Blue Ocean Strategy

© Veer
Mikhail Dudarev

Embrace endless possibilities of a blue ocean.

How did Apple predict that we'd love the iPod so much? After all, we seemed to be happy carrying around our clunky portable CD players – which were so much better than the personal cassette machines they'd replaced! But somehow they knew we wanted a smaller gadget that would hold a thousand songs. And they were right.

Or what about Southwest Airlines? Why did they decide to encourage their cabin crew to be friendly and funny, when other airlines wanted their staff to behave like maître d's in up-market restaurants? Southwest created a whole new type of flying experience, and their customers loved it.

Many organizations work hard at customer research to find out what their target market wants. But the ones that gain more than just a percentage point or two of market share are those that identify wants and needs that we don't even know we have. And, by challenging the assumptions of their industries, they're propelled to greatness. They have no competition, because they actually redefine the benchmarks for their kind of product.

If you look more closely, you'll find that many companies that achieve industry leadership use an approach that's now called "Blue Ocean Strategy". In this article we'll look at what Blue Ocean Strategy is, and look at how you can use it to foster change and innovation.

Blue Ocean Strategy

Blue Ocean Strategy was developed by W Chan Kim and Renée Mauborgne, both of whom are distinguished professors at INSEAD in France. They identified this approach to strategy based on a study of 150 strategic business moves, spanning more than 100 years and thirty industries.

The approach was first published in the Harvard Business Review in October 2004. The following year Kim and Mauborgne published a book entitled "Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant".

When it comes to defining what Blue Ocean Strategy is, it helps to start by picturing a vast ocean. Most businesses are located in what the authors call a red ocean. The red ocean is jam-packed with other businesses, all offering similar products and services. As they each fight to be the best, they stain the waters red with blood, shed through skirmishing at close quarters. Profits shrink and market share declines in red oceans, simply because they're so overcrowded.

Blue oceans are the exact opposite of red oceans. Blue oceans are...