In the 21st century, business organisations have had to evaluate their strategies to meet consumers’ dynamic needs. The world has changed in numerous ways that have led to shifts in how people do things. For businesses in both the public and private sectors, the challenge has been to rethink the strategies that drive operations and come up with ways to show differentiation at a low cost.
This shift in thinking is the essence of the book Blue Ocean Strategy written by Renee Mauborgne and W. Chan Kim in 2004. The two professors at INSEAD assert that companies that focus on creating and capturing ‘blue oceans’ – or unexplored market areas – can create significant value for their products and unlock new demand.
The blue ocean imagery is in contrast to its opposite, a red ocean, where organisations compete fiercely against each other, akin to sharks hunting in a limited space. In the metaphorical blue ocean, a company operates in an untapped market space and has minimal, if any, competition to worry about.
What this means is that start-ups and companies operating in established markets must evaluate whether they want to compete in a red ocean or are better off innovating in a blue ocean. The company that opts for the latter ultimately creates new demand for its offering and unprecedented value for its buyers. However, businesses also must be conscious of the need to innovate continuously.
Adopting the blue ocean mindset is something that companies require to thrive in the modern business environment. Nilesh Waghela, a retired independent business advisor, knows that implementing this mindset requires entrepreneurs to focus on offering quality to their customers. Through this thinking, competitors are no longer the benchmark; instead, it’s the desire to create the highest possible value.
From the Book
Kim and Mauborgne’s book is based on a study of 150 strategic moves drawn from over 30 industries. The professors show that leading companies will find success by creating uncontested market space and taking vital steps that create value and render competitors irrelevant. The book has three main sections:
- The first section presents blue ocean strategy, laying out key concepts such as value innovation and presenting the frameworks and analytical tools that aid the understanding and implementation of the strategy.
- The second section tackles the principles of formulating a blue ocean strategy, addressing how a company can use the Six Paths Framework to look across the traditional boundaries that define competition and reconstruct them to create new market space. It also shows how an organisation can focus on the big picture, extend beyond existing supply and demand in a blue ocean, and get its strategic values right.
- The last section delves into the implementation principles of the strategy, which include fair process and tipping point leadership. These principles are useful in overcoming the organisational hurdles that hinder execution. These hurdles are categorised as resource, cognitive, political and motivational hurdles. The authors also describe how these hurdles keep companies stuck in a status quo and address how organisations can find the resources to implement the strategy, keep people committed to implementing it, and overcome vested interests that could be working against the strategic shift.
While many strategic planning models are considered theoretical, blue ocean strategy isn’t one of them. The authors undertook a decade-long study, with the result being a model that’s applicable in real life. One success story is that of Apple’s iTunes music service that adopted the strategy to create a platform for users to legally download songs while allowing the purchase of single tracks instead of entire albums (to the benefit of artists). As a result, iTunes has played a significant role in the growth of digital music and paved the way for other innovations.
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