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 competing and what makes them special. Most companies fight hard for customers in markets that are already full. But other companies create completely new markets. In these new markets, there is no strong competition. How do they do this? Kim and Mauborgne’s famous business book tells us what mindset business owners need.
What you will learn: A famous business book in a short summary.
Competition, rivalry, a shark tank… 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 is another way to succeed.
Instead, you do not try to join the crowd at all. Business thinkers Chan Kim and Renée Mauborgne explained it like this in the early 2000s: Existing markets are like red oceans. They are red and cloudy from strong competition. But blue oceans are free and open. Smart business owners are brave enough to go into these clear waters. They create completely new markets, far from the bloody “shark tanks”. But what mindset do you need for this? This summary is a short and clear introduction to the now world-famous Blue Ocean Strategy.
Blink 1 – Blue Oceans are new and untouched markets
Imagine you start a company. Your product might be good, and you might run your business well. But you will have strong competition. You can make wine, audiobooks, or sell insurance. In the end, every market has limits. In this limited space, you will compete with other companies for the same customers.
It is no surprise that a famous business show in the US is called Shark Tank. The idea of a market as a “shark tank” with tough competition is very common. Experts also like to use the image of the “red ocean”. This is a sea that has turned bloody from brutal competition. It sounds strong, but it shows the idea well.
But sometimes, there are companies that succeed without such fighting. These companies appear suddenly. They seem to easily avoid the “shark fight”. What is their secret?
Well, these companies operate in completely different waters. They do not float in the “red ocean” like everyone else. Instead, they sail from the start on new seas: in a wide and untouched blue ocean. This idea describes a market that does not really exist yet. These new companies offer products or services that have little or no demand right now. This has some risks, but also big chances to grow. If you are the first in a market with no competitors, you quickly become the main company.
The idea is clear: Red oceans have strong competition and many dangers. But in the clear water of the blue ocean, there are no “sharks” or price fights. There is endless space for new ideas. So, the Blue Ocean Strategy asks this question: Who says you must accept the limited chances in a crowded business? What if you could create your own completely open space instead? You could make your own new rules.
Blink 2 – Cirque du Soleil redefined the circus
A great example of the Blue Ocean Strategy is the Canadian entertainment company Cirque du Soleil. The company, started by Guy Laliberté, changed the basic rules of the circus business. From the start, they did not use the classic acts with a ring or animal shows. These had been key parts of the industry for many years. This saved a lot of money. It also offered a good answer to worries about animal welfare.
Instead, Cirque du Soleil combined acrobatics with theatre and live music. They had a real orchestra, storytelling, special costumes, and grand stage sets. The result was a totally new type of art, like a mix of acrobatics and acting.
This new idea became very popular. Millions of people around the world wanted to see this new type of show. So, ticket prices quickly became higher than for old circus shows. In just a few years, the company grew from a small idea to a global success. This happened in an industry that many people thought was old-fashioned.
This success story brings us back to our sea idea: Cirque du Soleil did not sink in the “red ocean” with other circuses. Instead, it sailed into the unknown waters of a “blue ocean”, full of new chances.
This example also shows that you do not always need to invent something completely new. The important thing is that your offer is very different from what your rivals offer. We will explain how to do this in the next part.
Blink 3 – Pioneers break free from old beliefs
Does the circus example seem a little too unusual? Don’t worry. The Blue Ocean Strategy can also be used in other businesses. This includes cars, airlines, makeup, and streaming. Famous examples are companies like Ford, Nintendo, Netflix, Nespresso, Yellow Tail, Southwest Airlines, and The Body Shop. They all showed how smart decisions can open up completely new markets.
In the “red oceans”, there are unwritten rules. These are rules 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 make their products better following these rules. They also try to stay alive in the tough competition.
But in a “blue ocean”, these rules do not apply. In new areas, there are no rules at first. If you are brave enough to be a pioneer in these areas, you can make your own rules. This does not mean you have to change everything completely. Netflix, for example, did not invent movies or TV shows again. Often, just changing your business model is enough to create your own market, far from the crowd. To find these changes, pioneers in the “blue ocean” use their mental freedom. This means they are free to forget all old ideas and think in new ways.
But let’s say a company is ready to take this step. They want to rethink their product or their business model. Where do they start? The authors say it is good to start with these four questions: What can we increase, eliminate, reduce, and create?
In the last section, we will explain this using real examples.
Blink 4 – Four questions to find your blue ocean
Increase, eliminate, reduce, and create. Let’s look at each one.
- Increase: What part of my business can I make much better? This is what Southwest Airlines did in the USA. Before Southwest, only business people and rich people could afford to fly with them. But then Southwest made flights inside the country so easy, fast, and cheap. Suddenly, even average families could use their service.
- Eliminate: What things can I remove completely? We saw how Cirque du Soleil stopped using animal acts. These acts were expensive and caused problems. This was a brave step. It saved a lot of money and also fit with people’s concerns about animal welfare. Also, The Body Shop in the makeup industry stopped the old rule of animal testing. By doing this, the company found new customers who cared about ethical choices.
- Reduce: In what areas can I reduce or slow down things to make processes simpler and better? A good example is the Australian wine company Yellow Tail. At first, the company focused on fancy vineyards and a very long aging process. But then the company changed. They offered less fancy, simpler wines that were easy to drink and affordable for many people. With this plan, the Australian wines became popular all over the world.
- Create: Where in my business can I add completely new things? Netflix is a good example here. People used to rent or buy movies as physical discs. But Netflix started virtual on-demand streaming. This created a totally new way to watch media. Suddenly, customers could watch movies and shows anytime, from anywhere. This was a big change that turned the whole entertainment business upside down.
When you use these four questions, you can do two good things at once. You lower your costs to make products. And you make your business very different 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. This helps you make sure your “blue ocean” does not fill up with competitors. You can stay ahead of the competition for a long time.
Conclusion
In this short summary, you have learned the main idea of the Blue Ocean Strategy. Instead of fighting for customers in crowded markets, you can sail away from your rivals. You can open up completely new chances to sell things. To do this, you must be free to rethink your product, service, or business model. Forget all the old rules for success. Start by asking what you can increase, eliminate, reduce, or create. If you are a pioneer, you will enter new markets with almost endless possibilities. You will 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 ways and tools. These can help you stay away from the “shark tanks” for a long time. But it is worth being brave, letting go of old ideas, and sailing into new waters.
Source: https://www.blinkist.com/https://www.blinkist.com/de/books/der-blaue-ozean-als-strategie-de