The only way to beat the competition is to stop trying to beat the competition. Industries never stand still. They continuously evolve. The creators of blue oceans focused on value innovation, instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space. Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for. Conducting extensive customer research is not the path to blue oceans. Our research found that customers can scarcely imagine how to create uncontested market space. Their insight also tends toward the familiar “offer me more for less.” And what customers typically want “more” of are those product and service features that the industry currently offers. A good tagline must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest. Products or services that have different forms but offer the same functionality or core utility are often substitutes for each other. Alternatives include products or services that have different functions and forms but the same purpose. If a company’s strategic profile does not clearly reveal its focus, divergence, and compelling tagline, it will likely be muddled, undifferentiated, and hard to communicate. It is also likely to be costly to execute.. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. To reach beyond existing demand, think noncustomers before customers; commonalities before differences; and desegmentation before pursuing finer segmentation. People remember and respond most effectively to what they see and experience: “Seeing is believing.”. Blue Ocean Strategy Summary. No journey is easy; no friendship is filled only with laughter. But we were excited every day of that journey because we were on a mission to learn and improve. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all the industries not in existence today. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries, as Cirque du Soleil did. It will always be important to swim successfully in the red ocean by outcompeting rivals. Red oceans will always matter and will always be a fact of business life. To seize new profit and growth opportunities, companies need to go beyond competing and create blue oceans. Companies need not compete head-on in a given industry space. The strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering. The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. Red Ocean Strategy. Compete in existing market space. Beat the competition. Exploit existing demand. Make the value-cost trade-off. Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost. Blue Ocean Strategy. Create uncontested market space. Make the competition irrelevant. Create and capture new demand. Break the value-cost trade-off. Align the whole system of a firm’s activities in pursuit of differentiation and low cost. There is no such thing as a riskless strategy. Strategy will always involve both opportunity and risk, be it a red ocean or a blue ocean initiative. The Six Principles of Blue Ocean Strategy. Reconstruct market boundaries. Focus on the big picture, not the numbers. Reach beyond existing demand. Get the strategic sequence right. Overcome key organizational hurdles. Build execution into strategy. Effective blue ocean strategy should be about risk minimization and not risk taking. To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry. Four actions framework. Eliminate: Which of the factors that the industry takes for granted should be eliminated?. Reduce: Which factors should be reduced well below the industry’s standard?. Raise: Which factors should be raised well above the industry’s standard?. Create: Which factors should be created that the industry has never offered?. 3 completmentary qualities: focus, divergence, and a compelling tagline. Principle 1: Reconstruct market boundaries. Six paths framework. Look Across Alternative Industries. Observe the distinctive advantages of alternative products and services.. Look Across Strategic Groups Within Industries. Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of new blue ocean. By looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers. By questioning conventional definitions of who can and should be the target buyer, companies can often see fundamentally new ways to unlock value. Look Across the Chain of Buyers. Look Across Complementary Product and Service Offerings. The key is to define the total solution buyers seek when they choose a product or service. A simple way to do so is to think about what happens before, during, and after your product is used. What is the context in which your product or service is used?. What happens before, during, and after?. Can you identify the pain points?. How can you eliminate these pain points through a complementary product or service offering?. Look Across Functional or Emotional Appeal to Buyers. Functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion and, in so doing, can stimulate new demand. Companies’ behavior affects buyers’ expectations in a reinforcing cycle. Industries have trained customers in what to expect. When surveyed, they echo back: more of the same for less. When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space. Emotionally oriented industries offer many extras that add price without enhancing functionality. Stripping away those extras may create a fundamentally simpler, lower-priced, lower-cost business model that customers would welcome. Starbucks turned the coffee industry on its head by shifting its focus from commodity coffee sales to the emotional atmosphere in which customers enjoy their coffee. If you compete on emotional appeal, what elements can you strip out to make it functional? If you compete on functionality, what elements can be added to make it emotional?. Look Across Time. By looking across time—from the value a market delivers today to the value it might deliver tomorrow—managers can actively shape their future and lay claim to a new blue ocean. Principle 2: Focus on the big picture, not the numbers. Most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart—let alone makes the competition irrelevant. Focus attention on the big picture rather than becoming immersed in numbers and jargon and getting caught up in operational details. Drawing a strategy canvas does 3 things:. Shows the strategic profile of an industry by depicting very clearly the factors that affect competition among industry players. Shows the strategic profile of current and potential competitors, identifying which factors they invest in strategically. Shows the company’s strategic profile—or value curve—depicting how it invests in the factors of competition and how it might invest in them in the future. The Four Steps of Visualizing Strategy. Visual Awakening. Compare your business with your competitors’ by drawing your “as is” strategy canvas.. See where your strategy needs to change.. Visual Exploration. Go into the field to explore the six paths to creating blue oceans.. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. You should not only talk to these people but also watch them in action. Identifying the array of complementary products and services that are consumed alongside your own may give you insight into bundling opportunities. You need to look at how customers might find alternative ways of fulfilling the need that your product or service satisfies. See which factors you should eliminate, create, or change.. Visual Strategy Fair. Draw your “to be” strategy canvas based on insights from field observations.. Get feedback on alternative strategy canvases from customers, competitors’ customers, and noncustomers.. Use feedback to build the best “to be” future strategy. Visual Communication. Distribute your before-and-after strategic profiles on one page for easy comparison.. After the future strategy is set, the last step is to communicate it in a way that can be easily understood by any employee. Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy.. Principle 3: Reach beyond existing demand. By aggregating the greatest demand for a new offering, this approach attenuates the scale risk associated with creating a new market. There are three tiers of noncustomers that can be transformed into customers. They differ in their relative distance from your market. “Soon-to-be” noncustomers: buyers who minimally purchase an industry’s offering out of necessity but are mentally noncustomers of the industry. They are waiting to jump ship and leave the industry as soon as the opportunity presents itself. If offered a leap in value, not only would they stay, but also their frequency of purchases would multiply, unlocking enormous latent demand. What are the key reasons first-tier noncustomers want to jump ship and leave your industry? Look for the commonalities across their responses. Focus on these, and not on the differences between them. You will glean insight into how to desegment buyers and unleash an ocean of latent untapped demand. “Refusing” noncustomers: People who refuse to use your industry’s offerings. Buyers who have seen your industry’s offerings as an option to fulfill their needs but have voted against them. People who either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means. Their needs are either dealt with by other means or ignored. What are the key reasons second-tier noncustomers refuse to use the products or services of your industry? Look for the commonalities across their responses. Focus on these, and not on their differences. “Unexplored” noncustomers: never thought of your market’s offerings as an option. These unexplored noncustomers have not been targeted or thought of as potential customers by any player in the industry. That’s because their needs and the business opportunities associated with them have somehow always been assumed to belong to other markets. To maximize the scale of your blue ocean you should first reach beyond existing demand to noncustomers and desegmentation opportunities as you formulate future strategies. The Sequence of Blue Ocean Strategy. Buyer utility. Is there exceptional buyer utility in your business idea?. What trends have a high probability of impacting your industry, are irreversible, and are evolving in a clear trajectory? How will these trends impact your industry? Given this, how can you open up unprecedented customer utility?. Does your offering unlock exceptional utility?. Is there a compelling reason for the mass of people to buy it?. Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, it will not attract the masses no matter how many awards it wins. Create a strategic profile that passes the initial litmus test of being focused, being divergent, and having a compelling tagline that speaks to buyers. The way a product or service is developed becomes less a function of its technical possibilities and more a function of its utility to buyers. The Six Stages of the Buyer Experience Cycle. Purchase. How long does it take to find the product you need?. Is the place of purchase attractive and accessible?. Delivery. How long does it take to get the product delivered?. How difficult is it to unpack and install the new product?. Use. Does the product require training or expert assistance?. How effective are the product's features and functions?. Does the product or service deliver far more power or options than required by the average user? Is it overcharged with bells and whistles?. Supplements. Do you need other products and services to make this product work?. Maintenance. Does the product require external maintenance?. How easy is it to maintain and upgrade the product?. How costly is maintenance?. Disposal. Does use of the product create waste items?. The Six Utility Levers. Customer productivity. Helps a customer do things faster or better. Simplicity. Being easy to obtain, use, or dispose of. Convenience. Risk. A product might reduce a customer’s financial, physical, or credibility risks. Fun and image. Environmental friendliness. Where are the greatest blocks to utility across the buyer experience cycle for your customers and noncustomers? Does your offering effectively eliminate these blocks?. Price. Is your price easily accessible to the mass of buyers?. Companies are discovering that volume generates higher returns than it used to. As the nature of goods becomes more knowledge-intensive, companies bear much more of their costs in product development than in manufacturing. To a buyer, the value of a product or service may be closely tied to the total number of people using it. Brand building increasingly relies heavily on word-of-mouth recommendations spreading rapidly through our networked society. Cost. Can you attain your cost target to profit at your strategic price?. Adoption. What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?. This sequence leads to a commercially viable blue ocean idea. People who are worried about personal job security are more likely to scan the job market than to try to solve the company’s problems. Tipping point leadership builds on this insight to inspire a fast change in mindset that is internally driven of people’s own accord. There is no substitute for meeting and listening to dissatisfied customers directly. Instead of focusing on getting more resources, tipping point leaders concentrate on multiplying the value of the resources they have. You should concentrate your efforts on kingpins, the key influencers in the organization. These are people inside the organization who are natural leaders, who are well respected and persuasive, or who have an ability to unlock or block access to key resources. At the heart of motivating the kingpins in a sustained and meaningful way is to shine a spotlight on their actions in a repeated and highly visible way. This is what we refer to as fishbowl management, where kingpins’ actions and inaction are made as transparent to others as are fish in a bowl of water. The fishbowl gave an opportunity for high achievers to gain recognition for work in their own precincts and in helping others. By fair process we mean engaging all the affected people in the process, explaining to them the basis of decisions and the reasons people will be promoted or side- stepped in the future, and setting clear expectations of what that means to employees’ performance. The cushion of support provided by fair process, combined with the fishbowl emphasis on sheer performance, pushes people and supports them on the journey, demonstrating managers’ intellectual and emotional respect for employees. Unless people believe that the strategic challenge is attainable, the change is not likely to succeed. Break it down into bite-sized atoms that employees at different levels can relate to. It is only when all the members of an organization are aligned around a strategy and support it, for better or for worse, that a company stands apart as a great and consistent executor. When individuals feel recognized for their intellectual worth, they are willing to share their knowledge; in fact, they feel inspired to impress and confirm the expectation of their intellectual value, suggesting active ideas and knowledge sharing. Similarly, when individuals are treated with emotional recognition, they feel emotionally tied to the strategy and inspired to give their all. If individuals are not treated as though their knowledge is valued, they will feel intellectual indignation and will not share their ideas and expertise; rather, they will hoard their best thinking and creative ideas, preventing new insights from seeing the light of day. People realize that compromises and sacrifices are necessary in building a strong company. They accept the need for short-term personal sacrifices in order to advance the long-term interests of the corporation. This acceptance is conditional, however, on the presence of fair process. Eventually, however, almost every blue ocean strategy will be imitated. As imitators try to grab a share of your blue ocean, you typically launch offenses to defend your hard-earned customer base. But imitators often persist. Obsessed with hanging on to market share, you may fall into the trap of competing, racing to beat the new competition. Over time, the competition, and not the buyer, may come to occupy the center of your strategic thought and actions. If you stay on this course, the basic shape of your value curve will begin to converge with those of the competition. When the company’s value curve still has focus, divergence, and a compelling tagline, you should resist the temptation to value-innovate again and instead should focus on lengthening, widening, and deepening your rent stream through operational improvements and geographical expansion to achieve maximum economies of scale and market coverage