Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

stop looking to the competition. Value-innovate and let the competition worry about you.

Focus on innovating at value, not positioning against competitors

Competition is only good up to a point. When supply exceeds demand

While good strategy content is based on a compelling value proposition for buyers with a robust profit proposition for the organization, sustainable strategy execution is based largely on a motivating-people proposition.

Simply put, there is no substitute for meeting and listening to dissatisfied customers directly.

Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They are intangible capital. They allow companies to stand apart in the speed, quality, and consistency of their execution and to implement strategic shifts fast at low cost.

A company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. The same is true for great strategists.

Executives are paralyzed by the muddle. Few employees deep down in the company even know what the strategy is. And a closer look reveals that most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart—let alone makes the competition irrelevant. Does this sound like the strategic plans in your company?

senior managers’ goal here should be to manage their portfolio of businesses to wisely balance between profitable growth and cash flow at a given point in time.

Blue ocean strategy is not about being first to market. Rather it’s about being first to get it right by linking innovation to value.

An Incoherent Strategy When a company’s value curve looks like a bowl of spaghetti—a zigzag with no rhyme or reason, where the offering can be described as “low-high-low-low-high-low-high”—it signals that the company doesn’t have a coherent strategy. Its strategy is likely based on independent substrategies. These may individually make sense and keep the business running and everyone busy, but collectively they do little to distinguish the company from the best competitor or to provide a clear strategic vision. This is often a reflection of an organization with divisional or functional silos.

Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves.

To tip the cognitive hurdle fast, tipping point leaders such as Bratton zoom in on the act of disproportionate influence: making people see and experience harsh reality firsthand.

Experiences that don’t involve touching, seeing, or feeling actual results, such as being presented with an abstract sheet of numbers, are shown to be non-impactful and easily forgotten.

innovative ideas will be profitable only if they are linked to what buyers are willing to pay for.

To reach your organization’s tipping point and execute blue ocean strategy, you must alert employees to the need for a strategic shift and identify how it can be achieved with limited resources. For a new strategy to become a movement, people must not only recognize what needs to be done, but they must also act on that insight in a sustained and meaningful way. How

The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark.17 Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Different form, same function. Many companies that create blue oceans attract customers from other industries who use a product or service that performs the same function or bears the same core utility as the new one but takes a very different physical form. In the case of Ford’s Model T, Ford looked to the horse-drawn carriage. The horse-drawn carriage had the same core utility as the car: transportation for individuals and families. But it had a very different form: a live animal versus a machine. Ford effectively converted the majority of noncustomers of the auto industry, namely customers of horse-drawn carriages, into customers of its own blue ocean by pricing its Model T against horse-drawn carriages and not the cars of other automakers. In the case of the school lunch catering industry, raising this question led to an interesting insight. Suddenly those parents who make their children’s lunches came into the equation. For many children, parents had the same function: making their child’s lunch. But they had a very different form: mom or dad versus a lunch line in the cafeteria. Different form and function, same objective. Some companies lure customers from even further away. Cirque du Soleil, for example, has diverted customers from a wide range of evening activities. Its growth came in part through drawing people away from other activities that differed in both form and function. For example, bars and restaurants have few physical features in common with a circus. They also serve a distinct function by providing conversational and gastronomical pleasure, a very different experience from the visual entertainment that a circus offers. Yet despite these differences in form and function, people have the same objective in undertaking these three activities: to enjoy a night out.

Technology is not a defining feature. You can create blue oceans with or without it.

The hardest battle is simply to make people aware of the need for a strategic shift and to agree on its causes

Shift from convergence to divergence

Partnering, however, provides a way for companies to secure needed capabilities fast and effectively while dropping their cost structure. It allows a company to leverage other companies’ expertise and economies of scale. Partnering includes closing gaps in capabilities through making small acquisitions when doing so is faster and cheaper, providing access to needed expertise that has already been mastered.

brand building increasingly relies heavily on word-of-mouth recommendations spreading rapidly through our networked society.

the strategic price you set for your offering must not only attract buyers in large numbers but also help you to retain them.

Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, it will not attract the masses no matter how many awards it wins.

strategic planning should be more about collective wisdom building than top-down or bottom-up planning.

Drawing a strategy canvas is never easy. Even identifying the key factors of competition is far from straightforward. As you will see, the final list is usually very different from the first draft