Book Summary: “Blue Ocean Strategy” by Renee Mauborgne

November 14, 2008 | Comments Off on Book Summary: “Blue Ocean Strategy” by Renee Mauborgne

Blue Ocean Strategy is a groundbreaking book on opening up uncontested markets. This is a book summary I have written originally as part of the assignment for my Harvard innovation and entrepreneurship class.

blueoceanstrategy

Blue ocean strategy is a value innovation strategic move that opens up new uncontested market, creates new demand, makes the competition irrelevant and helps a company to generate more revenue than competitors that focus narrowly on the existing crowded market. Blue Ocean strategy pursues differentiation while lowers cost.

Competing in the red ocean (known marketplace) for a share of contracting markets is a necessary move, but it is not sufficient in sustaining profitability because supply exceeds demand in many industries, making differentiation difficult. Improvement in operations and technology drive some industries to reinvent themselves while help creating some new ones. Companies need to compete in both the existing market to survive, and open up new marketplaces for rapid growth.

There are six approaches to remake market boundaries, they include looking across (1) Alternative industries (2) strategic groups within industries (3) Chain of buyers (4) Complimentary products (5) Functional & emotional appeal (6) Time. To draw a Blue Ocean strategy, focus on the big picture and reach beyond existing demand, a good strategy has three qualities: focus, divergence and a compelling tagline. A structured process of visual awakening, exploration, strategy fair and communication pushes a company’s strategy towards blue ocean. Getting the strategy sequence right is very important. For a Blue Ocean strategy to work the product must have an exceptional user utility, accessible price, a healthy cost structure and a minimum adoption hurdles.

There are different hurdles to overcome when executing blue ocean strategies: Cognitive, resources, motivation, politics. Identify the people, acts and activities that exercise disproportional influence on performance. Focus on tipping point leadership: inspire a fast change in mindset that is internally driven of people’s own accord and motivate the influencers. Also allocate resources according to hot spot / cold spot and trade horses as necessary. In order to induce voluntary cooperation, leaders should engage, offer explanations of decisions, and state clearly state their new expectations to create a culture of trust and commitment. Revisit the value curve regularly.


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