Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant [Audiobook, Unabridged] [Audio CD]

 

 

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The authors looked at the business launches of 108 companies, and found that those which emphasized serving competitively uncontested customer needs were only 14 percent of the cases. Yet those "blue ocean" launches accounted for 61 percent of the total profits (or almost 10 times as many profits on average per launch as those who went after "red oceans," where competitive space is already served).

Rather than examining the processes that companies used to create these wins, the authors investigated the common strategic elements of the "blue ocean" cases they found, and developed a strategic planning process designed to focus on those elements. In the last 15 years, they have experimented with that process with a number of consulting clients and now report the results of their latest refined process.

They propose four principles formulate a strategy:

1. Reconstruct market boundaries

2. Focus on the big picture, not the numbers

3. Reach beyond existing demand

4. Get the strategic sequence right.

They also propose two principles to implement strategy:

5. Overcome key organizational hurdles

6. Build execution into strategy.

For applying each of the strategic principles, the authors describe different paths and steps, and provide simple, analytical tools designed to be applied in a back-of-the-envelope analysis.

1. Reconstruct market boundaries

Paths for this part of the process include looking across functional substitutes from other industries, different segments within an existing industry, different linked sets of buyers and buying influencers, complementary offerings, availability of functional versus emotional appeals, and extend the time perspective for a longer period. The key tool for this analysis is a simple strategy canvas that documents the areas where offerings have characteristics and whether the characteristics are positioned to be "high" or "low." Examples of this analysis abound.

2. Focus on the big picture, not the numbers

This part of the process comes in four steps:

a. Draw a strategy canvas (as described above) to see where change is needed

b. Directly observe customers and stakeholders being affected by current offerings

c. Have senior executives propose alternative strategy canvas solutions and pick a winner

d. Share the resulting strategy canvas to everyone and test it for implementation feasibility.

3. Reach beyond existing demand

You investigate specifically the needs of those who are about to stop buying in the existing industry, those who reject the existing offerings already, and noncustomers who buy now from markets distant from yours.

4. Get the strategic sequence right

You carefully check out the resulting idea in this order:

a. Does it add lots of new customer value (in terms of purchase, delivery, use, supplements, maintenance and disposal relative to customer productivity, simplicity, convenience, risk, fun and image, and environmental friendliness)?

b. Can most buyers afford the price?

c. Can you make a profit at that price?

d. Can you overcome the adoption challenges?

Blue Ocean Strategy converts into a discussion of implementation challenges from chapter 7 on, emphasizing "tipping point leadership" (refocusing attention, shifting resources from ineffective to effective areas, and gaining credibility); "fair process implementation" (involvement by employees and stakeholders rather than being treated like objects); putting up barriers to imitation; and repeating the process.

As you can see, this is a process-intensive "how to" book rather than a conceptual book, although the authors have chosen a powerful metaphor that helps offset the B-School diagrams and new terms and phrases.

The authors seem to be consciously trying to create a simpler, alternative version of Professor Michael Porter's classic, Competitive Strategy that excludes a focus on the classic simple strategies of more value, lower price or greater closeness to customers (see The Discipline of Market Leaders).

I found the book to be a close parallel to Professor Christensen's latest book for technology company innovation, Seeing What's Next, except Blue Ocean Strategy is intended to apply mostly to nontechnology companies. Both offer theories of an innovation process that they feel could work and early experiences with the process.

Both approaches remind me of the beginnings of reengineering. In fact, I renamed this book "Reengineering the Business Model" in my mind. I hope the experience with this process will be better than what followed from reengineering.

By contrast, I would like to humbly suggest that future researchers consider monitoring and examining instead the business model innovation processes of those who repeatedly introduce new business models that combine higher value, lower prices and reduced costs. I was shocked to see that such innovators were largely ignored in this book in favor of writing about cases where a single major business model innovation occurred in an organization.

If the authors had studied these examples (which have been described in the strategy literature since 1992), they would have discovered that business-model innovation of the sort they describe is more often driven by bottom-up sources and experiments rather than the top-down planning they support. As a result, I believe that their process will turn out to be relatively unproductive compared to the existing best practices in business model innovation.

As a result of that oversight, I concluded that this book will have its primary value for:

1. Entrepreneurs who are beginning to formulate a business model for a start-up and

2. Consultants who want a new service to sell to large companies who don't understand business model innovation.

I also have some quibbles with the scholarship behind the book. The key study for validating the superiority of Blue Ocean strategies isn't footnoted to a source and there is no documentation of the methodology, the sample used, the measurements or anything else that allows a reader to check out the conclusions.

Facts were frequently misstated or overstated in the beginning, once even contradicting the authors' own footnotes (saying that In Search of Excellence was published 20 years ago on page 9 while a footnote correctly states the publication date as 1982). Another example is the authors stating that the mutual fund industry was not a multibillion dollar industry in 1975 (really? -- I don't think so), nor were coffee bars a big business (the authors teach in Europe where coffee bars have been a huge business for many decades), and discount retail was not large then (ever heard of Wal-mart, Kmart, Levitz Furniture, etc.?).

For me, the best part of this book came in a few new cases that I wasn't familiar with before such as Curves (fitness salons for women), NovoLet (preloaded insulin injection pens), NABI (more durable, less costly to maintain buses), the Joint Strike Fighter (one platform customized for each branch of the U.S. military), and i-mode (Internet access on a cell phone in Japan). I thought all of the cases were well described.

If you are a serious student of strategic thinking, you should read this book. The book's content will come up in conversation, and you should have an opinion about these ideas.

The authors looked at the business launches of 108 companies, and found that those which emphasized serving competitively uncontested customer needs were only 14 percent of the cases. Yet those "blue ocean" launches accounted for 61 percent of the total profits (or almost 10 times as many profits on average per launch as those who went after "red oceans," where competitive space is already served).

Rather than examining the processes that companies used to create these wins, the authors investigated the common strategic elements of the "blue ocean" cases they found, and developed a strategic planning process designed to focus on those elements. In the last 15 years, they have experimented with that process with a number of consulting clients and now report the results of their latest refined process.

They propose four principles formulate a strategy:

1. Reconstruct market boundaries
2. Focus on the big picture, not the numbers
3. Reach beyond existing demand
4. Get the strategic sequence right.

They also propose two principles to implement strategy:

5. Overcome key organizational hurdles
6. Build execution into strategy.

For applying each of the strategic principles, the authors describe different paths and steps, and provide simple, analytical tools designed to be applied in a back-of-the-envelope analysis.

1. Reconstruct market boundaries

Paths for this part of the process include looking across functional substitutes from other industries, different segments within an existing industry, different linked sets of buyers and buying influencers, complementary offerings, availability of functional versus emotional appeals, and extend the time perspective for a longer period. The key tool for this analysis is a simple strategy canvas that documents the areas where offerings have characteristics and whether the characteristics are positioned to be "high" or "low." Examples of this analysis abound.

2. Focus on the big picture, not the numbers

This part of the process comes in four steps:

a. Draw a strategy canvas (as described above) to see where change is needed
b. Directly observe customers and stakeholders being affected by current offerings
c. Have senior executives propose alternative strategy canvas solutions and pick a winner
d. Share the resulting strategy canvas to everyone and test it for implementation feasibility.

3. Reach beyond existing demand

You investigate specifically the needs of those who are about to stop buying in the existing industry, those who reject the existing offerings already, and noncustomers who buy now from markets distant from yours.

4. Get the strategic sequence right

You carefully check out the resulting idea in this order:

a. Does it add lots of new customer value (in terms of purchase, delivery, use, supplements, maintenance and disposal relative to customer productivity, simplicity, convenience, risk, fun and image, and environmental friendliness)?
b. Can most buyers afford the price?
c. Can you make a profit at that price?
d. Can you overcome the adoption challenges?

Blue Ocean Strategy converts into a discussion of implementation challenges from chapter 7 on, emphasizing "tipping point leadership" (refocusing attention, shifting resources from ineffective to effective areas, and gaining credibility); "fair process implementation" (involvement by employees and stakeholders rather than being treated like objects); putting up barriers to imitation; and repeating the process.

As you can see, this is a process-intensive "how to" book rather than a conceptual book, although the authors have chosen a powerful metaphor that helps offset the B-School diagrams and new terms and phrases.

The authors seem to be consciously trying to create a simpler, alternative version of Professor Michael Porter's classic, Competitive Strategy that excludes a focus on the classic simple strategies of more value, lower price or greater closeness to customers (see The Discipline of Market Leaders).

I found the book to be a close parallel to Professor Christensen's latest book for technology company innovation, Seeing What's Next, except Blue Ocean Strategy is intended to apply mostly to nontechnology companies. Both offer theories of an innovation process that they feel could work and early experiences with the process.

Both approaches remind me of the beginnings of reengineering. In fact, I renamed this book "Reengineering the Business Model" in my mind. I hope the experience with this process will be better than what followed from reengineering.

By contrast, I would like to humbly suggest that future researchers consider monitoring and examining instead the business model innovation processes of those who repeatedly introduce new business models that combine higher value, lower prices and reduced costs. I was shocked to see that such innovators were largely ignored in this book in favor of writing about cases where a single major business model innovation occurred in an organization.

If the authors had studied these examples (which have been described in the strategy literature since 1992), they would have discovered that business-model innovation of the sort they describe is more often driven by bottom-up sources and experiments rather than the top-down planning they support. As a result, I believe that their process will turn out to be relatively unproductive compared to the existing best practices in business model innovation.

As a result of that oversight, I concluded that this book will have its primary value for:

1. Entrepreneurs who are beginning to formulate a business model for a start-up and
2. Consultants who want a new service to sell to large companies who don't understand business model innovation.

I also have some quibbles with the scholarship behind the book. The key study for validating the superiority of Blue Ocean strategies isn't footnoted to a source and there is no documentation of the methodology, the sample used, the measurements or anything else that allows a reader to check out the conclusions.

Facts were frequently misstated or overstated in the beginning, once even contradicting the authors' own footnotes (saying that In Search of Excellence was published 20 years ago on page 9 while a footnote correctly states the publication date as 1982). Another example is the authors stating that the mutual fund industry was not a multibillion dollar industry in 1975 (really? -- I don't think so), nor were coffee bars a big business (the authors teach in Europe where coffee bars have been a huge business for many decades), and discount retail was not large then (ever heard of Wal-mart, Kmart, Levitz Furniture, etc.?).

For me, the best part of this book came in a few new cases that I wasn't familiar with before such as Curves (fitness salons for women), NovoLet (preloaded insulin injection pens), NABI (more durable, less costly to maintain buses), the Joint Strike Fighter (one platform customized for each branch of the U.S. military), and i-mode (Internet access on a cell phone in Japan). I thought all of the cases were well described.

If you are a serious student of strategic thinking, you should read this book. The book's content will come up in conversation, and you should have an opinion about these ideas.

A must read for any leader, January 1, 2007

I recently read, "Blue Ocean Strategy " How to create uncontested market space and make the competition irrelevant" by Chan Kim and Renee Mauborgne. The title really tells it all. The book talks about creating uncontested market space on the theory that contested market space is very difficult to make money on. It is now one of my favourite books.

There is no such thing as riskless strategy. Strategy always has to involve both opportunity and risk but the present playing field is dramatically unbalanced in favour of tools and analytical frameworks exceeded in existing businesses. As long as this remains true, existing businesses will continue to dominate companiesâ(tm) strategic agenda even if it is a business imperative for creating new initiatives and takes on a new urgency.

One thing that I like about the book is that it uses multiple examples of companies who have revolutionized the industry that they are in by creating brand new markets and brand new spaces. For example, they talk about the automobile business moving from the Model T to General Motors, to small fuel efficient Japanese cars to the Chrysler mini-van, etc.

One of the most interesting stories was about the Japanese hair cut that used to cost $40 to $50 and included everything from a shoulder and scalp massage to shampoo, etc., but generally took an hour and subjected the customers to long waits. When a chain of barber shops went into Japan offering no appointments and traditional haircutting like we are accustomed to in North America, the chain thrived in a big way.

This example explains part of what the book proposes. The key is to look at what is really being offered and look at what parts you can dramatically improve. Often you can end up with lower costs while at the same time adding more value to the customer. In the case of the barbershop, they were able to reduce the cost by not having to spend as long on each customer, not serving tea, etc. While at the same time, reducing the customers waiting time which is an important commodity. The customers were not valuing the extras as much as they were valuing having their hair cut.

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2.0 out of 5 stars Adrift
Logical, clearly written (though buzz words abound), and engaging, it's no wonder Blue Ocean Strategy was such a bestseller. Read more

Published 5 months ago by Ian Robertson

2.0 out of 5 stars A book based on a simplistic idea
This is a well written book however based on a simple idea. The idea being "you should base your business what the customer is willing to pay for". Read more

Published on Jan 22 2009 by M. Rizvi

5.0 out of 5 stars A very useful business strategy thinking guide
You will read the first few pages and quickly reach the same conclusion as the authors. A blue ocean strategy makes a lot of sense. Read more

Published on Jun 18 2008 by Pierre Lapointe

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