Strategy & LeadershipW. Chan Kim and Renée Mauborgne dispel blue ocean mythsRobert M. Randall

Article information:To cite this document:Robert M. Randall , (2015),"W. Chan Kim and Renée Mauborgne dispel blue ocean myths", Strategy & Leadership, Vol. 43Iss 2 pp. 11 - 14Permanent link to this document:http://dx.doi.org/10.1108/SL-01-2015-0007

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Users who downloaded this article also downloaded:W. Chan Kim, Renée Mauborgne, (2005),"Value innovation: a leap into the blue ocean", Journal of Business Strategy, Vol.26 Iss 4 pp. 22-28 http://dx.doi.org/10.1108/02756660510608521Norman T. Sheehan, Ganesh Vaidyanathan, (2009),"Using a value creation compass to discover “Blue Oceans”", Strategy& Leadership, Vol. 37 Iss 2 pp. 13-20 http://dx.doi.org/10.1108/10878570910941172Svend Hollensen, (2013),"The Blue Ocean that disappeared – the case of Nintendo Wii", Journal of Business Strategy, Vol.34 Iss 5 pp. 25-35 http://dx.doi.org/10.1108/JBS-02-2013-0012

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Interview

W. Chan Kim and Renée Mauborgnedispel blue ocean myths

Robert M. Randall

W. Chan Kim and Renée Mauborgne are professors of strategy at INSEAD andco-directors of the INSEAD Blue Ocean Strategy Institute. They have produced asecond edition of their best-selling book, Blue Ocean Strategy: How to Create

Uncontested Market Space and Make Competition Irrelevant (Harvard Business ReviewPress, 2015), with three new chapters and a new introduction.

The original version of the book, published in 2005, introduced and defined the theoryand practice of blue ocean strategy – a unique methodology for creating commerciallyrelevant new market space – which it supported with frameworks and analytic tools.Almost immediately the concepts of “blue ocean” and “red ocean” strategies werebeing tossed around in management meetings in companies across the globe.[1]However, managers’ mental models, which are based on their backgrounds andpre-existing knowledge, sometimes led them to confuse blue ocean strategy withdisruption theory, niche marketing, customer-focused innovation and other pioneeringpractices. To get the most out of the blue ocean strategy methodologies and tools, anaccurate understanding on the underpinning concepts that guide their proper

application is essential. For guidance, Robert M. Randall, Editorof Strategy & Leadership, asked Chan Kim and RenéeMauborgne to differentiate blue ocean strategy from variousother approaches to strategic marketing and innovation.

Strategy & Leadership: Does implementing a blue oceanstrategy start by focusing on the unserved needs of currentcustomers?

Chan Kim and Renée Mauborgne: A blue ocean strategist gainsinsights about reconstructing market boundaries not by looking atexisting customers, but by exploring noncustomers. Whenorganizations mistakenly assume that blue ocean strategy is aboutbeing customer led, they reflexively focus on what they’ve alwaysfocused on: existing customers and how to make them happier.While such a perspective may shed insight on ways to improvevalue for current industry customers, it is not the path to createnew demand. To create new demand, an organization needs toturn its focus to noncustomers and why they refuse to patronize anindustry. Noncustomers, not customers, hold the greatest insightinto an industry’s pain points and points of intimidation that limit thesize and boundary of the industry.Renée Mauborgne and W. Chan Kim

DOI 10.1108/SL-01-2015-0007 VOL. 43 NO. 2 2015, pp. 11-14, © Emerald Group Publishing Limited, ISSN 1087-8572 STRATEGY & LEADERSHIP PAGE 11

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S&L: To create blue oceans, must a company venture beyond its core business?

Kim and Mauborgne: There is a common misperception that to create a blue ocean andbreak out of the red, organizations must venture into industries outside their core, whichunderstandably appears to multiply risk. And a select few do. Virgin is a classic example,and Apple in recent years metamorphosed from a computer maker to a consumerelectronics and media giant. These, however, are exceptions, not the rule. Blue oceans canjust as easily and more readily be created smack in the middle of an organization’s existingcore businesses.

This challenges the view that new markets are in distant waters. Blue oceans are right nextto you in every industry. When companies mistakenly believe that they must venturebeyond their core business to create blue oceans, they tend to either shy away fromventuring beyond the red ocean or, to the contrary, look far afield to other industries thathave little overlap with their knowledge, skills and competencies.

S&L: Is there a general misconception that blue ocean strategy is primarily about adoptingnew technologies?

Kim and Mauborgne: A blue ocean strategic move is not always about technologyinnovation. Even where technology is heavily involved, as with Salesforce.com, Intuit’sQuicken, or Apple’s iPhone, the reason buyers love these blue ocean offerings isn’tbecause they involve bleeding-edge technology, but because these offerings make thetechnology essentially disappear from buyers’ minds. The products and services are sosimple, easy to use, fun and productive. So technology is not a defining feature. Youcan create blue oceans with or without it. However, where technology is involved, it’skey that you link it to value. Ask: how does your product or service offer a leap inproductivity, simplicity, ease of use, convenience, fun or environmental friendliness?Value innovation, not technology innovation, is what opens up commercially compellingnew markets.

S&L: To successfully create a sustainable blue ocean, must a company be first to market?

Kim and Mauborgne: Blue ocean strategy is about being first to get the customer offeringright by linking innovation to value. Organizations that mistakenly assume blue oceanstrategy is about being first to market all too often get their priorities wrong. Theyinadvertently put speed before value. To avoid this trap, companies need to continuouslydrive home the idea that while speed is important, even more important is linking innovationto value.

S&L: Are blue ocean strategy and differentiation strategy synonymous?

Kim and Mauborgne: Under traditional competitive strategy, differentiation is achieved byproviding premium value at a higher cost to the company and at a higher price forcustomers. Differentiation is a strategic choice that reflects the value-cost trade-off in agiven market structure. Blue ocean strategy, by contrast, requires breaking the value-costtrade off to open up new market space. It is about pursuing differentiation and low costsimultaneously.

Blue ocean strategy is an “and-and,” not an either-or, strategy. When companiesmistakenly assume that blue ocean strategy is synonymous with differentiation, they all too

‘‘A blue ocean strategist gains insights about reconstructingmarket Boundaries not by looking at existing customers, butby exploring noncustomers.’’

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often miss the “and-and” of blue ocean strategy. Instead they tend to focus on what to raiseand create to stand apart and pay scant heed to what they can eliminate andreduce tosimultaneously achieve low cost.

S&L: Is a blue ocean strategy just a version of a low-cost, low-pricing strategy?

Kim and Mauborgne: Effective blue ocean strategy pursues both differentiation and lowcost simultaneously by reconstructing market boundaries. Instead of focusing on low cost,it seeks to create a leap in buyer value at a lower cost. Further, a blue ocean strategic movecaptures the mass of target buyers not through low-cost pricing, but through strategicpricing. The key here is not to pursue pricing against the competition within an industry butto pursue pricing against substitutes and alternatives that are currently capturing thenoncustomers of your industry.

S&L: What’s the significant difference between blue ocean strategy and an innovationinitiative?

Kim and Mauborgne: Blue ocean strategy is not synonymous with innovation. Unlike blueocean strategy, innovation is a very broad concept that is based on an original and usefulidea regardless of whether that idea is linked to a leap in value that can appeal to the massof buyers.

Simply creating something original and useful through innovation is not enough to createand capture a blue ocean, even if the innovation wins the company accolades and itsresearchers a Nobel Prize. To capture a commercially compelling blue ocean, companiesneed a strategy that can align their value, profit and people propositions in pursuit of bothdifferentiation and low cost.

S&L: What is wrong with thinking of blue ocean strategy as a strategic marketing strategy?

Kim and Mauborgne: Certainly, the blue ocean strategy frameworks and tools can beeffectively deployed to reframe, analyze and resolve the marketing issues of anorganization as it strives to break out of its red ocean. Especially relevant are those issuesrelated to developing a blue ocean value proposition. However, blue ocean strategyrequires more than a compelling value proposition. Sustainable success can only beachieved when a company’s value proposition is supported by key internal and externalpeople involved in its execution and is complemented by a strong profit proposition.Hence, to equate blue ocean strategy with a theory of marketing myopically masks theholistic approach needed to create a sustainable high-performance strategy, includingovercoming organizational hurdles, winning people’s trust and commitment, and creatingthe proper incentives via a compelling people proposition.

It’s also important not to confuse blue ocean strategy with niche strategy. While the field ofmarketing has placed significant emphasis on finer segmentation to effectively captureniche markets, blue ocean strategy works in the reverse direction. It is more aboutdesegmenting markets by focusing on key commonalities across buyer groups to open upand capture the largest portion of new demand.

S&L: Almost by definition blue ocean strategy seems to be about fleeing competition. Isn’tsome competition good for companies? If so, why pursue a blue ocean strategy?

‘‘Blue oceans can just as easily and more readily be createdsmack in the middle of an organization’s existing corebusinesses.’’

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Kim and Mauborgne: Historically, economists argued that absent competition, companieshave no incentive to improve their product or service. Certainly, with competitioncompanies are pushed to up their game, lower their prices, and improve their products andservices. However, when supply exceeds demand, as it does in an increasing array ofindustries, the intensity of competition tends to have deleterious effects on the profitablegrowth of organizations, as more and more firms fight to win a slice of a given pool ofcustomers. This is why blue ocean strategy argues that firms need to go beyond the mereimprovement of product or services in overcrowded industries and pursue value innovationto open up new market space and make the competition irrelevant.

S&L: Is blue ocean strategy synonymous with creative destruction?

Kim and Mauborgne: Blue ocean strategy is a concept that goes beyond creativedestruction to embrace nondestructive creation, which is its overriding emphasis. TakeViagra, which created a blue ocean in lifestyle drugs. Did Viagra effectively disrupt anexisting industry by displacing an earlier technology or existing product or service? No. Itcreated a blue ocean via nondestructive creation. By reconstructing existing marketboundaries, blue ocean strategy creates new market space within and beyond existingindustries. When new market space is created beyond existing industry boundaries, as withViagra, reconstruction tends to bring about nondestructive creation. When, on the otherhand, new market space is created within an existing industry, like disruptive innovation,displacement tends to occur.

The important question for practice is, what drives blue ocean strategy to go beyondcreative destruction to nondestructive creation, which is a key goal of most companies aswell as of governments in their quest to stimulate economic growth? The essential pointhere is that blue ocean strategy is not about finding a better or lower-cost solution to theexisting problem of an industry, both of which trigger disruption and displacement ofexisting products and services. Instead, blue ocean strategy is about redefining theproblem itself, which tends to create new demand or an offering that often complementsrather than displaces existing products and services.

To put the ideas and methodologies of blue ocean strategy into proper practice, leadersneed to also have a robust understanding of the misconceptions that lurk – the red oceantraps of destructive competition. Only by dispelling the misconceptions can leaders moveforward toward the ultimate goal of bringing blue ocean strategy theory to successfulpractice.

Note

1. See “Value pioneering – how to discover your own ‘blue ocean’: interview with W. Chan Kim andRenée Mauborgne”, Brian Leavy, Strategy & Leadership, Vol. 33 No. 4.

For instructions on how to order reprints of this article, please visit our website:www.emeraldgrouppublishing.com/licensing/reprints.htmOr contact us for further details: permissions@emeraldinsight.com

‘‘Value innovation, not technology innovation, is what opensup commercially compelling new markets.’’

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