Blue Ocean Strategy Summary: Kim & Mauborgne’s Guide to Creating Uncontested Market Space in 5 Minutes
W. Chan Kim and Renée Mauborgne’s revolutionary approach to business strategy through value innovation and market creation.
Table of Contents
- Introduction
- Book Overview
- Key Takeaways
- Core Concepts Explained
- Critical Analysis
- Practical Application
- Conclusion
- Related Book Summaries
Introduction
Why do companies fight bloody battles in saturated markets when they could create entirely new market spaces where competition becomes irrelevant? W. Chan Kim and Renée Mauborgne’s ‘Blue Ocean Strategy’ fundamentally challenges traditional competitive strategy by proposing that sustainable success comes not from beating the competition, but from making competition irrelevant by creating new demand in uncontested market space. Published in 2005, this book emerged from the authors’ 15-year study of 150 strategic moves across 30 industries, spanning more than 100 years of business history. The book’s central insight is that companies can succeed not by competing in existing markets (red oceans), but by creating new markets (blue oceans) where they can capture uncontested demand. Kim and Mauborgne discovered that the most successful companies throughout history didn’t win by fighting competitors in bloody red oceans, but by creating blue oceans of new market space where they could sail alone, at least initially. The book introduces the concept of value innovation—the simultaneous pursuit of differentiation and low cost—as the cornerstone of blue ocean strategy. Rather than making the trade-off between value and cost that underlies competitive strategy, value innovation allows companies to break this trade-off by eliminating and reducing factors the industry competes on while raising and creating elements the industry has never offered. Through compelling examples ranging from Cirque du Soleil and Southwest Airlines to Nintendo Wii and Yellow Tail wine, the authors demonstrate how organizations across industries have successfully created blue oceans. This 5-minute summary explores the key principles of blue ocean strategy, the analytical tools for identifying blue ocean opportunities, and the systematic process for implementing value innovation to create profitable growth.
Book Overview
‘Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant’ presents a comprehensive framework for moving beyond traditional competitive strategy to create new market spaces through value innovation. The book is structured around analytical tools and implementation frameworks that help organizations systematically identify and create blue ocean opportunities.
Kim and Mauborgne begin by establishing the fundamental difference between red oceans (existing market spaces with intense competition) and blue oceans (new market spaces with little or no competition). They demonstrate that while red ocean strategies focus on competing for existing demand, blue ocean strategies focus on creating new demand by offering buyers a leap in value that renders competition irrelevant. The book introduces several analytical tools including the Strategy Canvas for visualizing current competition and identifying blue ocean opportunities, the Four Actions Framework for challenging industry assumptions, and the Eliminate-Reduce-Raise-Create Grid for systematic value innovation. The authors explore six paths to blue ocean creation: looking across alternative industries, across strategic groups, across buyer chains, across complementary products and services, across functional or emotional appeal, and across time. The book provides detailed implementation guidance including how to build execution into strategy, overcome organizational barriers, and align the value proposition with profit and people propositions. Throughout the book, the authors emphasize that blue ocean strategy is not about technology innovation but about value innovation—redefining the problem the industry solves and creating new buyer value elements that the industry has never offered. The systematic approach makes blue ocean creation achievable for any organization willing to challenge industry assumptions and think creatively about value creation.
Key Takeaways
- Red vs. Blue Oceans: Red oceans represent existing markets with intense competition, while blue oceans are new market spaces with uncontested demand.
- Value Innovation: The cornerstone of blue ocean strategy is simultaneously pursuing differentiation and low cost rather than choosing between them.
- Competition is Irrelevant: Success comes from making competition irrelevant by creating new demand rather than fighting for existing customers.
- Four Actions Framework: Eliminate, Reduce, Raise, and Create factors to break the value-cost trade-off and create new value propositions.
- Six Paths Framework: Systematic ways to look beyond existing industry boundaries to identify blue ocean opportunities.
- Strategy Canvas: Visual tool for understanding current competition and identifying gaps for value innovation.
- Focus on Non-customers: Blue oceans often come from converting non-customers rather than competing for existing customers.
Core Concepts Explained
1. Red Oceans vs. Blue Oceans
The fundamental distinction that underlies the entire strategy framework:
Red Oceans (Existing Market Space):
- Industry boundaries are defined and accepted
- Competitive rules of the game are known
- Companies try to outperform rivals to grab greater market share
- As market space gets crowded, prospects for profits and growth decline
- Competition turns bloody, hence the metaphor of red oceans
- Zero-sum game where one company’s gain comes at another’s expense
Blue Oceans (New Market Space):
- Industry boundaries are not defined or are redefined
- Competitive rules are waiting to be set
- Competition is irrelevant because rules haven’t been established
- Demand is created rather than fought over
- Opportunity for highly profitable growth
- Win-win outcomes where value is created for buyers and companies
Historical Examples:
- Ford Model T: Created mass market for automobiles
- CNN: Created 24-hour news cycle
- Starbucks: Transformed coffee from commodity to experience
- Southwest Airlines: Combined convenience of air travel with cost of car travel
- Cirque du Soleil: Reinvented circus industry by eliminating animal acts and creating artistic performances
2. Value Innovation
The strategic cornerstone that enables blue ocean creation:
Traditional Trade-off Thinking:
- Companies must choose between differentiation or low cost
- Higher value typically means higher cost
- Lower cost typically means reduced value
- Competition focused on optimizing within these constraints
Value Innovation Breakthrough:
- Pursues differentiation and low cost simultaneously
- Creates leap in value for buyers and company
- Opens new and uncontested market space
- Breaks the value-cost trade-off
How Value Innovation Works:
- Eliminates factors that industries compete on but add little value
- Reduces factors that are over-designed relative to buyer needs
- Raises factors that increase buyer value
- Creates new factors that generate additional value
Value Innovation Examples:
- Southwest Airlines: Eliminated meal service and seat assignments (reduce cost) while increasing flight frequency and convenience (increase value)
- Yellow Tail Wine: Eliminated wine complexity and aging quality while creating easy drinking and fun wine experience
- Nintendo Wii: Reduced graphics sophistication while creating motion-controlled gaming for broader audience
3. The Four Actions Framework
A systematic tool for challenging industry assumptions and creating value innovation:
The Four Actions Framework helps organizations systematically break the value-cost trade-off through strategic innovation.
Eliminate:
- Which factors that the industry takes for granted should be eliminated?
- Remove factors that add cost but little value to buyers
- Challenge assumptions about what customers really need
- Examples: Southwest eliminated meal service, Cirque du Soleil eliminated animals
Reduce:
- Which factors should be reduced well below the industry standard?
- Identify over-designed elements relative to buyer value
- Cut costs by simplifying over-complex offerings
- Examples: IKEA reduced customer service, Yellow Tail reduced wine complexity
Raise:
- Which factors should be raised well above the industry standard?
- Identify elements that create significant buyer value
- Exceed customer expectations in key areas
- Examples: Southwest raised flight frequency, Body Shop raised natural ingredients
Create:
- Which factors should the industry never offered should be created?
- Discover entirely new sources of value
- Address previously unrecognized buyer needs
- Examples: Starbucks created community experience, Netflix created convenience of home delivery
4. The Strategy Canvas
A diagnostic tool for understanding current competition and identifying blue ocean opportunities:
Components of Strategy Canvas:
- Horizontal Axis: Range of factors the industry competes on and invests in
- Vertical Axis: Level of offering that buyers receive across key competing factors
- Value Curves: Graphic depiction of company’s relative performance across industry factors
Using the Strategy Canvas:
- Map current industry competition by plotting value curves
- Identify areas of over-competition where everyone offers similar value
- Discover unaddressed buyer needs or pain points
- Visualize potential blue ocean opportunities
- Design new value curve that differs significantly from competition
Characteristics of Effective Blue Ocean Value Curves:
- Focus: Clear profile that doesn’t spread resources across all factors
- Divergence: Distinctly different from other players in the industry
- Compelling Tagline: Clear message that communicates unique value proposition
5. The Six Paths Framework
Systematic approaches for identifying blue ocean opportunities:
Path 1: Look Across Alternative Industries
- Explore industries that provide alternative solutions to the same need
- Example: NetJets looked across commercial airlines and car rentals to create fractional jet ownership
Path 2: Look Across Strategic Groups
- Examine different strategic groups within the same industry
- Example: Curves combined convenience of local gyms with equipment of health clubs
Path 3: Look Across the Chain of Buyers
- Challenge assumptions about which buyer group to target
- Example: Novo Nordisk focused on diabetic patients rather than just doctors
Path 4: Look Across Complementary Product and Service Offerings
- Examine the total customer experience beyond core product
- Example: Amazon Web Services leveraged infrastructure for external customers
Path 5: Look Across Functional or Emotional Appeal
- Challenge whether industry competes on function or emotion
- Example: Swatch made watches emotional fashion accessories rather than just functional timepieces
Path 6: Look Across Time
- Participate in shaping external trends over time
- Example: Tesla anticipated shift toward sustainable transportation
6. The Three Tiers of Non-customers
Blue oceans often emerge from converting non-customers rather than competing for existing customers:
First Tier – Soon-to-be Non-customers:
- Buyers who minimally use industry offerings
- One foot in the market, one foot out
- Ready to jump ship if better alternative appears
- Example: People who rarely go to movies but might with better experience
Second Tier – Refusing Non-customers:
- People who consciously refuse to use industry offerings
- See industry solutions as unacceptable
- Require fundamental value innovation to convert
- Example: People who refuse to use traditional gyms due to intimidation
Third Tier – Unexplored Non-customers:
- People in markets distant from existing industry
- Never considered as potential customers
- Largest potential but requires most innovation
- Example: Financial services for previously unbanked populations
7. Implementation: The Three Strategy Propositions
Blue ocean strategy must align three propositions for successful implementation:
Value Proposition:
- Compelling reason for customers to buy
- Clear differentiation from competition
- Significant leap in value delivered
- Appeals to mass of buyers, not just niche
Profit Proposition:
- Business model that generates attractive profits
- Cost structure that supports the value proposition
- Pricing strategy that captures value created
- Sustainable competitive advantages
People Proposition:
- Motivates employees and partners to execute strategy
- Addresses fears and concerns about change
- Creates buy-in from key stakeholders
- Builds organizational capabilities needed
Critical Analysis
‘Blue Ocean Strategy’ has been highly influential in strategic thinking since its publication, providing a fresh alternative to traditional competitive strategy frameworks. The book’s strength lies in its systematic approach to identifying new market opportunities and its practical tools for implementing value innovation. The extensive research base and compelling case studies make the concepts accessible and actionable.
However, some critics argue that the book oversimplifies strategic challenges and may overstate the sustainability of blue ocean advantages. Many blue oceans eventually turn red as competitors enter attractive new markets, and the book doesn’t adequately address how to maintain blue ocean advantages over time. Additionally, not all industries or situations are suitable for blue ocean strategies, and some markets may be too mature or regulated for significant innovation.
Some scholars note that the examples chosen may reflect survivorship bias, highlighting successful blue ocean creators while ignoring failed attempts at value innovation. The book also doesn’t fully address the organizational challenges of implementing blue ocean strategies, which often require significant cultural and operational changes.
The distinction between red and blue oceans, while useful conceptually, may be overly binary in practice. Many successful strategies involve elements of both competitive positioning and value innovation, and companies may need to operate in red oceans while creating blue oceans.
Despite these limitations, the book’s core insights about value innovation and systematic market creation remain valuable for strategic planning and innovation initiatives across many industries and organizational contexts.
Practical Application
To apply Blue Ocean Strategy principles:
- Map Your Current Strategy Canvas: Visualize how your industry currently competes and identify areas of over-competition and unaddressed needs.
- Apply the Four Actions Framework: Systematically question what factors to eliminate, reduce, raise, and create to break the value-cost trade-off.
- Explore the Six Paths: Look beyond current industry boundaries using the six systematic approaches to identify blue ocean opportunities.
- Focus on Non-customers: Study the three tiers of non-customers to understand why they don’t use current industry offerings.
- Design Your New Value Curve: Create a strategy that diverges significantly from current competition while focusing on key value drivers.
- Test Value Innovation Ideas: Start with small experiments to test blue ocean concepts before full implementation.
- Align the Three Propositions: Ensure your value proposition, profit proposition, and people proposition support each other.
- Build Execution Capabilities: Develop organizational capabilities needed to implement and sustain blue ocean strategies.
Conclusion
‘Blue Ocean Strategy’ fundamentally reframes strategic thinking by showing that sustainable success comes not from competing in existing markets but from creating new market spaces where competition becomes irrelevant. Kim and Mauborgne’s insight that value innovation can break the traditional trade-off between differentiation and cost has influenced strategic planning across industries worldwide.
The book’s greatest contribution is providing systematic tools and frameworks for identifying and creating blue ocean opportunities. Rather than leaving innovation to chance, the analytical tools enable organizations to systematically explore possibilities for value innovation and new market creation.
For business leaders and strategists, the book offers an alternative to the zero-sum thinking that dominates competitive strategy. Instead of fighting for existing demand, organizations can focus on creating new demand through value innovation that benefits both buyers and companies. The key insight is that many of the most successful companies throughout history have succeeded not by beating competitors but by making competition irrelevant through the creation of entirely new market categories. As industries become increasingly crowded and competitive, the ability to create blue oceans becomes ever more valuable for sustainable profitable growth and strategic differentiation.
Related Book Summaries
- The Innovator’s Dilemma Summary: Clayton Christensen’s framework for understanding how disruptive innovations create new markets.
- Zero to One Summary: Peter Thiel’s approach to creating breakthrough innovations and monopolistic advantages.
- The Lean Startup Summary: Eric Ries’ methodology for testing and developing new market opportunities.
- Purple Cow Summary: Seth Godin’s principles for creating remarkable products that naturally stand out from competition.
