Originally published at: https://blog.12min.com/blue-ocean-strategy-summary-pdf/
MicroSummary: The Blue Ocean Strategy is a business book that has become mandatory for modern managers by proposing an organized structure to identify and implement differentiation in any industry and help you grow your business faster. The blue ocean strategy explains how to guide your business across seas with less competition and greater profitability. The authors researched the impact of innovative ideas on traditional industries and studied cases from companies such as Tesla Motors and Starbucks, creating a most attractive model of innovation that allows you to rethink the way your business competes in today’s marketplace. The book proposes rules and principles to be followed by entrepreneurs, managers, CEOs, and directors to help companies get out of the deadly waters of the red oceans.
How to Create Uncontested Market Space and Make Competition Irrelevant
Did you know that in the marketing world “angels” and “devils” also exist? Did it ever cross your mind to use tools like “fishbowl management” or “atomization” in a field like this? Our "Blue Ocean Strategy Summary" is all-encompassing and intriguing to train the fish from the bowl to make good profits, isn’t it? It’s not precisely like this, but it’s kind of funny, anyway.
It is a beautiful metaphor indeed: Blue Oceans (and Red Oceans). Blue Oceans means to prosper, peaceful, safe blue water. Red Oceans smells like a lot of bloody struggles, and shark-filled water - imminent dangers that threaten your survival. Two contrary elements which express good and evil.
Who Should Read "Blue Ocean Strategy"? and Why?The book is intended for all businessmen from various Industries, those eager to learn new ways, techniques, methods, and strategies that are not only beneficial in the business world but also in other aspects of life.
“Blue Ocean Strategy” book isn’t suitable only for the business community.
Adults, students, and knowledge seekers would find it also thrilling and inspiring; they may feel an intense urge while reading it that can drive them to call-to-action decisions and mentality.
Some experts divide the population, especially the young adults into two categories: Doers and Delayers (thinkers).
The real question that may occur in our minds is: How can a book be suitable for different kinds of persons from divergent backgrounds?
The answer lies in the question - The book is designed to target and answer the financial and business difficulties that almost every person faces on a day to day basis.
Let’s get you introduced to the authors.
About W. Chan Kim and Renée MauborgneAs a South-Korean-born theorist and businessman W. Chan Kim have established himself as a professor of the University of Michigan Business School in the US.
Later on, his professional life reaches a culmination while teaching international management and strategy and by having an executive role as a co-director at the INSEAD Blue Ocean Strategy Institute located in Fontainebleau, France.
There are numerous business journals written for Financial Times, The Wall Street Journal and The New York Times which represent only a small portion of Mr. W.Chan Kim’s area of expertise; he is also the founder and inventor of Value Innovation Network.
American-born economist and a business theorist Renée Mauborgne currently works as a professor for strategy and management theories.
Mis. Renée Mauborgne just like Mr. W.Chan.Kim has an executive role at the INSEAD Blue Ocean Strategy Institute as a co-director, and she is a Distinguished Fellow at INSEAD, where she teaches the different blue ocean strategies and management techniques as we said earlier.
As a fellow of the World Economic Forum, she has even declared herself as a writer due to numerously written articles on Blue Ocean Strategies and managing multinational corporations and companies.
Let me guess: now that you are sure that the authors are experts in the field, you are positive that this book may be beneficial to you.
Not sure yet? Okay, let us convince you, by presenting you this book’s summary.
"Blue Ocean Strategy Summary"If you ever need a clue or a long-term advice that will guide you throughout the whole process of how your company can maintain its current position in the existent market and discover new ones with less competition that are much more profitable and prosperous then, this is the book for you.
Blue Ocean Strategy is an “out-of-box” kind of breakthrough book that gives its readers a new way of understanding the framework organization that has an assignment to identify and implement different blue ocean strategies in various industries.
A true masterpiece written by W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy Summary is empowered to impart new ideas on traditional and older business industries. The central part is not the only interesting section of the book; even the appendices are more than capable of grabbing reader’s attention with first-class high-quality examples about lots of different product categories that vary from the Model T to movie theatre products.
To Avoid Red Oceans, Do Not Swim With SharksDo you work for a company that only thinks about ending the competition? To annihilate competitors is the agenda of every meeting? Know that this has a reason. Traditional business strategies originate from military models and are based on capturing the enemy to gain a position of defense.
Even keywords in the corporate universe, such as the term “headquarters” for headquarters, have their origins in the military universe.
As companies shape their strategies and outline their corporate goals, military metaphors such as “taking a stand”, “winning a business”, “defeating the competition”, proliferate. This language generates a model of competition in the market that says that for one to win, someone has to lose.
In all honesty, this sort of statements and forecasts inject a dose of skepticism in the minds of all. If the market fails to acknowledge the fact that the tech-savvy generation requires more than just satisfying the preferences of specific consumers, many companies may collapse in next to no time.
How companies approach the process of devising a market strategy and why sometimes is vital to back down instead of pushing forward? These questions feel a necessity for analysis, and as a result of the complexity of the issue, gradual problem-solving is essential.
If you focus merely on differentiation and how these market tendencies can be faced, you’ll end up drained and strategy-less.
Blue Ocean Strategy represents the idea of creating a win-win scenario for your company, which is the embodiment of long-term prosperity and success.
Creating and finding new market segments has never been more challenging than in the digital era. Red Ocean Strategies focus on maintaining the level of progression and simply confronting the organizations which control the most considerable portion of the existing segments.
This fierce competition causes damage to corporate fighters and fills the water with blood, creating a “red ocean.” In this ocean, companies that struggle end up with a market loss, profits reduction, and stagnant growth.
Exaggerated competitiveness, while appearing essential to today’s business culture, is no longer the only corporate strategy.
You must navigate the blue oceans, creating new markets where there is no conflict and growth and profits are plentiful.
This may seem a strange concept at first, but many of the industries and products you know and use every day - cars, record labels, petrochemicals and even aviation - did not exist in the last century.
In the last decades, we have seen multibillion-dollar industries, including mobile telephony, personal computing, and biotechnology. But who can predict the “blue ocean” industries that will emerge in the coming decades?
That is the question that your company should be asking for you to navigate in softer seas. The concept of the blue ocean not only created new industries - it created new industries exceptionally profitable.
Among the companies analyzed by Kim and Mauborgne that had revenue growth, 62% of total net revenues came from established competitive markets.
However, this revenue growth produced only 39% of the total profits. Already the new businesses, in blue oceans, have almost reversed the numbers: their expansion accounted for 38% of total revenues and 61% of profits.
Innovations are happening today at an intense pace due to globalization, mass production, and technology, which facilitate and accelerate the creation of new products, but similar to each other.
Big brands face an extraordinary invasion of new entrants into their markets, while consumers base their decisions on price only when space is little differentiated. To escape this “red ocean” cycle, with intense and direct competition, some companies have created lucrative new operations using the “blue ocean” strategy.
A good example is Starbucks, which made coffee a form of entertainment and networking, or Southwest Airlines, that made the problem of flying by economy class a fun and profitable business.
The Body Shop is another company that, with its affordable, natural cosmetics, has established a new blue ocean in a high-quality industry filled with very expensive competitors.
Coffee, fun flights and natural lotions are all innovations focused on value, or as the authors call, value innovations.
They generate, through a new product, more value to the final customer than the similar products. Any company, regardless of size or area of expertise, can exploit a value innovation.
To be successful, an innovation in value must provide savings and a new benefit that the consumer can immediately realize. If you want to go to the blue ocean, make sure your value innovation is accessible enough that most customers realize its benefit and differential shortly.
With a strategic bias, this type of innovation can only be viable when it becomes part of an intrinsic process of the company, involving constant improvements in operations, functionalities, and price focused on generating a real and tangible value for the client.
The sets of rules and principles that are present in the book are meant to be followed by intrepid strategists; all managers can find that the navigation is relatively easy, considering the author’s critical strategic advice.
Depending on different personalities and risk aversion mentality an intrepid executive may or may not undertake a voyage that can lead him to a spacious ‘’blue ocean of possibilities’’ and abandon the competitive and ‘’life-threatening’’ business waters.
But, let’s see this book from a different perspective, closer to your way of thinking.
The analogy I propose is market – dance steps.
Yes, you read right, dance steps! If businesses were a dance – this book might probably be choreography with mixed steps, in 3 acts:
- The slow dancing lead: Blue Ocean strategy
When your business is performing on a stage, which will be your primary concern?
You probably thought: COMPETITION. Guess what? You are wrong.
What? Why would competition not be significant? Why shouldn’t we focus our energies on it?
Well, by reading the book you will discover the answer, which is much simpler than you may think:
In the blue oceans’ world the competition is just irrelevant because the rules of the market game are waiting to be set.
But this is a partial W. Chan Kim truth. Because by reading more you’ll find so much more intriguing and exciting info about it.
How the four actions framework works? (Reduce, Eliminate, Create, Raise)
How will the profit and growth consequences help you to create blue oceans?
What a value innovation means in the blue oceans context?
And how a strategy canvas looks like?
I leave you to discover all this and so much more in the first part of W. Chan Kim’s book.
- The ballroom dance rhythm: Formulating the Blue Ocean Strategy
Prerequisite: “companies must break out of the accepted boundaries that define how they compete” and to have a keen insight into how to reconstruct market realities to open up blue oceans. How could they do that? W. Chan Kim provides six paths to accomplish this:
- Look at alternative industries
- Look at strategic groups within industries
Motivation is the engine. And that’s because working out collectively instead of alone is more dynamic, exciting, engaging, motivating and inspiring.
- Look across the chain of buyers
- Look across complementary product and service offerings
Because untapped value is often hidden in additional product and service. You have to see beyond your expectations and focus more on defining the total solution buyers seek when they choose a product or service.
- Look across functional or emotional appeal to buyers
- Look across time
Looking across time means perspective. To anticipate the now-tomorrow report—from the value, a market delivers today to the value it might deliver tomorrow. Only that way you will be able to shape your business future actively.
- The contemporary dance closing: Executing the Blue Ocean Strategy
This book proposes a strategy that is based on two main characteristics: maximizing the opportunities and minimizing the risk. Sounds good, right?
And if we have a strategy, we also have some principles. The authors share with us 8 of these principles. Every principle is associated with the respective risk involved, as follows:
- Reconstruct market boundaries by minimizing the search risk.
- Focus on the big picture, not on numbers, and consequently lower the planning risk.
- Reach beyond existing demand, decreasing the scale risk.
- Get the strategic sequence right and minimize the business model risk.
- Overcome key organizational hurdles and decrease the corporate risk.
- Build execution into the strategy, making the management risk as small as it can be.
- Align the value, profit, and people proposition and minimize the sustainability risk.
- Renew Blue Ocean as much as possible and remove any renewal risk.
All these principles can serve all sorts of companies, no matter the industry they are in. Also, they serve as essential pointers about their future strategy.
The Six Rules of The Blue Ocean StrategyA new market asks for new rules. And it is through them that you build or point your business toward a blue ocean.
- Rebuild the limits of the market. Reassess the premises that make up the assumptions of your industry and from there, define your business model. Master the key competitive guidelines of your industry (such as customer preferences, product quality, price level and quality) to create a visual representation of the strategy that clearly shows each of these factors. To create a new perspective, explore which of these current industry standards you could ignore, reduce, enlarge or even transform. Wine company Casella Wines used this analytical process to make its Yellow Tail brand the fastest growing wine in the history of American and Australian preference and the best-selling red wine in the United States in 2003. You must be wondering how is this possible. Through extensive research, Casella identified that beer drinkers and cocktails were a large potential market and a different consumer from their traditional consumer. Therefore, it has simplified the taste of your wine, making it fruitier, sweeter and lighter. The company also shifted the focus of its marketing efforts, abandoning the traditional and elitist appeal that focused on the palate complex, the aging of the wine and the location of the winery. It built its brand with a blue ocean strategy, targeted and differentiated. Red ocean strategies are based on finite and scarce markets. To expand your market boundaries into a broad blue ocean, look at your key competitors. Determine your limitations and identify spaces where they do not arrive. Find something you see, and it does not. Curves, a women's gym that offers a 30-minute workout program focused on the female audience, took advantage of the price, location, and ease of use of its service to create a new market and compete with traditional gyms. Novo Nordisk, an insulin-producing company, focused its communication of benefits from its product to physicians to revamp its market and begin offering direct treatment to the diabetic patient. To sell its product, it invoked consumer emotions and listed the benefits to end-users. Look far and see beyond. Apple acknowledged an emerging trend and a shift in consumer habits of online music users (which occurred in piracy and informality) when it captured the music download market through iTunes.
- Focus on the big picture, not the numbers. Pay attention to the global picture and do not get lost in statistics alone. Many strategists get bogged down in the data and lose sight of the whole and their ability to identify trends. To maintain your sense of direction, use your strategy map, a graphical representation of products, prices, and position in the industry, yours and your competitors. This map reveals your current position and possible opportunities. This exercise helps you glimpse the competitive environment through the eyes of your customers, enabling you to discover the factors that really matter to them. This can mitigate the risk of you investing time and effort into the wrong initiatives. When Samsung prepares new products, such as the 40-inch LCD TVs and the world's best-selling cell phone, it uses interdepartmental teams, representing all possible angles the customer may have about the products on the market to use the strategies map approach. With this analysis in hand, teams improve existing technologies to deliver new benefits of which their customers can readily take advantage.
- Go beyond existing demand, create demand. New businesses are naturally focused on their current customers, but real growth goes beyond existing demand. To reach the open sea, focus on potential future customers. To attract new customers to its advertising business via billboards on the streets of large metropolises, the French company JCDecaux thought that municipalities would be more interested in outdoor ads if they could get them for free and without any concern for maintenance. To meet these criteria, the company built durable street support equipment and signed long contracts with city halls. More plaques across the city have attracted more and more advertisers. Today the company operates in 33 countries and dominates, with high-profit margins, this specialized advertising sector.
- Understand the strategic sequence. Run your strategy sequentially to achieve your value innovation. Having a new and extravagant technology does not mean you have a blue ocean product. Technological innovation is not necessarily valued innovation if it is not perceived and desired by the customer. To be truly innovative, technology must deliver immediate value. Map the experience you want buyers to have in each of the sequential stages of your plan. Assess the utility, availability, comfort, safety, and environmental sustainability of your product from the perspective of how each of these factors affects the consumer when he or she buys takes them home, uses them and eventually discards their product. To develop your blue ocean strategy, follow four logical steps. Ask, in that order: Why should someone buy your product? Does it have any exceptional utility? Does it have a fair price to attract a large audience? Can you create it at a profitable price? Is there any impediment that discourages the market from accepting your product?
- Overcome internal obstacles. Successful execution requires your company to resolve disagreements between teams and departments. It is natural to face an organizational upheaval as you enter new waters in the blue ocean market. Managers may be bothered by the need for a major change, with the problems that may arise from the reallocation of resources, and uncertainty about the novelties’ performances. The insecurities about how this transition will transform the existing hierarchy are also common and need to be overcome.
Traditional strategies build their profits on differentiation on the market and high cost.
Blue Ocean strategy comes with a new way of thinking. Differentiate from another perspective: value innovation and simultaneously promote a strategic cost, to gain new demand.
In fact, the main idea of this strategy is based on the reach beyond the existing demand and the equilibrium between the value proposition, profit, and people proposition. Because Blue Ocean is “an “and-and,” not an either-or, strategy.”Authors: done, summary: done, one more thing to go - read on to discover this book's key lessons.
Key Lessons from "Blue Ocean Strategy"1. Eliminate all Market Boundaries 2. Leave the Statistics aside and see the Big Picture 3. Don’t Limit your Business 4. New technology doesn’t guarantee success
Eliminate all Market BoundariesThe first thing that every business faces are the wrongly evaluated premises that are shaping your company’s model.
To get a broader and broader perspective to the surroundings assumptions, and reports must be made so that you can specify the type of industry and market standards that you should omit, eliminate or even rebuild.
For example, these analytic processes were used by Casella Wines from Australia.
In pursuance of prosperity, Casella Wines has increased its brand awareness by breaking all marketing habits that resulted in a massive success of the newly created then Yellow Tail brand that was categorized as one of the fastest growing labels in the U.S history.
"Leave Statistics aside and see the Big Picture."You must resist the temptation to start with the early negative, judgmental comments, and predictions; your focus must be fixated on the company’s overall view and long-term opportunities.
Many strategists get lost down in statistics and income predictions, so they often miss the critical aspects that they should be concentrated on.
Strategy Canvas as a graphical and visual representation of the competition and its attributes is the best way to find the path that you and your company should take on a long run.
Don’t Limit your BusinessIt is only natural that a company would rely on Pareto’s 80:20 customer mechanisms. However, the real growth lies beyond the current demand. Therefore, businesses must find a new way and sacrifice their early profits by placing customer satisfaction at the very centre of their priorities(not the money).
This would lead to engagement possibilities with neutral and competitor’s customers.
"New technology doesn’t guarantee success"The strategy must be executed sequentially so that the company would achieve its "value innovation." The latest technological equipment is helpful in creating safety and high-quality products and services, however, just by having it without any knowledge of using it doesn’t indicate that your company is capable of producing a blue ocean product.
An assessment of such product/service is required to test their usefulness, handiness, safety, distribution complexity, service delivery, environmental contribution and “environmental friendliness.”
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"Blue Ocean Strategy" Quotes
[bctt tweet="The only way to beat the competition is to stop trying to beat the competition. " username="get12min"]
[bctt tweet="Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of blue ocean." username="get12min"]
[bctt tweet="Some industries compete principally on price and function largely on calculations of utility." username="get12min"][bctt tweet="Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves." username="get12min"]
[bctt tweet=“The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities.” username=“get12min”]
Final Notes:Our "Blue Ocean Strategy Summary" outlines only the most key elements.
Providing clear and familiar concepts and cases is both the book’s strong point, as well as its weak point. It is a good read for beginners, but more sophisticated readers will probably find it useless since there is nothing particularly new in it.
If you have come here, you are striving to make an effort to swim towards the open and blue seas. Here are the main concepts to assimilate.
Creating a blue ocean for your company is based on believing that to be successful in business you have to generate and capture more value and not attack and compete with established companies where margins are low, and prices always fall.
The new big markets did not exist a few decades ago, and they all had explosive growth.
Think smartphones, social networks or even the Starbucks phenomenon.
None of them was a success for “charging less” but for generating value in innovative ways and easily applicable in the day to day of the consumer. To navigate blue oceans, you also need a map.
Create a strategic map of all the potential benefits of being offered, perceived, and potential new markets before pointing your boat in a new direction.