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72Principle · Group 9

Blue Ocean

Blue Ocean Strategy

“Instead of fighting everyone for the same customers, you create a new space without competition by eliminating what everyone takes for granted and adding what does not yet exist.”

Most strategies ask how you can become better than the others. The principle of the Blue Ocean asks how you can make the comparison irrelevant.

Group 9: Markets and OrganizationsT6 Business Strategy
Go to the in-depth section ↓
Many small teal dots crowd in a tight circle around a mist-blue swarm and collide. At the turning point, one dot drops three mist-blue splinters, turns gold and travels on an arc out into a wide, empty frame in which new gold dots light up; in the final image other dots follow, and the edge of the frame grows dense again.
In short

Instead of fighting everyone for the same customers, you create a new space without competition by eliminating what everyone takes for granted and adding what does not yet exist.

What it’s about: Most strategies ask how you can become better than the others. The principle of the Blue Ocean asks how you can make the comparison irrelevant. In red oceans, everyone fights for the same customers, and every advantage is immediately countered. Blue oceans are markets that do not yet exist. You reach them by leaving out what your industry takes for granted and creating what nobody offers yet. That way, costs fall and value rises at the same time.

In depth

The principle in detail

Three steps through the principle: grasp it, place it, put it to work. Open each topic on its own.

The core messageCore statement and 3 clarifications
In essence

Instead of fighting for the same customers, you can look for people nobody has reached so far.

It does not say
That a new product is already a new market.
It does not say
That a blue ocean stays free. Success attracts imitators, and even a new market offers no protection against crises.
It also says
Value innovation requires both. If you only add and leave nothing out, you drive costs up.
The explanationMany people don’t use an offering because it is too expensive, too complicated or too far away.
  • So the focus shifts to noncustomers.
  • Many people don’t use an offering because it is too expensive, too complicated or too far away.
  • If you find a solution for them, you enlarge the market instead of merely redistributing it.
The question

Whom are you not yet reaching at all, and what would you have to leave out to reach them?

The signs3 signs when you heed it · 3 when you overlook it
When you heed it
  • You can say who doesn’t use your offering and why.
  • In planning, things are cut as often as they are added.
  • You examine your industry’s habits to see whether they benefit anyone or merely serve to keep pace with the competition.
When you overlook it
  • Every planning round begins by looking at the competition.
  • Offerings become more extensive and more expensive year after year without reaching new people.
  • Nobody talks about noncustomers.
The backgroundTradition T6 Business Strategy
  1. 2004
    OriginW. Chan Kim and Renée Mauborgne

    Blue Ocean Strategy

  2. Tradition T6
    TraditionBusiness Strategy

    Michael E. Porter, Richard P. Rumelt, Henry Mintzberg, Clayton M. Christensen, W. Chan Kim and Renée Mauborgne

    See the tradition on the Origin page
Read more: the full background

From the article “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne in the Harvard Business Review (2004) and their book of the same name (2005).

The research2 sources: 1 case study, 1 theory · 2004–2005 · with limitations of the research
2 sources2004–2005 period1 case study1 theory
Strength of evidence
  1. weak
  2. moderate
  3. strong

A collection of successful cases selected in hindsight, without a comparison group; the figures on the 108 launches come from the authors themselves.

  1. 2004
    Case study
    W. Chan Kim and Renée Mauborgne

    “Blue Ocean Strategy” in the Harvard Business Review: more than 150 new markets in over 30 industries across roughly a hundred years; of 108 launches, 14% created new markets and accounted for 38% of revenues and 61% of profits.

  2. 2005
    Theory
    W. Chan Kim and Renée Mauborgne

    “Blue Ocean Strategy”: value innovation by eliminating, reducing, raising and creating; the focus on noncustomers.

Where the research reaches its limits
  • The examples were selected in hindsight; failed attempts to create new markets barely appear.
  • Many blue oceans quickly turn red when imitators arrive, and even a new market offers no protection against crises, as Cirque du Soleil found out in 2020.
  • That the new space remains “without competition” goes beyond the sources.
  • The principle is an aid to thinking, not a guarantee of success.
Read more: what research shows

W. Chan Kim and Renée Mauborgne of the INSEAD business school presented the principle in the Harvard Business Review in 2004, followed in 2005 by the book “Blue Ocean Strategy.” They analyzed more than 150 cases spanning around a hundred years and over 30 industries in which new markets emerged. As their unit of analysis, they chose the individual strategic move, not the company or the industry. In an analysis of 108 business launches, 14% created new markets; they accounted for 38% of revenues and 61% of profits. Their tool consists of four questions: eliminate, reduce, raise, create. Critics object that the cases were selected in hindsight, that there is no comparison group and that failed attempts barely appear.

The related principles27 Victory without Fighting · 31 Indirect Approach · 70 Positioning · 76 Disruption
Victory without FightingIndirect Approach

To go deeper, see 27 Victory without Fighting (if you create new space, you win without having to defeat your opponent) and 31 Indirect Approach (going where there is no resistance)

Positioning

70 Positioning stands in tension with this principle, since the blue ocean seeks to dissolve its choice between low cost and distinctiveness

Disruption

76 Disruption also reaches noncustomers, but starts at the lower end of an existing market

Read more: the full text

To go deeper, see 27 Victory without Fighting (if you create new space, you win without having to defeat your opponent) and 31 Indirect Approach (going where there is no resistance). 70 Positioning stands in tension with this principle, since the blue ocean seeks to dissolve its choice between low cost and distinctiveness; 76 Disruption also reaches noncustomers, but starts at the lower end of an existing market.

The action steps5 things you can actually do

  1. Write down who doesn’t use your offering, and talk to three of these people about their reasons.

  2. List the things you and your competitors invest in, and mark what means little to people.

  3. Ask the four questions: what will you eliminate, what will you reduce, what will you raise, what will you create?

  4. Cut at least one customary expense before you add anything new.

  5. Test a new offering on a small scale, and at the same time plan what you will do when others follow.

The reflection questions3 questions: Who doesn’t use your offering, and what keeps these people away?
  1. Who doesn’t use your offering, and what keeps these people away?
  2. What do you spend effort on only because everyone else does?
  3. What would you leave out if you no longer had to keep up with the others?

Take your time with one question. Write down your answer – or talk it over with someone you trust.

To finish
The picture to rememberThe animation once more, with an explanation
  1. Many small teal dots crowd in a tight circle around a mist-blue swarm and collide
  2. At the turning point, one dot drops three mist-blue splinters, turns gold and travels on an arc out into a wide, empty frame in which new gold dots light up
  3. In the final image other dots follow, and the edge of the frame grows dense again
Strategy Check

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In context

Group 9: Markets and Organizations

Guiding question: How does an organization win in the long run?

Stage 3 of 5: Choose the path

Where the 92 principles come from: eight traditions of strategy, from classical war theory to dealing with uncertainty.

More about the origin

Background: WEGVISOR’s own selection from the strategy literature · More about the origin

Examples

The principle in practice

From the different spheres of society.

Media

Ted Turner, CNN and the Blue Ocean

On June 1, 1980, CNN goes on the air in Atlanta, the first television channel to broadcast nothing but news around the clock. Ted Turner does not fight the big networks for the best evening newscast. He creates a new market: news whenever you want to watch it.

Blue Ocean
Education

The Open University and the Blue Ocean

In 1969, a British university receives its founding charter, and it has no intention of taking students away from anyone. The Open University is aimed at adults who were never able to study, and for their sake it leaves out what had defined universities until then: entry barriers and the campus as the place of learning.

Blue Ocean
Culture & Sports

Guy Laliberté, Cirque du Soleil and the Blue Ocean

In 1984, former street performers in Quebec found Cirque du Soleil. They leave out what makes the classic circus expensive and vulnerable, above all the animals, and add what until then only the theater offered: themes, stories, artistic music. The result is a new market between circus and theater.

Blue Ocean
Culture & SportsBusiness

Movie: The Greatest Showman

In Michael Gracey’s 2017 musical, P. T. Barnum first fails with an ordinary museum. He succeeds only when he shows something that has never existed in this form. When he then pushes into the market of high society, he almost loses everything.

Blue Ocean
FAQ

Questions about the Blue Ocean

What does the principle of the Blue Ocean say?

You achieve more over time if you create a new market instead of fighting in a crowded one. The way there: leave out what the industry takes for granted, and create something new that attracts noncustomers.

Where does the principle come from?

It comes from W. Chan Kim and Renée Mauborgne of the INSEAD business school. They described it in 2004 in the Harvard Business Review and in 2005 in their book “Blue Ocean Strategy.”

What are some examples?

In 1980, CNN created the market for round-the-clock news. The Open University opened up university study to adults without entry requirements. Cirque du Soleil combined circus and theater.

How well is the Blue Ocean supported by research?

Evidence: weak – a collection of successful cases selected in hindsight, without a comparison group; the figures on the 108 launches come from the authors themselves.

Your next step

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You came from: Blue Ocean.