By Jonathan 2 Comments

Book Review: Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne

Blue Ocean Strategy
Blue Ocean Strategy

A couple of week ago an acquaintance of mine recommended that I read a book called Blue Ocean Strategy. Now typically what happens when someone gives me an unsolicited recommendation like that is that I file it away in the “later” pile and often never get around to it.

As it happens though I really trust this person’s opinion, and the fact that he made a special point of recommending it to me gave me the extra motivation needed to go out and purchase the book.

And boy am I glad I did.

Blue Ocean Strategy is a business book, and as such it is truly excellent, but the principles it is based on can actually apply to many aspects of life.

What is blue ocean strategy?

To explain blue ocean strategy one first needs to understand what it’s opposite is. If you guessed it is red ocean strategy, you’re right.

Red ocean strategy describes the standard method of doing business, in which everyone is battling for the same piece of the pie. Every company is a shark in direct competition with other sharks, scrambling for every scrap of food, or market share, creating a blood bath in the process, hence, the red ocean.

With this strategy, everyone is fighting for an ever smaller piece of the pie, and only the strongest, and luckiest survive. There is little room for new entrants to use this strategy, no matter how compelling their product or service might be.

An extreme example of a red ocean strategy is the Linux operating system. Several times over, companies, some of them very large and powerful (Corel) have attempted to market Linux as a desktop PC operating system, in direct competition with Microsoft Windows. Every time they have failed to have any noticeable success.

Why?

Because Windows is firmly entrenched in the market, and Linux is not significantly different enough from Windows for people to see a benefit. Linux is seen, and rightly so, as being kind of like Windows, but less compatible and harder to use. To geeks who enjoy a challenge, Linux is appealing. No one else even knows what it is.

Linux has not seen success because it has entered an already saturated market, without being different enough to be compelling.

A blue ocean strategy is the exact opposite. Blue ocean is about created a market for something that did not exist before, and marketing it in a space free from competition.

Starbucks in it’s early days employed a blue ocean strategy. Prior the arrival of Starbucks there was no market in North America for high-priced, premium coffee. Canadian’s had Tim Horton’s and American’s had Dunkin’ Donuts. Starbucks created a market that did not previously exist, and enjoyed years relatively free of competition. This was the key to their success.

So what is the book all about?

Blue Ocean Strategy is not simply a collection of case studies, although there are plenty.It is also a comprehensive how to guide. Here is the chapter outline.

  1. Creating Blue Oceans
  2. Analytical Tools and Frameworks
  3. Reconstruct Market Boundaries
  4. Focus on the Big Picture, Not the Numbers
  5. Reach Beyond Existing Demand
  6. Get the Strategic Sequence Right
  7. Overcome Key Organizational Hurdles
  8. Build Execution into Strategy
  9. Conclusion: The Sustainability and Renewal of Blue Ocean Strategy

Each chapter is extremely in-depth and contains real actions steps to take, and includes a wealth of flow charts and graphs which are not only helpful, but easy to understand. Case studies are interwoven into the text, so you never find yourself bored or overwhelmed by the details.

If you’re imagining that the book is one of those long-winded space fillers and that blue ocean strategy could be summed up as “think of and original idea, don’t copy what’s been done”, you;d be wrong. That is only one small part.

Blue Ocean Strategy also suggest radical rethinking of the way companies are structures, they way they are run, how relationships are handled. It takes everything you think you know and turns it on it’s head.

Eliminate-Reduce-Raise-Create Grid:

Perhaps one of the most interesting innovations in the book is the eliminate-reduce-raise-create grid. The name might be a mouthful, but the chart itself is very simple, and very helpful.

The purpose is to visualize what will be required to re-invent something existing so that it can then be marketed to an entirely new market.

It looks like this:

EliminateRaise
ReduceCreate

Doesn’t seem like much, but it’s actually and extremely useful tool. Consider the following example, using Starbucks again as an example.

Eliminate

  • fast food atmosphere
  • in-house food production
Raise

  • perceived quality
  • prices
  • coffee choices
  • quality of service
Reduce

  • labour costs (required by in-house production of food)
Create

  • a comfortable, “third place” environment
  • cozy atmosphere
  • a destination
  • prestige product

The blue ocean is all around us, but you can’t escape the red ocean.

I think one of the most valuable concepts in the book is the idea that you do not have to have an original idea to employ blue ocean strategy and find success, only original execution. This removes a huge emotional hurdle for many of us who aren’t exactly Thomas Edison.

Cirque du Soleil did not invent the circus, it reinvented the circus. It took the entire concept of what a circus was, turned it on it’s head and not only revived a dead industry, it became the industry.

Subway introduced the concept of fast food that was made fresh and healthy. A huge segment of Subway’s customer base does not regularly eat at other fast food restaurants.

The other thing I appreciated about the book is that it did not become so hung up on its concept that it ignored the obvious: the red ocean is here to stay too. Every company that starts out in a blue ocean eventually finds itself competing with the sharks. That’s the reality of success. But if you get a head start, and have the opportunity to sail smoothly through calm waters, they probably won’t be able to catch you.

Overall I cannot recommend this book highly enough. If you are running, or are planning to start your own business it is invaluable, but every strategy that can be applied to business can also be applied to life, and personal development.

If you are alive and ticking, you should read this book.

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Reply to Kenneth

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2 Comments:

  • Kenneth says:

    Linux is not different enough from Windows?! What are you talking about? You can’t even compare them. Linux-based OS is in EVERY WAY different from Windows. Do some research on the open-source model, and what Linux is all about and you’ll see. You are good at explaining red and blue ocean markets, but when dealing with different OS’s you are rock bottom.

    • Jonathan says:

      To your average non-technophile consumer, no, Linux is not any different than Windows. Just more complicated, less refined (which is saying something since Windows is not very refined to begin with), and more confusing. And that’s assuming they even know what it is in the first place.

      Obviously on a technical level Linux is a very different beast than Windows, but that’s entirely irrelevant.

      You’re good at, er, something I suppose, but as far as reading comprehension goes, you are rock bottom.