How to Create new Market Boundaries – Blue Ocean Strategy

Phil Neil

In today’s hyper-competitive business landscape, companies often find themselves trapped in what Chan Kim and Renee Mauborgne call the “red ocean of rivals fighting” for shrinking profits. The Blue Ocean Strategy, one of the most iconic and impactful strategy books ever written, presents a revolutionary new strategy to break free from this destructive cycle. This business strategy framework, developed through years of Harvard Business Review’s research, shows how organizations can create your blue ocean of uncontested market space.

The Fundamental Shift From Red Ocean to Blue Ocean Thinking

The concept of blue ocean strategy is based on a fundamental distinction between two types of markets. The “red ocean” represents all existing industries where companies compete head-to-head in known market space. In contrast, blue oceans of new market space represent untapped potential where competition is irrelevant.

As highlighted in Harvard Business Review’s publication, this strategy offers a systematic approach to shift from red ocean competition to blue oceans within your industry. The authors argue that traditional competition results in nothingbut a bloody red ocean where rivals fight over the same customers.

The Four Actions Framework: Tools to Reconstruct Market Boundaries

Blue Ocean Strategy offers systematic tools and frameworks to shift your perspective. The Four Actions Framework provides specific frameworks to shift from red ocean thinking to blue ocean creation:

Eliminate: Which factors that the industry takes for granted should be eliminated?
Reduce: Which factors should be reduced well below industry standards?
Raise: Which factors should be raised well above industry standards?
Create: Which factors should be created that the industry has never offered?

This blue ocean approach helps companies systematically question industry assumptions and reconstruct market boundaries. The strategy canvas is another powerful tool that visually maps your competitive position against industry factors.

Six Paths Framework: Finding Your Blue Ocean Opportunity

Renee Mauborgne and Chan Kim outline six alternative paths to reconstruct market boundaries and make competition irrelevant:

1. Look Across Alternative Industries

Consider how other industries solve similar problems. For example, Netflix looked at video rental stores and created a new blue ocean with its subscription model.

2. Look Across Strategic Groups

Examine different strategic groups within your industry. Southwest Airlines created a blue ocean idea by combining aspects of driving and flying.

3. Look Across the Chain of Buyers

Focus on different buyer groups. Bloomberg Terminal revolutionized financial data by targeting traders rather than IT departments.

4. Look Across Complementary Offerings

Consider the broader context of your product’s use. Nintendo Wii created blue ocean opportunities by focusing on family entertainment rather than hardcore gaming.

5. Look Across Functional or Emotional Appeal

Shift from functional to emotional appeal or vice versa. Starbucks transformed coffee from commodity to experience.

6. Look Across Time

Anticipate future trends. Tesla saw the ocean of competition to blue before traditional automakers did.

Examples of Blue Ocean Strategy in Action

Some of the most compelling examples of blue ocean strategy demonstrate how companies have created blue oceans in various industries:

Cirque du Soleil: Combined circus and theater to create a new entertainment category
Uber: Created a creating new market by solving urban transportation problems
Apple iTunes: Solved music piracy while creating a legal distribution platform

These examples of blue ocean strategy show how companies can find unknown market space by applying Blue Ocean principles.

The Systematic Process of Blue Ocean Strategy Formulation

Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost. As the authors state, “blue ocean strategy is the simultaneous pursuit of differentiation and low cost.” This strategy is the simultaneous pursuit breaks the value-cost tradeoff.

The process involves:

Identifying the key factors your industry competes on
Determining which factors to eliminate, reduce, raise or create
Developing a new value curve through the strategy canvas
Testing your concept with potential customers

This strategy formulation process helps companies systematically identify and capture blue ocean opportunities.

Why Blue Ocean Strategy Works: Making Competition Irrelevant

The power of this business strategy lies in its approach to making the competition irrelevant. Instead of fighting over existing demand, companies create new demand in creating and capturing blue oceans.

As Renee Mauborgne explains, “The blue ocean strategy argues that to win in the future, companies must stop competing with each other.” This marketing strategy focuses on value innovation rather than competitive benchmarking.

Implementing Blue Ocean Strategy in Your Organization

To successfully implement this new strategy, companies need to:

Overcome organizational hurdles through tipping point leadership
Build execution into strategy from the start
Align value, profit and people propositions
Use the right strategy tools at each stage

The blue ocean strategy offers systematic methodology for companies to break out of the red ocean of competition and discover new growth opportunities.

Conclusion: Creating Your Blue Ocean

Blue Ocean Strategy, selected blue ocean strategy as one of the most impactful strategy books ever written, provides a comprehensive framework for creating new marketspace. The ocean strategy offers systematic tools to help businesses:

Identify uncontested market space
Develop innovative value propositions
Make competition irrelevant
Capture new demand

As chan kim and renee mauborgne demonstrate through numerous case studies, this strategy offers a comprehensive approach to sustainable business growth. By applying these principles, companies can successfully shift from red ocean competition to discover their own new blue ocean of opportunity.

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