Book Review - Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne
It seems like most businesses these days try to compete by "doing more" than the other guy. Either sell for lower cost, or have more features, etc., etc., etc... This leads to the "red ocean", a playing field marked by bloody battles and ever-decreasing returns. But W. Chan Kim and Renee Mauborgne propose that a business should adopt Blue Ocean Strategy, a way to redefine the playing field and stake out an area all to yourself.
Part 1 - Blue Ocean Strategy: Creating Blue Oceans; Analytical Tools and Frameworks
Part 2 - Formulating Blue Ocean Strategy: Reconstruct Market Boundaries; Focus on the Big Picture, Not the Numbers; Reach Beyond Existing Demand; Get the Strategic Sequence Right
Part 3 - Executing Blue Ocean Strategy: Overcome Key Organizational Hurdles; Build Execution into Strategy; Conclusion - The Sustainability and Renewal of Blue Ocean Strategy
Appendix A - A Sketch of the Historical Pattern of Blue Ocean Creation, Appendix B - Value Innovation - A Reconstructionist View of Strategy, Appendix C - The Market Dynamics of Value Innovation; Notes; Bibliography; Index; About the Authors
The authors spent time studying companies that redefined markets to figure out what they did to create a "blue ocean" market for themselves. Companies such as Cirque du Soleil, who decided that another "circus" had nothing to offer. But by redefining the term, eliminating high-cost elements like animals, and enhancing the theatrical experience, they were able to pull in a far different audience at a much higher premium. Better yet, there was no other competition in that area. Such is the goal of a blue ocean market. Another example is Southwest Air. Rather than comparing themselves to the cost and value structure of other airlines, they measured themselves against the transportation alternative of driving. In order to compete on that basis, they had to minimize things traditionally valued by the carriers (meals, lounges, large planes) and maximize things sought by drivers (lower cost, frequent flights, direct destinations). By doing so, they were able to separate themselves from the rest of the industry into an area that has delivered profits far in excess of other carriers.
The documentation in the book on the steps and processes involved in systematically designing a blue ocean market is presented well. It's not all luck and chance, and following these processes would greatly enhance the chance of making that next big leap. As in most books of this type, I think there's a tendency to examine things in hindsight, making bad decisions far more obvious now than they were then. You could follow every step put forth here, and there's still no guarantee that it all works out right. I was also surprised at how few companies make more than one blue ocean market in their existence. Once others move into that area, it seems like innovation then becomes very incremental. It's as if they become invested in their new status quo, and are unable to let go to move to a new area. There are exceptions (think Apple's Mac and also their iPod), but it seems pretty rare.
This is one of those books that most company leaders should read in order to figure out if their offerings are only meant to create more blood in the water, or whether they have the skills to swim away from everyone else in order to make their own blue ocean markets.
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