In the red oceans industry boundaries are defined and accepted, and the competitive rules of the game are known.
Here companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities and cutthroat competition turns red ocean bloody.
Blue oceans, in contrast, are defined by untapped market space, demand creation and the opportunity for highly profitable growth.
Although some blue oceans are created well beyond existing industry boundaries most are created from within red oceans by expanding existing industry boundaries.
In the blue oceans, competition is irrelevant because the rules of the game are waiting to be set. It will always be important to swim successfully in the red ocean by outcompeting rivals.
Red oceans will always matter and will always be a fact of business life. But supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance.
Companies need to go beyond competing. To seize new profit and growth opportunities, they also need to create blue oceans.
Blue Ocean Strategy
Renee Mauborgne and W. Chan Kim
Waxdale Advisors is one of the 6 management service companies part of 400 Startups. Its services include IT project management, project advisory, and startup advisory.