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Executive Interviews: Interview with W Chan Kim & Renee Mauborgne on Blue Ocean Strategy
December 2008
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By Dr. Nagendra V Chowdary
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What do you mean by Blue Ocean
Strategy? What are its defining
characteristics?
Blue ocean strategy is about creating
and capturing uncontested market
space, thereby making the
competition irrelevant. In more
specific terms blue ocean strategy is
about a whole system alignment of
the value proposition (utility minus
price) by creating an offer that
dramatically raises buyer utility at the
right price for the mass of the market;
profit proposition (price minus cost)
by creating a leap in value for the
company itself by making a tidy
profit; and people proposition by practicing fair process and building
execution into strategy formulation.
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In short, blue ocean strategy is about
creating exceptional value for the
buyer and compelling profit for the
firm, executed in amotivating fashion
for people around it. As far as
defining characteristics, a blue ocean
strategy must have three key
components in order to implement
and communicate your strategic
move the strategy must be focused,
diverge from the competitions
strategic profile, and have a
compelling tagline that speaks to the
market. -
Can you share with our readers a
few examples of how the firms in
your study created a BOS? Were
there any specific pattern that you
noticed in all such firms (for
instance, the nature and intensity of
competition in their respective
industries, the nature of their
industry life cycle (introduction,
growing, getting plateaued,
declining, etc.), the sophistication of
the markets, the level of economic
development of their country of
origin, etc.?
In our two decades of research we
found that there is no pattern of
perpetually excellent firms,
industries, or correct level of a
markets maturity. History shows
that companies, industries, and
markets are constantly being created
and expanded over time and that
conditions and boundaries are not
given; only individual actors can
shape them. Therefore, we believe
that the strategic move is the right
unit of analysis for explaining the
creation of blue oceans and the root of
profitable growth. By strategic move,
wemean the set ofmanagerial actions
and decisions involved in making a
major market creating business
offering. The strategic moves we
discuss in our book moves that
have delivered products and services
that opened and captured new market space, with a significant leap
in demand contain great stories of
profitable growth. -
What distinguishes red oceans
from blue oceans?
Red ocean, or competition based
strategy, assumes that an industrys
structural conditions are given and
that firms are forced to compete
within them, an assumption based
on what academics call the
structuralist view, or environmental
determinism. To sustain themselves
in the marketplace, practitioners of
red ocean strategy focus on building
advantages over the competition,
usually by assessing what
competitors do and striving to do it
better. Grabbing a bigger share of the
market is seen as a zero sum game in
which one companys gain is
achieved at another companys loss.
Hence, competition, the supply side
of the equation, becomes the defining
variable of strategy. Here, cost and
value are seen as trade offs and a firm
chooses a distinctive cost or
differentiation position. Because the
total profit level of the industry is also
determined exogenously by
structural factors, firms principally
seek to capture and redistribute
wealth instead of creating wealth.
They focus on dividing up the red
ocean, where growth is increasingly
limited. Blue ocean strategy, on the other
hand, is based on the view that
market boundaries and industry
structure are not given and can be
reconstructed by the actions and
beliefs of industry players. This is
what we call a reconstructionist view.
Recognizing that structure andmarket
boundaries exist only in managers
minds, practitioners who hold this
view do not let existing market
structures limit their thinking. To
them, extra demand is out there,
largely untapped. The crux of the
problem is how to create it. This, in
turn, requires a shift of attention from
supply to demand, from a focus on
competing to a focus on value
innovation that is, the creation of
innovative value to unlock new
demand. This is achieved via the
simultaneous pursuit of
differentiation and low cost.
1.
Business Strategy Case Studies
2. ICMR
Case Collection
3.
Case Study Volumes
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