Blue Ocean Shift

Introduction

In today's fiercely competitive business world, many companies find themselves trapped in what authors W. Chan Kim and Renée Mauborgne call "red oceans" - overcrowded markets where rivals fight for a shrinking pool of profits. But what if there was a way to break free from this cutthroat competition and sail into wide open "blue oceans" of untapped market space?

That's the premise behind "Blue Ocean Shift," which builds on the authors' previous bestseller "Blue Ocean Strategy." This book provides a practical, step-by-step approach for how organizations of any size can move from red to blue oceans by creating new markets where none existed before.

Drawing on a decade of research and real-world examples, Kim and Mauborgne lay out a systematic process for making this shift, along with the tools and frameworks needed to navigate uncharted waters. The goal is to make the competition irrelevant by creating and capturing new demand, rather than fighting over existing customers.

For leaders and organizations feeling trapped by intense competition, "Blue Ocean Shift" offers an inspiring alternative path to growth and success. Let's dive into the key ideas and actionable steps for making your own blue ocean shift.

The Power of Blue Ocean Shifts

The authors begin by explaining the fundamental difference between red and blue ocean strategies:

• Red oceans represent existing, known market space where industry boundaries and competitive rules are well-defined. Companies try to outperform rivals to grab a greater share of existing demand. As the space gets more crowded, prospects for growth and profits diminish.

• Blue oceans represent untapped market space with potential for high growth and profits. Demand is created rather than fought over. There's ample opportunity for growth that's both profitable and rapid.

Making a blue ocean shift means moving from a red ocean of bloody competition to a blue ocean of new market space. This allows companies to break out of the value-cost trade-off that typically constrains strategy.

The authors provide several compelling examples of successful blue ocean shifts across industries:

• Groupe SEB, a French appliance maker, created the ActiFry - a new way to make french fries with just a tablespoon of oil instead of deep frying. This opened up an entirely new market.

• The UK charity Comic Relief revolutionized fundraising with their Red Nose Day concept, making charitable giving fun and accessible to everyone.

• CitizenM hotels eliminated standard luxury hotel features like front desks while enhancing the sleeping experience, creating affordable luxury accommodations.

These examples show how blue ocean shifts allow companies to simultaneously pursue differentiation and low cost, creating a leap in value for both the company and its customers.

The Three Key Components of Blue Ocean Shifts

The authors identify three essential elements for successfully executing a blue ocean shift:

1. Adopting a blue ocean perspective - Expanding your thinking beyond accepted industry boundaries and norms.

2. Applying humanness in the process - Engaging people's hearts and minds to build their confidence to drive new growth.

3. Using market-creating tools - Applying practical frameworks and analytics to translate blue ocean thinking into commercially compelling new offerings.

Let's explore each of these components in more detail.

1. The Blue Ocean Perspective

Adopting a blue ocean perspective means fundamentally reconceptualizing your business and industry. The authors outline four key traits of blue ocean strategists:

• They see industry conditions as shapeable, not fixed. They look beyond accepted boundaries to find new opportunities.

• They focus on creating new demand, not just capturing existing customers from competitors.

• They aim to make the competition irrelevant, not just beat rivals at their own game.

• They pursue differentiation and low cost simultaneously, not trade one off against the other.

This expansive mindset opens up new possibilities beyond conventional strategic thinking. It allows companies to envision and create entirely new markets.

2. Humanness in the Process

The human element is crucial for getting people on board with a transformative blue ocean initiative. The authors emphasize three key aspects of humanness:

• Atomization - Breaking down big challenges into small, achievable steps to build people's confidence.

• Firsthand discovery - Letting people experience the need for change themselves rather than being told.

• Fair process - Engaging stakeholders, explaining decisions, and setting clear expectations.

By incorporating these human touches, leaders can motivate and align their teams around an ambitious blue ocean shift.

3. Market-Creating Tools

The authors provide five practical tools to help systematically create new market space:

1. Pioneer-Migrator-Settler Map - Assessing your current portfolio of offerings
2. Strategy Canvas - Visualizing your strategic position vs. competitors
3. Buyer Utility Map - Uncovering hidden pain points in the customer experience
4. Six Paths Framework - Exploring potential areas for market creation
5. Four Actions Framework - Reconstructing buyer value elements

We'll explore each of these tools in more depth as we walk through the blue ocean shift process.

The Five Steps to Making a Blue Ocean Shift

With the key components in place, the authors lay out a systematic five-step process for making a blue ocean shift:

1. Choose your starting point
2. Understand where you are now
3. Imagine where you could be
4. Find how you get there
5. Make your move

Let's examine each step in detail.

Step 1: Choose Your Starting Point

The first step is selecting the right place to begin your blue ocean initiative. The authors recommend using the Pioneer-Migrator-Settler (PMS) Map to assess your current portfolio of offerings:

• Pioneers are your most innovative offerings that deliver exceptional value. They represent your future growth.

• Settlers are me-too offerings that provide little distinctive value beyond competitors.

• Migrators fall in between, providing better value than competitors but not truly innovative.

To create a PMS Map:

1. Draw a square divided into three horizontal sections (top, middle, bottom).
2. Place pioneers as circles in the top section, migrators in the middle, and settlers at the bottom.
3. Size the circles based on revenue contribution.

This visual map reveals your portfolio's innovation profile. A healthy business should have a good number of pioneers. If you're overly reliant on settlers, it indicates a need for more blue ocean moves.

Use the PMS Map to identify promising areas to target for your blue ocean shift - either by moving migrators up to pioneers or creating entirely new pioneer offerings.

Step 2: Understand Where You Are Now

With a starting point chosen, the next step is gaining a clear picture of your current strategic landscape. The key tool here is the Strategy Canvas.

The Strategy Canvas is a graphic depiction of your company's relative performance across key competing factors in your industry. To create one:

1. List 5-12 key factors the industry competes on along the x-axis.
2. Plot the offering level for each factor on the y-axis (low to high).
3. Draw your curve and that of key competitors.

This visual allows you to see:

• How your offering compares to competitors
• Where the industry focuses its investments
• What buyers receive from existing competitive offerings

A strategy canvas that closely resembles competitors indicates you're trapped in the red ocean. This tool helps highlight the need for a blue ocean shift and potential areas to differentiate.

Step 3: Imagine Where You Could Be

With a clear view of the current landscape, it's time to envision potential blue oceans. The authors provide two key tools for this step:

Buyer Utility Map

This tool uncovers hidden pain points in the customer experience that could be eliminated or reduced. It's a 6x6 grid mapping the six stages of the buyer experience cycle against six utility levers.

The six buyer experience stages are:

1. Purchase
2. Delivery
3. Use
4. Supplements
5. Maintenance
6. Disposal

The six utility levers are:

1. Customer productivity
2. Simplicity
3. Convenience
4. Risk reduction
5. Fun and image
6. Environmental friendliness

For each cell, identify obstacles that:

• Impede customer productivity
• Prevent simplicity
• Hamper convenience
• Increase risk
• Inhibit fun/positive image
• Harm environmental friendliness

This exercise reveals opportunities to create new utility for customers.

Six Paths Framework

This framework helps generate blue ocean opportunities by looking across:

1. Alternative industries
2. Strategic groups within the industry
3. Chain of buyers
4. Complementary product and service offerings
5. Functional-emotional orientation of the industry
6. Trends over time

For each path, ask:

• Why do buyers trade across alternatives?
• What happens before, during, and after your product/service is used?
• Who are the other influencers in the purchase decision?
• How can you shift the functional-emotional orientation?
• How can you participate in shaping external trends?

This systematic exploration often reveals unexpected opportunities for market creation.

Step 4: Find How You Get There

With potential blue ocean opportunities identified, the next step is developing concrete strategic moves. The key tool here is the Four Actions Framework.

This framework poses four key questions:

1. Which factors taken for granted should be eliminated?
2. Which factors should be reduced well below industry standard?
3. Which factors should be raised well above industry standard?
4. Which factors should be created that the industry has never offered?

Eliminating and reducing factors can lower your cost structure. Raising and creating factors increase buyer value and create new demand.

Apply these questions to the insights generated from the previous tools. This will help you formulate specific blue ocean strategic moves that break the value-cost trade-off.

Step 5: Make Your Move

The final step is selecting your best blue ocean move and launching it in the market. The authors recommend holding a "Blue Ocean Fair" to evaluate options:

1. Invite key stakeholders from across the organization.
2. Present each blue ocean option, including:
   • Tagline
   • Strategy canvas
   • Four actions framework
3. Allow time for reflection and discussion.
4. Have attendees vote on the most promising options.

This process builds understanding and buy-in for the chosen strategy. With a winning move selected, you're ready to implement your blue ocean shift.

Putting It All Together: The Blue Ocean Shift in Action

To illustrate how all the pieces fit together, let's look at a detailed example of a successful blue ocean shift - the case of Yellow Tail wine.

The Challenge: The U.S. wine industry was intensely competitive, with thousands of brands competing and wine consumption stagnant. Imports were taking share from domestic producers.

Step 1: Choose the starting point Australian winemaker Casella Wines saw an opportunity to create a new type of wine for casual drinkers intimidated by traditional wines.

Step 2: Understand the current situation The strategy canvas revealed the industry competed primarily on:

• Wine prestige and legacy
• Vineyard quality and grape pressing techniques
• Aging qualities
• Complexity and sophistication of taste

Step 3: Imagine new possibilities Using the buyer utility map and six paths framework, Casella identified key pain points:

• Overwhelming choice confused buyers
• Wine terminology was intimidating
• Taste was often too complex for casual drinkers

They saw an opportunity to create a fun, simple wine for everyday consumption.

Step 4: Find how to get there Applying the four actions framework, Yellow Tail:

Eliminated:

• Wine complexity
• Wine jargon
• Aging qualities

Reduced:

• Wine range
• Vineyard prestige
• Price

Raised:

• Ease of selection
• Ease of drinking
• Fun and adventure

Created:

• Simple, colorful labeling
• Retail store partnerships
• Dramatically different bottle

Step 5: Make your move Yellow Tail launched with a bold, fruity wine that was easy to drink and select. The fun kangaroo label and affordable price made it accessible to casual drinkers.

The Result: Yellow Tail became the fastest-growing wine brand in U.S. history, creating an entirely new market of casual wine drinkers. Within two years it was the #1 imported wine into the U.S.

This example shows how systematically applying the blue ocean shift process can lead to breakthrough market creation, even in a crowded, competitive industry.

Key Takeaways and Practical Applications

As we've explored the blue ocean shift process, several key principles emerge that can be applied to any organization:

1. Look beyond competing - Instead of battling rivals, focus on making the competition irrelevant by creating new market space.

2. Focus on non-customers - Look to convert non-consumers into customers by removing key pain points and barriers.

3. Pursue differentiation and low cost - Break the value-cost trade-off by eliminating and reducing costly factors while raising and creating new sources of value.

4. Reconstruct market boundaries - Challenge fundamental industry assumptions and look across conventional boundaries to find blue ocean opportunities.

5. Get the strategic sequence right - Ensure you have exceptional buyer utility, strategic pricing, and the ability to profit at that price before launching.

6. Overcome organizational hurdles - Address cognitive, resource, motivational, and political hurdles that can derail a blue ocean initiative.

7. Build execution into strategy - Engage people throughout the process to build understanding and support for the new strategy.

To start applying these principles in your organization:

• Assess your current strategic position using the Pioneer-Migrator-Settler Map and Strategy Canvas.

• Identify key pain points in your industry using the Buyer Utility Map.

• Explore potential blue ocean opportunities using the Six Paths Framework.

• Develop concrete strategic moves with the Four Actions Framework.

• Engage key stakeholders in evaluating and selecting the most promising blue ocean initiatives.

Remember that making a blue ocean shift is not a one-time event, but an ongoing process of creating new market space and making the competition irrelevant.

Conclusion

In a world of intense competition, "Blue Ocean Shift" offers a refreshing and practical approach to breaking free from the pack and creating new paths to growth. By systematically applying the tools and frameworks outlined in this book, organizations in any industry can chart a course to blue oceans of uncontested market space.

The key is shifting your mindset from competing within existing markets to creating entirely new ones. This requires challenging long-held industry assumptions, focusing on non-customers, and pursuing value innovation that makes the competition irrelevant.

While making a blue ocean shift isn't easy, the step-by-step process and market-creating tools provided offer a clear roadmap. By incorporating the human element to build people's confidence, organizations can align and motivate their teams to drive transformative growth.

In today's fast-changing business environment, the ability to create new market space is more vital than ever. "Blue Ocean Shift" equips leaders and organizations with the perspectives, frameworks, and tools needed to sail beyond the bloody competition of red oceans into the clear blue waters of new markets and explosive growth.

By mastering the art and science of market creation, you can inspire confidence, seize new growth, and shift from competing to creating. The vast blue ocean awaits - it's time to chart your course.