Creating uncontested market space. Explanation of Blue Ocean Strategy of W. Chan Kim and Renée Mauborgne.
What is Blue Ocean Strategy? Description
Rather than competing within the confines of the existing industry or trying to steal customers from rivals (Bloody or Red Ocean Strategy) W. Chan Kim and Renée Mauborgne are suggesting Blue Ocean Strategy: developing uncontested market space that makes the competition irrelevant.
According to Kim and Mauborgne in the HBR of October 2004, competing in overcrowded industries is no way to sustain high performance. The real opportunity is: to create blue oceans of uncontested market space.
Competitive Advantage critique
Of course competition is important. But by focusing on competition and competitive advantage, according to Kim and Mauborgne, scholars, companies, and consultants have ignored two very important – and far more lucrative – aspects of strategy:
* To find and develop blue oceans, and
* To exploit and protect blue oceans. These challenges are very different from those to which strategists have devoted most of their attention.
In blue oceans demand is created, rather than fought over. There is ample opportunity for growth that is both profitable and rapid.
Two ways to create blue oceans
1. One is to launch completely new industries, as eBay did with online auctions.
2. It is more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry.
Certainly Kim and Mauborgne deserve credits for having made the point of the over-focus on competitive advantage and also for their beautiful metaphor of the two types of oceans.
Book: W. Chan Kim, Renée Mauborgne – Blue Ocean Strategy