A deep dive into Blue Ocean Strategy

SkillsCategory
7 min read
Ashliegh Gehl

If there’s one consistent hurdle that entrepreneurs face, it’s growing a business. Once a company launches, there’s a burst in growth and after a few months the hype plateaus. What worked in the beginning may not work today. The same strategies can’t be recycled as consumer habits change, technology advances, and the socioeconomic climate shifts. The Blue Ocean Strategy may be the spark you need to ignite your company’s growth strategy.  

The Blue Ocean Strategy has a reputation of revitalizing businesses.

Before we take a deep dive into Blue Ocean Strategy, let’s learn why it has been embraced by countless organizations and industries around the world, and is an integral part of contemporary business management practices. 

Who created Blue Ocean Strategy?  

Blue Ocean Strategy is a theory developed by W. Chan Kim and Renée Mauborgne, professors of strategy at INSEAD, the second largest business school in the world.

W Chan Kim and Renee Mauborgne

Companies rise and fall based on the strategic moves they make.” - W. Chan Kim and Renée Mauborgne 

They’re also:

  • Codirectors of the INSEAD Blue Ocean Strategy Institute
  • Fellows of the World Economic Forum
  • The founders of the Blue Ocean Global Network

They have received countless accolades including the Nobels Colloquia Prize for Leadership on Business and Economic Thinking and the Carl S. Sloane Award by the Association of Management Consulting Firms. Needless to say, they’re incredibly accomplished! 

What is Blue Ocean Strategy? 

“Blue Ocean Strategy” is a book that was published in 2004, and:

  • Is a bestseller across five continents
  • Has been translated into 46 languages
  • Has sold more than four million copies worldwide

It was also awarded a Thinkers50 Strategy Award for Best Business Book of the decade. 

This strategy is backed by some big brains and it’s a must-read business management book. Now that you know more about who created this theory, let’s explore the actual theory which includes two market camps – the red ocean and the blue ocean. 

Wading through the red ocean 

When you were creating your business plan, you probably looked at your competitors. You wanted to see who dominated the market. This may have influenced some of the business decisions you made in areas such as:

  • Marketing
  • Branding
  • Company culture
  • Products

When you were evaluating your competitors, you were looking into what W. Chan Kim and Renée Mauborgne call the red ocean.

The red ocean is composed of all businesses that currently exist – the known market.

 

In the red ocean, there are rules by which companies in their respective industries abide. As more companies enter the red ocean, the less space there is for profit, and it becomes harder to grow your company.

We’ve seen small, locally owned coffee shops close their doors due to large, corporate coffee chains moving in and squeezing them out.

It feels like a dog-eat-dog world, and it’s incredibly difficult to stand out because there are plenty of businesses offering similar products and going after the same customers.

Keep in mind, this doesn’t mean your business won’t do well in the red ocean. It just means that there are more barriers to growth and the rules of competition confine your business’ potential. 

Hello, blue ocean! 

The blue ocean theory is made up of industries not in existence. The market is unknown, and it hasn’t been blemished by competition.

In this beautiful, big ocean new businesses create demand instead of chasing it or fighting for consumers.

Growth in the blue ocean is rapid and highly profitable.  

You may be thinking, “My company is already created! I’m in the red ocean. It’s too late.” Fun fact! Most blue ocean companies emerge from the red ocean.

These are companies that have altered an existing industry and emerged in a brand-new way. They’re in a league of their own. 

From stilt walker to Cirque du Soleil CEO 

Guy Laliberté was an accordion-playing, fire-eating stilt-walker before he became CEO of Cirque du Soleil, a Canadian company that was created by a bunch of street performers in 1984.

It emerged during a time when circus interest was in steady decline. Children, one of the circus’ primary audiences, were more interested in  console gaming than entertainment under the big top.

On top of that, the circus’ red ocean was oversaturated and dominated by Ringling Bros and Barnum & Bailey.  

We reinvent the circus  

In the early days, Cirque’s tagline clearly defined the company’s mission. It loudly stated, “We reinvent the circus.”

With this statement as a guide, they pushed the boundaries of the imagination by creating one-of-a-kind performances that attracted patrons of the fine arts – theatre, opera, ballet – by the droves.

The clients were adults and corporations, not children.

They made the circus theatrical, an art. In the company’s first 20 years, they achieved revenues that took Ringling and Barnum & Bailey more than a century to achieve.  

Uber’s fast lane  

Cirque isn’t the only well-known Canadian company to make a splash in the blue ocean.

Uber, created by Calgarian Garrett Camp, looked at the state of the taxi industry and from it emerged ridesharing.

Passengers seeking transportation would know when their ride would arrive via an app, how much it would cost, and they could read reviews about their driver. It changed transportation and created a whole new industry that incorporated cashless transactions. 

Check out this YouTube video to learn how Uber dominated the car rental industry.  

Four Actions Framework 

With both Cirque du Soleil and Uber, the companies created a new value curve using what W. Chan Kim and Renée Mauborgne refer to as the Four Actions Framework. The framework consists of four questions.  

  1. Raise

Which factors should be raised well above the industry’s standards? 

  1. Create

Which factors should be created that the industry has never offered?  

  1. Reduce

Which factors should be reduced well below the industry’s standard?

4. Eliminate

Which factors that the industry has long competed on should be eliminated? 

Ask these questions of your industry, apply the answers to your business, and start to tease out your industry’s logic and business model. By applying this to your current business, you’ll start to construct a strategy – and hopefully have an a-ha moment tha

Group of people gathered around a table

t acts as your gateway into the blue ocean. 

Blue Ocean Strategy recap 

If you’re finding that your company’s growth has slowed, take a minute to assess how deep your company is in the red ocean and start to strategize a way out.

With a red ocean frame of mind, you’re worried about your competitors and are competing for a small slice of the pie. The more companies that enter your sector, the smaller the slice gets.

In the blue ocean, you’re reframing your industry using the Four Actions Framework.

To get started, checkout these tools Blue Ocean Strategy tools – and remember, most blue ocean companies come from the red ocean. The next blue ocean company could be yours! 

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