2. Blue Oceans
Blue Oceans are defined by untapped market
space, demand creation, and the opportunity
for highly profitable growth.
The industry evolution allows for infinite
growth of blue oceans.
Blue oceans are necessary because red
oceans lead to similar products, price wars,
and lower profit margins.
3. Red vs Blue Oceans
Red Oceans Blue Oceans
Compete in existing
market
Beat the competition
Exploit existing demand
Make the value cost
tradeoff
Align the whole system of
a firms activities with its
strategic choice of
differentiation or low cost
Create uncontested market
space
Make the competition
irrelevant
Create and capture new
demand
Break the value cost tradeoff
Align the whole system of a
firms activities in pursuit of
differentiation AND low cost
4. The Profit and Growth Consequences of Creating Blue Oceans
86% of business launches are red oceans
which capture only 62% of total revenue and
39% of total profit overall
14% of business launches are blue oceans
which capture 38% of total revenue and 61%
of total profit
Blue oceans are about six times smaller than
red oceans but capture almost twice the
amount of profits
5. Structuralist View
Red Ocean Blue Ocean
Structuralist view believes
that an industries
structural conditions are
given and that firms are
forced to compete within
them.
Reconstructionist view
believes that market
boundaries and industry
structure are not given and
can be reconstructed by
the actions and beliefs of
industry players.
6. Cirque Du Soleil
Create uncontested new market space (that
made the competition irrelevant)
Appealed to an entirely new customer base
Cirque succeeds in a stagnant industry by not
trying to beat the competition but to make them
irrelevant. A benefit to this strategy is being able
to BE the benchmark, and set your own rules.
Designed a more sophisticated “circus” that
appealed to the traditionalTheater audience
with both a theme and story line
7. Blue Ocean Companies
Ebay (First Public Online Auction)
Amazon (First Online Garage Sale)
Ford ModelT (First Mass Produced Automobile)
ESPN (First 24 Hour Sports Channel)
Saehan’s MPMan (First MP3 Player)
Motorola (First Cell Phone)
8. Value Innovation
Instead of focusing on competition firms
focus on making competition irrelevant by
creating a leap in value for buyers and
customers which leads to opening up new
and uncontested market space.
9. Continued…
Value without innovation focuses on value
creation on an incremental scale, something
that improves value but n0t sufficient to
make you stand out in the marketplace
Innovation without value is technology
driven, market pioneering, or futuristic, often
shooting beyond what buyers are ready to
accept.
10. Analyses
In Search of Excellence was published 20 years
ago and two thirds of the model companies
identified in the book began to slip into oblivion
within two years of the books publication.
Built to Last sought out the “successful habits of
visionary” companies that had a long running
track record of superior performance, however
much of the success attributed to some of the
model companies was the result of industry
sector performance rather than the companies
themselves.
11. Continued…
Hewlett Packard met the criteria of Built to
Last by outperforming the market over the
long term, however so did the entire
computer hardware industry.
HP did not even outperform the competition
within the industry.
12. Six principals for Blue Ocean
Strategy
Formulation Principals
Reconstruct Market Boundaries
Focus on the big picture, not the numbers
Reach beyond existing demand
Get the strategic sequence right
• Execution Principals
– Overcome key organizational hurdles
– Build execution into strategy
13. Takeaways
Blue Oceans are untapped market spaces that
make competition irrelevant
Value innovation decreases cost while
increasing buyer value
Technology is a catalyst for blue oceans but
not required
Strategic moves and not the firm or industry,
is the right measure of analysis for explaining
the creation of blue oceans and sustained
high performance.
