Blue Ocean Strategy
How to Create Uncontested Market Space and Make the Competition Irrelevant
by W. Chan Kim & Renee Mauborgne
“Blue Ocean Strategy is a must-read for any CEO who wants to transform their organization to seize new growth.”
Stop Fighting Your Rivals: How to Create a Market All to Yourself
Picture a typical industry. What do you see? A group of companies locked in a life-or-death struggle for market share. They benchmark each other relentlessly, fight over the same pool of customers, and engage in brutal price wars that slash profits and turn the water bloody with competition. This, according to strategy professors W. Chan Kim and Renée Mauborgne, is a "red ocean." It's where most businesses live, fighting an exhausting and crowded battle for dominance.
But what if, instead of trying to win that bloody fight, you could simply sail away to a clear, open blue ocean where there were no competitors? What if you could create a new market space all to yourself, making the competition completely irrelevant? This is the radical and powerful premise of their landmark book, Blue Ocean Strategy. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, the book is a practical guide to systematically creating these uncontested market spaces and unlocking explosive new growth.
What You'll Learn
The crucial difference between a "red ocean" of bloody competition and a "blue ocean" of new market space.
Why the strategic goal should be to make your competition irrelevant, not to beat them.
The concept of "value innovation"—the secret to simultaneously achieving differentiation and low cost.
A four-step framework for redesigning your business and creating a new value curve.
The detailed story of how Cirque du Soleil used this strategy to reinvent the circus industry.
Escaping the Red Ocean: The Power of Value Innovation
The fundamental difference between the two strategies is their focus. Red ocean strategy is about competing in existing market space. You accept the current industry structure and try to outperform your rivals to grab a bigger slice of a finite pie.
Blue ocean strategy, in contrast, is about creating new market space. It's about breaking the existing market boundaries and making the competition irrelevant. You aren't just trying to get a bigger slice of the pie; you are baking a whole new pie.
The cornerstone of this approach is a concept Kim and Mauborgne call Value Innovation. For decades, business strategy has been dominated by a single trade-off: you can either create higher value for customers at a higher cost (differentiation) or create reasonable value at a lower cost (cost leadership). You have to choose.
Value innovation rejects this trade-off. It is the simultaneous pursuit of differentiation and low cost. A blue ocean is created when a company’s actions favorably affect both its cost structure and its value proposition to buyers. Costs are saved by eliminating and reducing the factors an industry competes on, while buyer value is lifted by raising and creating elements the industry has never offered. It’s about finding a new way to deliver exceptional value that also lowers your costs.
Case Study: How Cirque du Soleil Created a Blue Ocean
The most iconic example of blue ocean strategy in action is Cirque du Soleil. In the 1980s, the traditional circus industry was a dying red ocean. It was a shrinking market with intense competition for a limited audience of families with children. The costs were high, driven by the logistics of animal acts and the pressure to sign "star" performers. Animal rights groups were also adding to the pressure.
The founders of Cirque du Soleil didn't try to make a "better" traditional circus. They set out to reinvent it. They didn't just target existing circus-goers; they created a new form of entertainment that appealed to adults and theater patrons who would never have gone to a Ringling Bros. show. They created a blue ocean of uncontested market space.
How did they do it? They used a simple but powerful framework to systematically reconstruct the elements of the traditional circus.
The Four Actions Framework: How Cirque du Soleil Found Its Blue Ocean
This framework is the practical heart of Blue Ocean Strategy. It challenges you to question every long-held assumption about your industry by asking four key questions. Here’s how Cirque du Soleil applied it to create a new market.
Eliminate: Which factors that the industry takes for granted should be eliminated?
Cirque du Soleil eliminated: Animal acts (a huge cost and source of public concern), star performers (who commanded high salaries), and aisle concessions (which detracted from the artistic atmosphere).
Reduce: Which factors should be reduced well below the industry standard?
Cirque du Soleil reduced: The roles of "fun and humor" and "thrill and danger." While still present, they were no longer the central focus as they were in traditional circuses.
Raise: Which factors should be raised well above the industry standard?
Cirque du Soleil raised: The uniqueness of the venue. They replaced the dusty old big top with a luxurious, theater-like tent, creating a premium experience that could command a premium price.
Create: Which factors should be created that the industry has never offered?
Cirque du Soleil created: A theme for each show, a more refined and artistic atmosphere, multiple productions running simultaneously, and sophisticated, artistic music and dance.
By eliminating and reducing costly factors while raising and creating new elements of value, Cirque du Soleil offered a brand-new experience at a lower cost structure than a traditional circus, while charging a higher ticket price than one. That is value innovation.
How to Find Your Own Blue Ocean: A Starter Guide
Blue ocean creation is a systematic process, not a random stroke of genius. Here’s how you can start.
1. Draw Your Strategy Canvas: First, you need to understand the current red ocean. Identify the key factors your industry competes on (for airlines, this might be price, meals, hub connectivity, etc.). Then, plot on a graph how you and your main competitors score on each of these factors. This visual "Strategy Canvas" will give you a stark picture of how everyone is essentially offering the same thing.
2. Apply the Four Actions Framework: With your canvas in front of you, systematically go through the Eliminate-Reduce-Raise-Create questions for your own business. Challenge every assumption. Does your industry really need to compete on factor X, or is it just a habit? What could you create that would make customers' lives dramatically simpler or more productive?
3. Look to Non-Customers: Most companies focus on how to get more of their existing customers. Blue oceans are often unlocked by focusing on non-customers. There are three tiers: "soon-to-be" non-customers who are on the edge of your market, "refusing" non-customers who consciously choose against your market, and "unexplored" non-customers in distant markets. Ask yourself: Why don't they use our industry's offerings? Solving their problems can unlock massive new demand.
4. Reconstruct Market Boundaries: Think beyond your industry's current definition. Look at complementary products and services. Could you bundle something that would solve a customer's entire problem, not just one piece of it? Think about the emotional versus functional appeal of your product. Can you shift it?
Final Reflections
Blue Ocean Strategy provides a powerful and optimistic message for any leader feeling trapped in a competitive struggle. It demonstrates that market boundaries are not fixed and that strategy is not limited to a choice between differentiation and low cost. By providing a set of practical, analytical tools like the Strategy Canvas and the Four Actions Framework, Kim and Mauborgne offer a systematic way to pursue value innovation and create new frontiers of growth. The book is a compelling call to action: stop fighting for scraps in the bloody red ocean and start creating the clear, open blue oceans of tomorrow.
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