Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant.
The dominant focus of strategy work over the past thirty years has been on competition-based red ocean strategies. The result has been a fairly good understanding of how to compete skillfully in red waters.
From analyzing the underlying economic structure of an existing industry to choosing a strategic position of low cost or differentiation or focus to benchmarking the competition.
Some discussion around blue ocean exists. However, there is little practical guidance on how to create them. Without analytic frameworks to blue oceans and principles to effectively manage risk, creating blue oceans has remained wishful thinking that is seen as too risky for managers to pursue as strategy.
The continuing creation of blue oceans
How many now unknown industries will likely exist in 20 years? The reality is that industries never stand still. They continuously evolve. Operations improve, markets expand, and players come and go.
History teaches us that we have a hugely underestimated capacity to create new industries and to re-create existing ones. Yet, the overriding focus of strategic thinking has been on competition-based red ocean strategies.
Part of the explanation for this is that corporate strategy is heavily influenced by its roots in military strategy. Described this way, strategy is about confronting an opponent and fighting over a given piece of land that is both limited and constant.
Unlike war, however, the history of industry shows us that the market universe has never been constant; rather blue oceans have continuously been created over time.
To focus on the red oceans is therefore to accept the key constraining factors of war-limited terrain and the need to beat an enemy to succeed and to deny the distinctive strength of the business world; the capacity to create new market space that is uncontested.
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.