What if there were a way to reduce your costs, increase value for buyers, and make your competition irrelevant all at the same time? There is and it’s called the blue ocean strategy: it accomplishes all of the above by “opening up a new and uncontested market space”. Blue Ocean Strategy outlines how to get there in a neat framework, which only prompts one question: Why is every business not doing this?
A notorious management term by now, blue ocean is just another way of saying go where you have no competitors. In a red ocean, waters turn bloody from the constant combat for customers, which makes differentiation — being better than your competitors — difficult and costly. Smart companies differentiate and lower costs at the same time by creating and capturing new demand in an alternative category they invent. In other words, create a market, be the first in it, and reap the rewards of competition-less domination.
Though being the first in a market allows you to leave your competitors scrambling to catch up while you enjoy swimming in the blue ocean, getting there is a feat. While Blue Ocean Strategy wastes no words throughout 200-plus pages, it implies that every business isn’t doing this because change of blue-ocean magnitude is extremely hard and requires a good dose of luck.
That the authors of Blue Ocean Strategy coined the term and developed a coherent model for it isn’t to say they were the first to recognize that being the first beats being the best in a market. For example, Al Ries and Jack Trout’s Positioning: The Battle for Your Mind made it clear, back in 1980 and from another angle, that “The easy way to get into a person’s mind is to be first.” Becoming a Category of One was an earlier 21st-century account of why creating new market categories is good for you and your business.
Where Kim and Mauborgne get all strategic and theory-practical, Calloway gets all personal and fuzzy. Where the former’s tight management prose makes you regret trying to skip even a sentence, the latter’s narrative is highly scannable. And where Blue Ocean Strategy offers a strategic framework and is a must-read, Becoming a Category of One dispenses generalities and first-person accounts. A blue ocean is an ocean; a green apple remains just an apple.
Sustainability and blue oceans
I couldn’t read Blue Ocean Strategy without considering the implications for sustainability. Sustainable companies should make use of the blue ocean strategy to prevail. Under the framework, sustainable products’ value-add of reduced environmental impact faces two significant hurdles on the path to mass adoption: it isn’t salient for enough non-customers (their mouths say so, but not their wallets); and it’s expensive for companies to implement. Insufficient value leap for buyers and higher cost for companies are the precise opposite of what makes blue oceans possible. Will design step in and supplant green as the differentiator for sustainable products?
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Joe Calloway, Becoming a Category of One: How Extraordinary Companies Transcend Commodity and Defy Comparison, 2nd Edition, Hoboken: Wiley & Sons, 2009.
W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston: Harvard Business School Press, 2005.
{ 3 comments… read them below or add one }
I agree that it is better to create new market space or a blue ocean rather than competing in the existing market. Blue ocean strategy consultant can be very helpful in this regard.
There are a few reasons why I think many businesses won’t follow the blue ocean strategy. Moving second or third can have its own advantages, as the first company in a category may make mistakes and a later competitor will know what not to do. There’s also the “Nobody ever got fired for buying IBM” where you need some external approval or funding to move, and a move into an unknown market is considered a risky bet. The business that attempts this strategy also requires a lot more effort in planning, as there won’t be a benchmark to compare results with initially. Overall I think the benefit of moving first outweighs the disadvantages, as it’s one of the only ways to outmaneuver competitors with much greater resources.
@Eric: Thanks for sharing your thoughts. The book not only successfully overcomes the objections to being first, it shows why being first remains the best strategy around. Yes, the blue ocean strategy requires a lot more of everything up front. If done right, the potential payoff is huge.