Blue Ocean Strategy
by Alex Ng
W. Chan Kim and Renée Mauborgne’s revolutionary approach to business strategy through value innovation and market creation.
The Big Idea
"Stop competing in overcrowded markets (red oceans) and instead create uncontested market space (blue oceans) where competition becomes irrelevant."
Key Insights
Red Ocean vs. Blue Ocean
Red oceans are existing markets where competitors fight over shrinking profits. Blue oceans are new market spaces where you define the rules and capture new demand.
Cirque du Soleil created a blue ocean by combining circus and theater, attracting adults willing to pay premium prices—a market traditional circuses ignored.
Value Innovation
Don't choose between differentiation and low cost. Blue ocean strategy pursues both simultaneously by eliminating factors the industry takes for granted and creating factors it has never offered.
Southwest Airlines eliminated meals, seat assignments, and hub connections, but added frequent departures and friendly service—creating a new value curve.
The Four Actions Framework
Reconstruct buyer value by asking: What factors can be eliminated? Reduced below industry standard? Raised above industry standard? Created that the industry never offered?
Yellow Tail wine eliminated aging prestige and complex taste, reduced wine range and vineyard prestige, raised store involvement and easy drinking, and created fun and adventure.
Focus on Non-Customers
Instead of fighting over existing customers, focus on the three tiers of non-customers: soon-to-be non-customers, refusing non-customers, and unexplored non-customers.
Nintendo Wii targeted non-gamers (parents, seniors) instead of competing with PlayStation and Xbox for hardcore gamers, creating massive new demand.
Strategy Canvas
Visualize your competitive landscape by plotting the factors of competition and each player's offering level. This reveals opportunities to break from the pack.
When you see all competitors clustered together on the strategy canvas, there's opportunity to create a dramatically different value curve.
Chapter Breakdown
Part 1: Blue Ocean Strategy Concepts
The Problem with Competition
Most companies focus on beating rivals within existing industry boundaries. This "red ocean" thinking leads to commoditization, price wars, and shrinking profits as markets become overcrowded.
Value Innovation: The Cornerstone
Value innovation occurs when companies align innovation with utility, price, and cost positions. It's about making competition irrelevant by creating a leap in value for both buyers and the company.
Part 2: Analytical Tools
The Strategy Canvas
A diagnostic tool that captures the current state of play in the known market space. It shows which factors the industry competes on and where competitors invest.
The Four Actions Framework
- Eliminate: Which factors that the industry takes for granted should be eliminated?
- Reduce: Which factors should be reduced well below the industry standard?
- Raise: Which factors should be raised well above the industry standard?
- Create: Which factors should be created that the industry has never offered?
Part 3: Finding Blue Oceans
Six Paths Framework
Look across:
- Alternative industries
- Strategic groups within industries
- Buyer groups
- Complementary product and service offerings
- Functional or emotional appeal to buyers
- Time trends
The Three Tiers of Non-Customers
- First tier: "Soon-to-be" non-customers on the edge of your market
- Second tier: "Refusing" non-customers who consciously choose against your market
- Third tier: "Unexplored" non-customers in distant markets
Part 4: Execution
Blue ocean strategy requires overcoming organizational hurdles: cognitive, resource, motivational, and political. The key is tipping point leadership—focusing efforts on the people and activities that have disproportionate influence.
Take Action
Practical steps you can implement today:
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Draw a strategy canvas of your industry to visualize the competitive landscape
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Apply the Four Actions Framework: Eliminate, Reduce, Raise, Create
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Identify the three tiers of non-customers in your market
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Look across alternative industries, strategic groups, and buyer groups for opportunities
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Challenge industry assumptions—what does everyone take for granted?
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Focus on the big picture, not the numbers, when setting strategy
Who Should Read This
Entrepreneurs looking to create new market opportunities. Business strategists tired of competing on price alone. Executives seeking growth in mature industries. Anyone interested in innovation and competitive strategy.
Summary Written By
Software Engineer & Writer
Software engineer with a passion for distilling complex ideas into actionable insights. Writes about finance, investment, entrepreneurship, and technology.
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