Blue Ocean Strategy Summarizing Chapters 1-3
Chapter 1 introduces the concept of creating a Blue Ocean, the new market space. It describes Red ocean and Blue ocean markets, those that exist in known market space and those that do not respectively. Citing examples of successful companies like Cirque du Soleil, the authors determine the path to success is to begin by not competing.
Most blue oceans are created from within the red oceans to expand existing boundaries. Although seen as too risky to be pursued, the book focuses on the practical frameworks and analytics to creating of a blue ocean.
Significant observations point out that analyzing the strategic move explains the creation of blue oceans. Patterns which create blue oceans and achieve high performance are the set of managerial actions and decisions involved in making a major market-creating business offering is referred to as the strategic move.
The strategic logic called value innovation focuses on making competition irrelevant and by creating a major favorable decision in value for buyers and the company. Aligning innovation with utility, price and cost positions new and uncontested market space is opened for creating blue ocean. Hence the focus is on a simple mantra of driving costs down and simultaneously driving value up for buyers.
Coming forth to build an innovation strategy that envelops an entire blue ocean and a re-constructionist view which widens market boundaries and industry structure and reconstructs the values in an industry. The idea is to make market boundaries focus on the big picture not values and to reach beyond the existing demand. Effective blue ocean strategy should lead to risk minimization and for that the strategy canvas offers a diagnostic and an action framework for building a compelling blue ocean strategy.
A fundamental change in an industry should begin by moving the strategic focus from competitors to innovative alternatives, and from customers to non-customers. For a new value curve, the four action framework offers guidelines to create blue ocean by eliminating the factors of industry that are taken for granted, reduction below industry’s standard, raised above industry standard and to create/offer innovative service. Hence pushing the companies to act on all four and create a new value curve by pursuing differentiation and lower costs. Being understood by managers it helps create a high level of engagement in its application and as completing the grid becomes a challenge, every factor is scrutinized and the company realizes it struggle for competition, leading them on a path of discovery to creating a blue ocean. As the authors cite examples the three complimentary qualities to the value curve for a blue ocean strategy are focus, divergence and a driven tagline. These qualities fulfill the strategy of a blue ocean company making it approachable, differentiated and affordable for both the user and company itself. The company is now on the right track with opportunity maximizing and risk minimizing path to creating a blue ocean.
To conclude the main principle of blue ocean strategy is to reconstruct the market boundaries and break from competition and with an innovation strategy develop value innovation.