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Introduction

“Blue Ocean Strategy, Expanded Edition” presents a groundbreaking approach to market creation and business strategy. Authors W. Chan Kim and Renée Mauborgne argue that competing in crowded markets is less profitable and explain how to make the competition irrelevant by creating “blue oceans” — untapped new market spaces ripe for growth. The book introduces systematic frameworks for developing blue ocean strategies and provides numerous examples and tools for businesses to chart distinctive paths for growth.

1. Red Oceans vs. Blue Oceans

Key Concept:
– Red Oceans: These represent all the industries currently in existence, the known market space. Competition is fierce, markets are crowded, and growth is constrained.
– Blue Oceans: These symbolize all the industries not in existence today, the unknown market space. They are untapped, with opportunities for growth and profitability.

Action:
– Conduct a comparative analysis to identify characteristics of your red ocean and potential blue ocean opportunities. List the competitive factors in your industry and determine which ones can be eliminated, reduced, raised, or created.

Examples:
– Cirque du Soleil: Instead of competing with traditional circuses, Cirque du Soleil combined elements of theater and circus, creating a new market space that attracts a different clientele willing to pay higher prices for a premium experience.

2. Value Innovation

Key Concept:
Value Innovation is the cornerstone of blue ocean strategy. It focuses on making the competition irrelevant by creating a leap in value for both the company and customers.

Action:
– Use the Four Actions Framework (Eliminate, Reduce, Raise, Create) to re-examine your product or service offering. Identify attributes that can be repositioned to deliver unprecedented value.

Examples:
– Ford Model T: Henry Ford eliminated many cost elements (color choices, luxury features), greatly reduced costs, raised durability and reliability, and created a car-culture phenomenon by making automobiles affordable to the masses.

3. The Strategy Canvas

Key Concept:
The strategy canvas is a diagnostic and action framework for building a compelling blue ocean strategy. It captures the current state of play in the known market space and indicates the future potential.

Action:
– Create a strategy canvas to visualize how your company’s strategic profile compares to competitors. This can highlight areas of differentiation and opportunities for innovation.

Examples:
– Southwest Airlines: The airline industry’s strategy canvas showed that traditional airlines competed on meals, assigned seating, and lounges. Southwest Airlines eliminated these and focused on low cost, punctuality, and fun, creating a unique offering that appealed to nonconsumers of air travel.

4. The Four Actions Framework

Key Concept:
This framework helps companies to systematically reconstruct buyer value elements in crafting a new value curve.

Action:
– Utilize the Four Actions Framework in brainstorming sessions to identify which factors of your business can be eliminated, reduced, raised, and created to break from traditional competition.

Examples:
– Yellow Tail Wine: Casella Wines targeted nontraditional wine consumers by simplifying the wine selection process and creating an easy-drinking, non-sophisticated wine that appealed to beer and cocktail drinkers.

5. Reaching Beyond Existing Demand

Key Concept:
Shift the focus from competing within established segments to creating new demand by tapping into noncustomers.

Action:
– Identify the three tiers of noncustomers (those who are soon to be noncustomers, refusing noncustomers, and unexplored noncustomers), and develop strategies to convert them into new demand.

Examples:
– Novo Nordisk: The company shifted focus away from competing in the saturated insulin market and tapped into the underserved diabetic community by offering integrated solutions, including patient education and control systems that simplified diabetes management.

6. Overcoming Organizational Hurdles

Key Concept:
Implementing a blue ocean strategy requires overcoming key organizational hurdles such as cognitive, resource, motivational, and political challenges.

Action:
– Use the Tipping Point Leadership approach to identify and leverage leaders (key influencers) within the organization who can drive change and build momentum toward the new strategy.

Examples:
– NYPD: Commissioner William Bratton implemented a blue ocean strategy by reallocating resources and focusing on high-impact crime areas, thereby significantly reducing crime rates without increasing the budget.

7. Building Execution into Strategy

Key Concept:
Successful execution requires integrating strategy formulation and execution. Fair process principles — engagement, explanation, and expectation clarity can win employees’ trust and cooperation.

Action:
– Apply fair process when developing and implementing strategies. Engage individuals in the decision-making process, clearly explain the reasoning behind decisions, and clarify new expectations to ensure buy-in and cooperation.

Examples:
– Elco: By engaging employees in the strategy development process and clearly outlining new strategic directions, Elco turned around its loss-making shipbuilding division by moving into building pleasure yachts.

8. The Three E’s of Fair Process

Key Concept:
The Three E’s — Engagement, Explanation, and Expectation clarity — are critical for building trust and commitment within the organization.

Action:
– Ensure that all levels of the organization are engaged in the strategy formulation, provide a clear explanation of strategic decisions, and set clear expectation standards to foster a cooperative environment.

Examples:
– Groupe Valfond: When it faced financial trouble, the company harnessed fair process principles by engaging unions and workers in the turnaround plan, explaining the logic and benefits, and setting clear expectations.

9. The Strategy Execution Roadmap

Key Concept:
A systematic approach to strategy execution is articulated through building alignment, motivating, and focusing on achieving the set goals.

Action:
– Develop a step-by-step roadmap that includes milestones, responsible parties, and timelines to ensure rigorous execution of the blue ocean strategy.

Examples:
– Apple: During the launch of the iPod, Apple used clear milestones and targets for its teams, aligning efforts across development, marketing, and retail to ensure a successful product launch.

10. Institutionalizing the Strategy

Key Concept:
Embedding blue ocean strategy within the company’s processes and culture ensures sustainability and long-term success.

Action:
– Regularly re-examine and refine your strategy using the Blue Ocean tools to stay ahead of market changes and continuously seek new blue ocean opportunities.

Examples:
– Philips Lighting: By institutionalizing its blue ocean strategy processes, Philips continually examined and adapted its market offerings, transitioning from traditional lighting solutions to innovative, energy-efficient lighting markets.

Conclusion

The “Blue Ocean Strategy, Expanded Edition” equips businesses with a repeatable, systematic approach to finding new growth opportunities in uncharted market spaces. By focusing on value innovation, strategically aligning organizational efforts, and continuously refining strategies, companies can create their blue oceans — spaces where competition is irrelevant, and growth is substantial. Applying the principles and frameworks presented in the book can help companies not just survive, but thrive, in today’s increasingly crowded and competitive markets.