Words Into Works #118 | The Blue Ocean Strategy

The Blue Ocean Strategy is about breaking out of the cutthroat competition by creating new market spaces, or “blue oceans,” ripe for growth. W. Chan Kim and Renée Mauborgne argue that companies should seek untapped markets where they can innovate without the threat of rivals instead of battling over a shrinking profit pool in crowded markets.

This approach redefines traditional competitive strategies by encouraging businesses to create unique value, making the competition irrelevant. It’s a call to explore the vast, uncharted waters of business opportunities. “Stop looking to the competition,” write the authors. “Value-innovate and let the competition worry about you.”

Big Idea 1: Value Innovation

This concept challenges the conventional trade-off between value and cost. Traditionally, companies believe they must either differentiate to create value at a higher cost or pursue low-cost strategies that sacrifice value. Value innovation breaks this trade-off by creating a leap in value for the company and its customers, simultaneously driving up value and reducing costs.

Consider Cirque du Soleil. They transformed the circus industry by blending the excitement of circus arts with the sophistication of theater. They slashed costs by eliminating expensive elements like animals and focusing on high-quality performances.

At the same time, they raised the artistic level, creating a unique experience that drew new audiences willing to pay premium prices. This dual strategy of cutting costs and raising value allowed them to sail into a blue ocean free from traditional circus competition.

Big Idea 2: The Strategy Canvas

The Strategy Canvas is a visual tool that maps out an industry’s current play and helps identify potential blue oceans. It highlights the factors in which industry players compete and invest. By plotting these factors, companies can see where they converge and where opportunities for differentiation lie.

Take Southwest Airlines as an example. Their Strategy Canvas revealed that travelers valued quick, reliable, cost-effective flights, such as meals or assigned seating, over frills. Southwest eliminated and reduced the features that didn’t add much value from the customer’s perspective, such as meals and lounges.

Instead, they focused on what mattered—efficient operations and frequent departures. This clear shift created a new market space for budget-conscious travelers, making traditional airlines’ competition irrelevant in this new segment. (For more on Southwest Airlines, read Words Into Works #058: Less, But Better.)

Big Idea 3: The Four Actions Framework

The Four Actions Framework is a practical guide to creating a new value curve. It prompts companies to answer four key questions:

1. What factors can be eliminated?
2. What factors should be reduced?
3. What factors should be raised?
4. What factors can be created?

Yellow Tail Wine is one brand that used the Four Actions Framework to redefine the wine market. They eliminated complexity and aging quality, which confused novice drinkers and reduced focus on wine terminology and prestige.

Furthermore, they emphasized simplicity and fun and created an entirely new category of easy-to-drink and approachable wine. This strategy enabled Yellow Tail to tap into a broader casual drink market, creating a blue ocean where traditional wineries couldn’t compete.

This structured approach encourages a rethink of industry norms and helps uncover unique value propositions. (For more information on positioning, read my summary of Al Ries and Jack Trout’s landmark book Positioning.)

Conclusion

Companies can create new market spaces where competition becomes irrelevant by focusing on value innovation, leveraging the Strategy Canvas, and applying the Four Actions Framework. This strategy shifts the focus from competing within established boundaries to creating new ones, unlocking significant opportunities for success.

Cirque du Soleil, Southwest Airlines, and Yellow Tail are examples of brands that demonstrated that the Blue Ocean Strategy is a powerful blueprint for innovation and market leadership in uncontested spaces. Embrace the Blue Ocean Strategy and set sail into your own uncharted blue ocean.