Blue Ocean Strategy Book Review

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Blue Ocean Strategy Book Review

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Blue Ocean StrategyBook Review

Meghan Davidson



Justin Pickard

Michael Simpson

Justin Vargas


Canada’s Largest Cultural ExportsCreated by Guy Laliberte in 1984

Global champion of the circus industry

Circus/Theatre Hybrid

Cirque du Soleil


Red/Blue Ocean Comparison

Red Ocean

Blue Ocean

Represents all the industries in existence today.

The known market

Industry boundaries are defined and accepted, and the competitive rules of the game are known


Represents all the industries NOT in existence today

The unknown market

It is defines by untapped market space, demand creation, and the opportunity for highly profitable growth






Why create Blue Oceans?


The cornerstone of Blue Ocean Strategy. Focuses on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Occurs by aligning innovation with utility, price and cost positions.

Value Innovation


Value Innovation


Blue Oceans vs. Red Oceans

Blue Ocean

Red Ocean

Create uncontested market space

Make the competition irrelevant

Create and capture new demand

Break the value-cost trade-off

Align the whole system of a firm’s activities in pursuit of differentiation and low-cost

Compete in existing market space

Beat the competition

Exploit existing demand

Make the value-cost trade-off

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost


Chapter 2

Analytical Tools and Framework


Strategy Canvas

Strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It serves two purposes:

Captures current state of play in the known market space

Captures the offering level that buyers receive across these competitive factors

The value curve is a graphic depiction of a company’s relative performance across its industry’s factors on competition.

Analytical Tools and Frameworks


Four Actions Framework


It pushes them to simultaneously pursue differentiation and low cost to break the value-cost trade off.

It immediately flags companies that are focused only on raising and creating and thereby lifting the cost structure and often overengineering products and services - a common plight in many companies.

It is easily understood by managers at any level, creating a high level of engagement in its application.

Because completing the grid is a challenging task, it drives companies to robustly scrutinize every factor the industry competes on, making them discover the range of implicit assumptions the make unconsciously in competing.

Eliminate-Reduce-Raise-Create Grid





A firm does not diffuse its efforts across all key factors of competition


Diverge from the other players

Compelling Tagline

Strategic profile is clear; a fun simple to follow slogan

Ex: Nike: Just do it!

Characteristics of a Good Strategy


Reconstruct market boundaries to break from the competition and create blue oceansSuccessfully identify blue ocean opportunities that exist

Six Path Framework pattern for creating blue oceans

Ch.3-Reconstruct Market Boundaries


Path 1 & Path 2

Path 1: Look Across Alternative Industries

Path 2: Look Across Strategic Groups within Industries

A company not only competes with other firms in their industry but also with companies in those other industries that produce alternative products or services



and airlines

Blue Oceans can be unlocked by looking at groups of companies within an industry that pursue a similar strategy


Path 3 & Path 4

Path 3: Look Across the Chain of Buyers

Path 4: Look Across Complementary Product & Service offering

The purchasers who pay for the product or service may differ from the actual users, and in some cases there are important influencers as well.

Untapped value is often hidden in complementary products and services

Services in products have been traditionally defined

Ex: Phillips and British Teakettle


Path 5 & Path 6

Path 5: Look Across Functional or Emotional Appeal to Buyers

Path 6: Look Across Time

Competition in industry based on rational and emotional appeal

Companies who challenge appeals can find new market space

Ex: Quick Beauty House and haircuts

All industries are subject to external trends that affect business over time, and looking at trends with right perspective can show you blue ocean opportunities


Focusing on the big picture and not numbers is key to mitigating risk

Drawing your strategy canvas is important to identifying the key factors of competition

Four Steps of visualizing strategy is important to unlock people’s creativity

Ch.4-Focusing on the Big Picture, Not the Numbers


Step 1 & Step 2

Step 1: Visual Awakening

Step 2: Visual Exploration

Compare your business with your competitors by drawing your “as is” strategy canvas

See where your strategy needs to change

Go into field to explore the six paths to create blue ocean

Observe the distinct advantages and alternatives products and services

See which factors you should eliminate, create, or change


Step 3 & Step 4

Step 3: Visual Strategy Fair

Step 4: Visual Communication

Draw your “to be” strategy canvas based on insights from field observations

Get feedback on alternative strategy canvases from customers, competitors customers, and non customers

Use feedback to build the best “to be” future strategy

Distribute your before and after strategic profiles on one page for easy comparison

Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy


Visualizing strategy at the corporate levelUsing the Strategy Canvas

Using the Pioneer-


-Settler Map

Overcoming the limitations of strategic planning

Should be creative driven, and more motivational , invoke willing commitment,

Ch.4-Focusing on the Big Picture, Not the Numbers Cont.


Reach Beyond Existing Demand


First tiers noncustomersThese are “soon to be” customers


A Manger is a British fast food company who located a growing number of first tier noncustomers.

Three tiers of noncustomers


Second tier noncustomersThese are “refusing” noncustomers. Customers either find the offering unacceptable of beyond their means.



Third tier


These are “unexplored” noncustomers.

Teeth whitening example

Three tiers cont.


Get the Strategic Sequence Right


Testing for exceptional UtilityFrom Exceptional Utility to Strategic Pricing

Step 1: Identify the Price Corridor of the Mass

Step 2: Specify a Level Within the Price Corridor

From Strategic Pricing to Target Costing

Ch.6 cont.


From Utility, Price, and Cost to AdaptationEmployees

Business Partners

The General Public

The Blue Ocean Idea Index

Ch. 6 cont.


Chapter 7

Overcome Key Organizational Hurdles


There are four hurdles managers face once a blue ocean company has developed. These hurdles are cognitive, limited resources, motivation, and politics.

Tipping point leadership is necessary to overcome these hurdles.

This style of leadership allows you to overcome these four hurdles at low cost and fast while winning employees’ support in executing a break from the status quo.

Bill Bratton of the NYPD

Tipping Point Leadership


Tipping point leaders make people aware of the need for a strategic shift and instead of relying on numbers to break through the cognitive hurdle, they make people experience the need for change in two ways:

Ride the “electric sewer”

Meet with disgruntled customers

Break Through the Cognitive Hurdle


After organization members realize the need for change, then leaders are faced on the problem of limited resources.

Tipping point leaders concentrate on multiplying the value of the resources they have. There are three factors of disproportionate influence that leaders can use:

Redistribute resources to your hot spots

Redirect resources from your cold spots

Engage in horse trading

Jump the Resource Hurdle


Then there is the need to execute blue ocean strategy by motivating employees and doing all this with limited resources.

Follow three factors of disproportionate influence in motivating employees:

Zoom in on kingpins

Place kingpins in a fishbowl

Atomize to get the organization to change itself

Jump the Motivational Hurdle


It is impossible to escape organizational politics in corporate and public life.

In order to overcome these political forces, focus on three disproportionate influence factors:

Secure a consigliere on your top management team

Leverage your angels

Silence your devils

Knock Over the Political Hurdle


Chapter 8

Build Execution Into Strategy


The sixth principle of blue ocean strategy is in order to build people’s trust and commitment and inspire their voluntary cooperation, companies need to include execution into strategy from the start.

Poor processes can ruin strategy execution.

When procedural justice was exercised, people were more satisfied with the outcome and their commitment.

The Power of Fair Process


Three mutually reinforcing elements define fair process and all members of a corporation look to these. They are:



Expectation clarity

The Three E Principles of Fair Process


Fair process matters to individuals’ emotional and intellectual recognition.

It is important for people to feel recognized for their ideas and thoughts, and then they want to share more of their knowledge and give more of their efforts.

On the other hand, if fair process is violated, people don’t feel the need to give effort, expand ideas and knowledge, or listen to others’ insights.

Intellectual and Emotional Recognition


Voluntary cooperation, commitment, and trust are intangible capital. People’s confidence in one another is higher when they have trust.

With commitment, people are willing to give up their own interests for the better interest of the company.

Companies that have successfully executed a blue ocean strategy say it would have been possible without

these things.

Fair Process and Blue Ocean Strategy


Once a company creates a blue ocean, sooner or later imitators will followAs the original company and the early imitators succeed and expand the blue ocean, more companies will jump in.


his raises the question: when should a company reach out to create another blue ocean

Chapter 9: Conclusion: The Sustainability and Renewal of Blue Ocean Strategy


A blue ocean strategy brings with it considerable barriers to imitation

Blue ocean strategy may conflict with other companies’ brand image -- ex: The Body Shop

Natural monopoly -- ex:


Patents or legal permits block imitation

High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market --ex: Wal-Mart

Network externalities discourage imitation --ex: eBay

Imitation often requires significant political, operational and cultural changes --ex: southwest airlinesCompanies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators -- ex: Microsoft

Barriers to Imitation


As you can see the barriers are high and that is why we have seldom rapid imitation of the blue ocean strategy

Also blue ocean strategy is a system approach that requires not only getting each strategic element right but also aligning them in an integral system to deliver value innovation

Therefore, imitating a system is not easy

Barriers to Imitation cont.


Eventually almost every blue ocean strategy will be imitated

You need to stay away from trying to compete with the new competition or over time your value curve will begin to converge with your competition

To avoid competing, you need to monitor value curves on the strategy canvas---it alerts you to reach out for another blue ocean when your value curve begins to converge with those of the competition, and prevents you from starting a new blue ocean when there is still a huge profit to be collected

When to Value-Innovate Again


As rivalry intensifies, bloody competition commences and the ocean will turn redAs competitors value curve converges toward yours, you should begin reaching out for another value innovation to create a new blue ocean

When to Value-Innovate Again


The six principle of blue ocean strategy should serve as essential pointers for every company thinking about its future strategy if it aspires to lead the increasingly overcrowded business world

Companies should go beyond competing for share to creating blue oceans and how to make

competition irrelevant


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