The key ideas

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

W. Chan Kim, Renée Mauborgne, 2005

Why do some companies spend years fighting over the same customers, while others create a market where there are simply no rivals? W. Chan Kim and Renée Mauborgne studied 150 strategic moves across more than a hundred years and found a common logic in them. You'll learn how to cut what isn't needed, find buyers among the people who never come to you, and carry out change in a way people believe in.

Who it is for

For anyone tired of the race of price cuts and promotions in a crowded market. For entrepreneurs, managers and anyone curious about where new markets come from.

The only way to beat the competition is to stop trying to beat the competition.

The circus that shouldn't have survived

Canada, the early eighties. The circus as an industry is slowly dying: children are drifting off to television and video games, audiences are shrinking, and keeping animals and star performers keeps getting more expensive. Any sensible adviser would have said that opening a new circus at a time like this made no sense. But in 1984 a group of street performers, Guy Laliberté among them, founds Cirque du Soleil. In less than twenty years it will reach revenues that the world's largest circus, Ringling Bros., took more than a hundred years to reach.

How is that possible in a market that is shrinking? The question occupied two professors at INSEAD business school, W. Chan Kim and Renée Mauborgne. For more than fifteen years they studied 150 strategic moves in more than thirty industries over more than a hundred years. The book that grew out of this came out in 2005 and sold millions of copies.

The authors' answer sounds almost defiant. Most companies fight in a market where the boundaries were drawn long ago, the rules are known and everyone battles for the same customers. The authors call such a market a red ocean. Those who won big did something else. They didn't try to outrun their rivals. They went where there were no rivals yet, into a blue ocean. There, demand isn't taken from one another. It's created.

This book isn't about inspiration, it's about tools. You'll see how to fit a whole industry on one sheet of paper, which four questions to ask about your product and where to look for buyers nobody has noticed yet. And at the end you'll learn why even a brilliant strategy fails if people don't believe in it.

Why the water turns red

Picture a street with five similar coffee shops in a row. Each one cuts prices, throws in a free cookie with the coffee and launches a new promotion. That doesn't bring more customers to the street. They just move from one door to the next, and profits melt away for all five.

Kim and Mauborgne describe such a market as a red ocean, where the water is red with blood: everyone is fighting over the same catch. The boundaries of the industry are taken as given, and everyone knows the rules of the game. To grow, you have to take share from a rival. The more crowded the market gets, the more the products look alike, until in the end people tell them apart only by price.

A blue ocean works the other way round. It's a space that isn't yet on the map of industries. Demand there isn't divided but created, and competition doesn't matter, because nobody has written the rules yet. The authors stress that blue oceans appear all the time. A hundred years ago there were hardly any cars, recorded music or aviation, and today these are huge industries.

The problem, as the authors see it, lies in what managers are taught. Almost all strategy theory explains how to fight in red water: how to study rivals and take share from them. How to get out of that water is explained far less often. The book was written to fill that gap.

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About the author

W. Chan Kim and Renée Mauborgne are professors of strategy at INSEAD business school. Their book has sold more than three and a half million copies.

All books by this author: W. Chan Kim, Renée Mauborgne

Terms from the book

  • Ford
  • strategic move
  • INSEAD
  • Laliberté: Guy Laliberté, a Canadian entrepreneur and former street performer, one of the founders of Cirque du Soleil and its long-time head.
  • Cirque du Soleil: A Canadian circus company founded in 1984 in Quebec. It brought circus together with theatre, music and dance.
  • Ringling: Ringling Bros. and Barnum & Bailey, the oldest and for a long time the largest circus in the United States, with animal acts and star performers.
  • Red ocean: An image from the book, not a scientific term: an existing market with known boundaries and rules, where companies fight over the same customers.
  • Blue ocean: An image from the book: a new market space where demand is created rather than divided, and where there is no competition yet.
  • Value innovation: The authors' concept: lowering costs and raising value for the buyer at the same time, which breaks the usual choice between expensive and cheap.
  • Strategy canvas: The authors' tool: a chart that lists along the horizontal axis what an industry competes on, and marks along the vertical axis how much of it each player offers.
  • Value curve: A company's line on the strategy canvas. It shows what the company invests in and what it gives the buyer.
  • Casella: Casella Wines, a family winery from Australia that launched Yellow Tail wine in 2001.
  • Four actions: The authors' tool of four questions: what to eliminate, what to reduce, what to raise and what to create.
  • Yellow Tail: An Australian wine brand from the Casella winery that became the best-selling imported wine in the United States.
  • Six paths: The authors' framework: six ways to look past the usual boundaries of an industry in search of a new market.
  • NetJets: An American company that since the 1980s has sold fractional ownership of business jets.
  • Curves: An American chain of small women's fitness clubs with a short circuit workout.
  • QB House: A Japanese chain of barber shops founded in 1996 in Tokyo. It gives a haircut in about ten minutes.
  • Noncustomer: The authors' concept: a person who doesn't buy from the industry yet. The authors divide noncustomers into three tiers by their distance from the market.
  • Pret A Manger: A British café chain founded in 1986 in London. It sells fresh sandwiches made the same day.
  • JCDecaux: A French outdoor advertising company that installs and maintains bus shelters and other street furniture in cities.
  • Philips: A Dutch electronics company founded in 1891.
  • CD-i: A multimedia compact disc player from Philips in the early 1990s that never found wide demand.
  • Bratton: William Bratton, an American police chief. He headed the New York City Transit Police, then the police of the whole city from 1994 to 1996.
  • Tipping point leadership: The authors' concept: a way of carrying out change by putting effort into the few actions that influence people most.
  • Elco: A company whose two plants the authors use to show the importance of fair process.
  • Fair process: The authors' concept: a decision is made so that people are engaged, get an explanation and clearly understand what is expected of them.

All terms

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