Book review The Blue Ocean Strategy Learnings

-Siddhi Patel TY I-144

A market universe composed of two sorts of oceans: red oceans and blue oceans. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all the industries not in existence today. This is the unknown market space. In the red oceans, industry boundaries are dened and accepted, and the competitive rules of the game are known. Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for prots and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody. Blue oceans, in contrast, are dened by untapped market space, demand creation, and the opportunity for highly protable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries, as Cirque du Soleil did. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. With supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufcient to sustain high performance. Companies need to go beyond competing. To seize new prot and growth opportunities, they also need to create blue oceans. . A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering Part of the explanation for this is that corporate strategy is heavily inuenced by its roots in military strategy. The very language of strategy is deeply imbued with military referenceschief executive ofcers in headquarters, troops on the front lines. Described this way, strategy is about confronting an opponent and ghting over a given piece of land that is both limited and constant. Unlike war, however, the history of industry shows us that the market universe has never been constant; rather, blue oceans have continuously been created overtime. To focus on the red ocean is therefore to accept the key constraining factors of warlimited terrain and the need to beat an enemy to succeed and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested. The creators of blue oceans, surprisingly, didnt use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value in- novation 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
1|Page

tends to focus on value creation on an incremental scale, something that improves value but is not sufcient to make you stand out in the marketplace.18 Innovation with- out value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for.19 In this sense, it is important to distinguish between value innovation as opposed to technology innovation and market pioneering.

Positives
The authors provide some useful conceptual frameworks for exploring blue ocean strategy in the context of any business, including, nonprofits. I particularly like the notion of a strategy canvas where you can plot a value curve for your organization and your competitors. For Blue Ocean strategy, you must radically alter the existing value curve by creating new points on the curve, as well as raising, reducing, or completely eliminating others. I also like this book because it shares attention between both strategy and execution. There is an entire chapter on overcoming organizational hurdles to executing blue ocean strategy. The authors describe tipping point leadership that uses small numbers of people and resources to overcome organizational barriers to implementing blue ocean strategic moves. They also stress the importance of including all parts of an organization in the development and execution of strategy for it to succeed. Ultimately, they point to the value of an organizational culture based in trust, commitment, and voluntary cooperation. This is not a generic book about strategic planning. Blue ocean strategic moves are designed specifically for high-growth ventures, and the authors admit that not all strategic moves must be toward blue oceansthere is plenty of money to be made in red oceans. But organizations looking for significant growth, even within a particular division, can glean several valuable and applicable lessons in this book.

Negatives
There are very few success stories of companies that applied their theories. The authors present many examples of successful innovations, and then explain from their Blue Ocean perspective essentially interpreting success through their lenses. There is no way to know how many companies exploiting a blue ocean strategy concept failed. The examples in the book are selected to "tell a winning story". A whole chapter of the book explaining what the authors call "Tipping Point Leadership" is based on a conclusion that the drop in crime in New York city was caused by a change in policies, actions, and leadership. However, according to the book Freakonomics, crime rates dropped due to an increase in abortion rates several years earlier. Crime rates fell simultaneously in cities other than New York that had not applied what the authors call Tipping Point Leadership
2|Page