Author: W. Chan Kim & Renée Mauborgne
_W. Chan Kim & Renée Mauborgne_
Reading time: 11 minutes
Synopsis
Blue Ocean Strategy (2004) changed how companies think about competition and what makes them special. Most companies try hard to get customers in markets that are already full. But other companies create new markets where there is no tough competition. How do they do it? Kim and Mauborgne’s modern business classic explains what kind of thinking business owners need for this.
What you will learn: A modern business classic in a short summary.
Competition, rivalry, shark tanks… We often think of the business world as a battlefield. Most companies try hard to get customers in markets that are already full. But there’s another way to succeed.
You don’t have to join the crowd. Business experts Chan Kim and Renée Mauborgne explained this idea in the early 2000s. They said that existing markets are like red oceans. They are red and murky from strong competition. Blue oceans, however, are free and open. Smart business owners are brave enough to enter these clear waters. They create completely new markets, far from the bloody shark tanks. But what kind of mindset do you need for this? This summary is a quick and clear introduction to the world-famous Blue-Ocean Strategy.
Blink 1 – Blue Oceans are new and untouched markets
Imagine you start a business. No matter how good your product is or how smart you manage it, you will face strong competition. You can make wine, produce audiobooks, or sell insurance. In the end, every market has limits. In this limited space, you will compete with other sellers for the same customers.
It’s no surprise that one of the most famous business shows in the US is called Shark Tank. The idea of a market as a ‘shark tank’ – a place of tough competition – is everywhere. Economists also use the image of a red ocean. This is a sea colored red with blood from brutal competition. It sounds strong, but it makes the point.
But sometimes, there are companies that succeed without such a fight. These companies appear out of nowhere. They seem to avoid the shark fight easily. What is their secret?
Well, these companies are in completely different waters. They do not swim in the red ocean with everyone else. Instead, they sail on an unknown sea from the start: in a wide and untouched blue ocean. This idea describes a market that does not really exist yet. These pioneers offer products or services that have little or no demand yet. This has some risk, but it also offers huge chances for growth. If you are the first to enter a market with no competitors, you quickly become the main player.
The idea is clear: Red oceans are full of fights and dangers. But in the clear water of the blue ocean, there are no sharks or price wars. Instead, there is endless space for creativity. So, the Blue-Ocean-Strategy asks this question: Why should you accept the limited choices of a crowded industry? What if you could create your own completely open playing field? With new rules that you make yourself?
Blink 2 – Cirque du Soleil changed the idea of a circus
A great example of the Blue-Ocean Strategy is the Canadian entertainment company Cirque du Soleil. The company, led by founder Guy Laliberté, completely changed the basic rules of the circus business. From the start, they did not use the usual circus acts like ringmasters and animal shows. These had been central to the industry for decades. This saved a lot of money. It also solved the problem of worries about animal welfare.
Instead, Cirque du Soleil mixed acrobatics with elements from theatre and live music. They had a real orchestra, storytelling, detailed costumes, and grand stage designs. The result was a completely new art form, somewhere between acrobatics and acting.
This new approach was very popular. Millions of people around the world wanted to see this new kind of show. Ticket prices quickly became higher than for traditional circus shows. In just a few years, the company grew from a small niche product to a successful global brand. This happened in an industry that people thought was old-fashioned.
This recipe for success brings us back to our sea idea: Instead of sinking in the red ocean with the rest of the circus world, Cirque du Soleil sailed into the unknown waters of a blue ocean full of new chances.
This example also shows that you don’t always have to invent something completely new. What is important is that your offer is clearly different from what your competitors offer. We will look at how to do this in the next section.
Blink 3 – Pioneers free themselves from old beliefs
Does the circus example seem a bit too unusual to you? Don’t worry. The Blue-Ocean Strategy can also be used in other industries. This includes cars, airlines, cosmetics, and streaming. Famous examples are companies like Ford, Nintendo, Netflix, Nespresso, Yellow Tail, Southwest Airlines, and The Body Shop. All of them have shown how smart changes can open up completely new markets.
In the established parts of red oceans, there are unwritten rules. These are rules that seem to have no other choice, like: “You can only buy or rent movies,” “Wine is only for rich people,” or “Flying is expensive.” Most companies in these markets follow these rules. They work hard to improve their products based on these rules. They try to stay alive in fierce competition.
But in a blue ocean, these rules do not apply. In unknown areas, there are no rules at first. And pioneers who bravely enter these areas can create their own rules. This does not mean you have to do everything completely differently than before. Netflix, for example, did not invent the movie or TV series format. Often, changes in the business model are enough to create your own market, away from the crowd. But to find these changes, the leaders in the blue ocean use their mental freedom. This is the freedom to throw away all old ideas and think completely outside the box.
But what if a company is ready to take this step? What if it’s ready to rethink its product or business model? Where do you start? The authors suggest starting with these four questions: What can we increase, eliminate, reduce, and create?
In the last section, we will explain this with clear examples.
Blink 4 – Four questions to find your way to the blue ocean
Increase, eliminate, reduce, and create. Let’s look at them one by one.
- Increase: Which part of my business can I take to a completely new level? This is what Southwest Airlines in the USA did. Before, only business travelers and rich people could afford their flights. But then Southwest made domestic flights simple, fast, and cheap. Suddenly, average families could also use the service.
- Eliminate: Which parts can I remove completely? We saw how Cirque du Soleil stopped using expensive and controversial animal acts. This was a brave step. It saved a lot of money and also fit with current ideas about animal welfare. Similarly, The Body Shop in the cosmetics industry broke with the old rule of animal testing. By doing this, the company found new customer groups who care about ethics.
- Reduce: In which areas can I cut back and simplify? This helps make processes easier and more effective. A good example is the Australian wine producer Yellow Tail. The company first focused on fine vineyards and a long aging process. But then the company changed to less prestige and elegance. They offered pleasant and affordable wines for more people. With this strategy, Australian wines became very popular exports worldwide.
- Create: Where in the value chain can I introduce completely new elements? Netflix stands out here. Instead of just lending or selling movies physically, the company started virtual on-demand streaming. This created a completely new way to consume media. Suddenly, customers could watch content anytime and anywhere. This was a revolution that changed the entire entertainment industry.
Ideally, these four questions help you do two things at once: You lower your production costs and you stand out from your competitors. This is the secret to success in the blue ocean. Keep asking yourselves these four questions. Regularly check what you can increase, eliminate, reduce, or create new. This will help you make sure the blue ocean doesn’t fill with competitors. You can then stay ahead of the competition for a long time.
Conclusion
In this quick summary, you have learned the main idea of the Blue-Ocean Strategy. Instead of fighting for demand in crowded markets, you can sail away from competitors. You can open up completely new sales chances. To do this, you free yourself to rethink your product, service, or business model completely. You throw away all supposed rules for success. Start by asking which aspects or areas you can increase, eliminate, reduce, or create completely new. Ideally, as a pioneer, you enter new markets with almost endless potential. You lower your costs and clearly stand out from your competitors.
Of course, this summary is only a first look. The Blue-Ocean Strategy offers many more methods and tools to keep sailing beyond the shark tanks. But it is worth being brave and letting go of all old beliefs. It’s worth sailing into new waters.
Source: https://www.blinkist.com/https://www.blinkist.com/de/books/der-blaue-ozean-als-strategie-de