 million book copies, is published in 43 different languages and is a bestseller across five continents.  Click here to read ‘8 Key Points of Blue Ocean Strategy‘.

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