For many companies—both startups and incumbents—the panacea of strategy is to create an entirely new market without competition. This idea of strategy is the core of Chan Kim & Renée Mauborgne’s Blue Ocean Strategy (2005). With over 4 million copies sold, it is one of the most popular strategy texts today. And given that their recent follow-up book Blue Ocean Shift (2017) was an instant bestseller too, I assume the idea of a blue ocean is still as attractive as it was a decade ago. But is it also a good idea?
The idea and its origin
The basic message of Blue Ocean Strategy is that organizations should not try to compete in existing markets (red oceans) but rather create or find new markets where competition does not yet exist (blue oceans). In other words: it tells companies to be entrepreneurial, to find and create their own opportunities and differentiate themselves from others, rather than to take opportunities already taken by others.
The blue and red ocean metaphor is a powerful one. With the Jaws movies series in mind, we can easily visualize a bloody red ocean with aggressive sharks eating you alive. And, the tranquil silence of the sunset over a blue ocean is readily depicted in our mind as well. Furthermore, Kim & Mauborgne’s book contains a host of examples and some handy tools helping managers facing the challenge of developing new strategy.
Yet, the blue ocean metaphor is also misleading, for it suggests that the red versus blue distinction is the main distinct and new contribution of the book. This suggests that strategy texts before Blue Ocean Strategy were predominantly fostering competition in existing markets, in red oceans. This, though, is not an accurate depiction of the older strategy literature and doesn’t give it sufficient credit.
This is most evident when we compare Blue Ocean Strategy to Michael Porter’s work. In their book, Kim & Mauborgne position their approach directly against Porter’s strategy approach: his five forces framework, his three generic strategies and the like. In doing so, they suggest that Porter’s approach is aimed at competing in existing markets whilst their own approach at the creation of new markets. Yet, Blue Ocean Strategy resembles Porter’s approach quite strikingly, and at their hart the message of both approaches is the same: if you can do it, go for uncontested market spaces.
Porter’s five forces framework, for example, doesn’t tell companies to go where the competition is—the red ocean. On the contrary, it tells them to be creative and find ways to avoid and limit competition as much as possible; to go to industries where the five forces are least powerful—a message not that different from Blue Ocean Strategy. Along those same lines, Porter’s generic strategies framework (cost leadership, differentiation, and focus) does not tell companies to develop strategies equal to their competitors. On the contrary, it advises companies to differentiate themselves from others. The focus on uniqueness and differentiation is so important to Porter, that he even defines strategy as “being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” Can it be more Blue Ocean?
Benefits and risks
If the basic message of Blue Ocean Strategy is not that new, does this mean we should discard it as just another management fad? Not entirely. The power of Blue Ocean Strategy lies in the tools it provides for facilitating companies actually delivering a unique mix of value. Porter’s five forces framework is helpful for understanding the structure of an industry and the competitive dynamics within it. Furthermore, his generic strategies made companies aware that strategy making implies making some fundamental choices. But, as Kim & Mauborgne remark, these existing frameworks are not very well-suited to foster the kind of creativity needed for actually developing unique strategies. The frameworks offered in Blue Ocean Strategy, on the other hand (such as the “strategy canvas” and the “four actions framework”) are specifically aimed at helping companies to come up with new strategies. So, Blue Ocean Strategy is not that novel or distinct as a concept, but it does offer some handy tools to generate new strategy.
However, there are risks as well, especially when the core idea of creating blue oceans is taken as extreme as it is presented:
- Being eaten. The main advice of Blue Ocean Strategy is to “create uncontested market space” and “make competition irrelevant.” When taken too seriously, this advice may lead to companies ignoring relevant competition. Many managers and entrepreneurs already tend to assume mistakingly that they have no competitors, that they have the best product or technology in the world and that there is an ocean of impatient customers waiting for their product. To avoid being eaten by the competition while on their way to a possibly blue ocean, the best advice to these companies is, perhaps, to make competition more relevant and to think more about contested market spaces.
- Swimming too far. A second risk with taking Blue Ocean Strategy too seriously is that it may stimulate companies to go into markets that are too far off their own competencies. By being stimulated to be creative and think different, companies following a Blue Ocean Strategy are pushed to forget about their own history, strengths, and path dependent competencies. In the past they may have built up particular competencies that were the basis of their success so far. When reaching out to new industries these competencies may not suffice, implying a great amount of risk for failure.
- No fish. A final risk of Blue Ocean Strategy is that it can lead companies to oceans that are blue for a very good reason. Oceans can be dead, empty, and impossible for most species to survive in. Along the same line “markets” may be uncontested for a very good reason: because there is no market. We have seen examples of this during the internet bubble where the wildest blue oceans have been imagined. The implication is that Blue Ocean Strategy needs to come with a reality check whether the opportunity found is real, or can be made real by the company.
Although not really new, Blue Ocean Strategy promotes a nevertheless useful idea of moving away from the competition. It does so with an attractive metaphor and it contains a number of practical tools to develop innovative strategies. At the same time though, it involves quite some risks that make that it certainly should not be adopted as a universal approach to strategy. It may sometimes work, but in many cases it won’t and it might even harm the organization if not used with sufficient care.
This post was published earlier here on my forbes.com page.
Image credit: Getty