Blue Ocean Strategy - A Synopsis part 1- W.Chan Kim, Renee Mauborgne

Definition

The authors use the red ocean metaphor to describe an overcrowded market space of competitors all fighting for the same piece of the pie. 

Blue ocean strategy is when an organization breaks away from the conventional approach to facilitate the creation of new uncontested market space thereby making competition irrelevant

Strategy Canvas

    The x-axis represents the many factors organizations compete on (price, image, support, speed, etc.) and the y-axis illustrates where each company is positioned for each factor

     In this example, Southwest analyzed alternatives to flying (i.e. the car) and designed a unique strategy from the competition (other airlines).  Their tagline could be "the speed of a plane at the price of a car - whenever you need it."

    To create a blue ocean strategy, organizations must be committed to value innovation.  The authors stress that "value" and "innovation" must work together simultaneously in order to develop a blue ocean strategy.  

 

     ELIMINATE factors that no longer add value for the customer; this will eliminate unnecessary costs.

     REDUCE factors that were over designed or features that were added for the sake of competition; reduces unnecessary costs.

     RAISE factors important to the customer that have been compromised; utilize some of the cost savings from the first two actions.

     CREATE factors that have never been offered (a new value proposition).

     To create a blue ocean strategy you must change your organization's curve on the strategy canvas and move away from the competition. 

    Must meet three characteristic of good strategy i.e Focus, Divergence, and a Tagline (The new strategy FOCUSES on the important areas and not on every single factor, DIVERGES away from the competitors offerings, and has a simple easy to communicate TAGLINE)