Blue Ocean Strategy #1

Creating Blue Oceans Strategy

Red Oceans represent all the industries in existence today. It’s a Known market space;

Whereas Blue Oceans denote all the industries Not in existence today. This is the Unknown market space.

Although the term blue oceans is new, their existence is Not.

Value Innovation: The Cornerstone of Blue Ocean Strategy

The companies caught in the Red Oceans followed conventional approach, racing to beat the competition by building a defensible position within existing industry order. The creators of Blue Oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space. Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for.

In this sense, value innovation is more than innovation. It is about strategy that embraces the entire system of a company’s activities. Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves.

Red Oceans Vs Blue Oceans

Red Ocean Strategy

  • 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.

Blue Ocean Strategy

  • 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.

Source : Blue Ocean Strategy by W. Chan Kim, Renee Mauborgne

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Posted on September 4, 2011, in Blue Ocean Strategy. Bookmark the permalink. Leave a comment.

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