THEORY 75

KIM AND MAUBORGNE’S BLUE OCEAN STRATEGY

Use to escape from tired, over-crowed old markets and find a new ocean to play in.

The W. Chan Kim and Renee Mauborgne model differentiates between what they call Red and Blue Ocean Strategies (BOS). However, you should realise that it is essentially a theoretical model that describes what should be done, and it doesn’t actually tell you how to do it. That said, it still provides a valuable way of thinking about where an organisation should position itself vis-à-vis their competition.

Red Ocean Strategy and Blue Ocean Strategy

Blue Ocean Strategy is all about innovation and thinking creatively about the markets an organisation wishes to be in.

HOW TO USE IT

  • Accept that it not easy to implement a BOS. There is no step-by-step guide to follow. You need to be as creative. That said there are a few principles to guide you.
  • You or the organisation’s management team need to decide which factors:
    • are considered sacrosanct by the industry you operate in can be eliminated
    • could be reduced below the accepted norm in the industry
    • should be raised above the accepted norm in the industry
    • can be created in the industry for the first time and offered to customer
  • When considering the above questions, it’s essential that customer value drives the discussion and not how the competition are going to react. In your Blue Ocean there will be no competitors (at least initially).
  • Start by identifying potential blue oceans in which the risks are minimised. Avoid high risk areas. Moving to a Blue Ocean strategy is risky enough without additional commplications.
  • Avoid thinking about the minutia. Concentrate on the big picture.
  • Don’t spend time thinking about the existing demand. Sony built the Walkman at a time when there was no demand for such a gadget.
  • Focus on how you can build a strong business model which will ensure long-term profit.
  • Deal with organisational resistance/problems to the new strategy (see Theories 60, 65 and 89).
  • Plan the implementation of the strategy and use the new approach to motivate and inspire staff and play to their expertise.
  • Remember BOS does not rely on new technology. Opportunities exist in exploiting existing technology in new and innovative ways.
  • You don’t have to create a new industry. Ideas that already exist in the Red Ocean can often be exploited in new and innovative ways.
  • Do not allow the current success of your competitors to influence your thinking. If you get it right you will eliminate your competition by changing oceans.
  • Work up the costs and cashflows of everything in as much detail as possible.

QUESTIONS TO ASK

  • Why are there no competitors in the Blue Ocean? What does this tell you?
  • What’s the organisation’s attitude to change? Do I need to get some key stakeholders behind me before I even hint at my ideas in public?
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