Blue Ocean Shift - Book Summary

Dive headfirst into the uncharted blue ocean of new market spaces.

Imagine your organization stuck in a 'red ocean', a highly saturated and fiercely competitive market. Have you ever wondered if there's an escape hatch that could transport you into a 'blue ocean', a vast, tranquil space devoid of competition and teeming with untapped potential?

Well, wonder no more. Rooted in years of practical experience, this summary gives you the oars to sail towards that elusive 'blue ocean'. The journey starts with a comprehensive blueprint—a shift from competing within industry confines to exploring new, promising markets laden with opportunities.

Get ready to discover:

How a French fry maker stirred a revolution in its market through a blue ocean shift;

How a simple red clown nose reshaped the charitable industry;

And how luxury hotel chain citizenM created a blue ocean by doing away with the front desk.

Keep your eyes on the horizon as we navigate through these captivating narratives.

Soar above your competition with the power of a blue ocean shift.

When it comes to crafting a business strategy, you are often faced with a perceived dichotomy - either you opt for a value-driven path, focusing on exceptional quality and service to expand your business, or adopt a low-cost strategy, striving to offer the best prices among your competitors. Both approaches have their merits, but is that all there is?

Enter the blue ocean shift - the game changer in your strategic arsenal. It's about propelling your business beyond the realm of cutthroat competition, into virgin markets, brimming with opportunities.

Let's take the example of Groupe SEB, a renowned French manufacturer of small appliances, including a french fry maker. Conventionally, making french fries has been synonymous with deep frying in oil. This method, though widely accepted, is expensive, hazardous, messy, and frankly, unhealthy.

Then, in 2006, Groupe SEB launched ActiFry, a groundbreaking product that transformed the way french fries were made - with no frying and using only a tablespoon of oil. ActiFry didn't just bring in new customers; it pioneered a whole new market, placing Groupe SEB on the global map as a leader.

So, what is a blue ocean shift really about? Simply put, it's a transition from a fiercely competitive market space — the red ocean — to a tranquil, opportunity-laden market, which we refer to as the blue ocean. It might sound like a miraculous feat, but it's rooted in a methodical process that revolves around three crucial components.

Firstly, the shift requires a fresh blue ocean perspective to broaden your thinking horizon. Secondly, it demands a human touch to inspire people to support this paradigm shift. Finally, you need to develop market-creating tools to morph that renewed perspective into a desirable product.

But these concepts can appear abstract at first. In the upcoming parts of this summary, we'll delve into the intricate details of how this process works and how you can apply it to your own business.

Discover the strategies for crafting new market spaces.

So, we've established that a blue ocean strategy can pivot your business onto a transformative path. But before we delve into the nuances of a new perspective, humaneness, and market-creating tools necessary to implement this strategy, it's crucial to understand some market creation theory. This foundational knowledge will illuminate why making such a shift is so effective.

You might think that markets emerge solely when novel ideas or superior solutions come to the fore. However, market creation relies on three more specific strategies.

Most business leaders and entrepreneurs are familiar with the first strategy - disruptive innovation. This concept, originally termed 'creative destruction' by Joseph Schumpeter, a twentieth-century Austrian economist, occurs when a new invention supersedes its predecessor, thus shaking up the industry.

Consider the case of Kodak, the indisputable leader in the photographic film industry, whose dominion was utterly upended by the advent of digital photography.

Then, there's non-disruptive creation, where markets are neither annihilated nor replaced. Instead, a fresh market is carved out without disturbing the existing ones.

A fitting example is Pfizer's Viagra. This new drug didn't cause ripples in the existing pharmaceutical market. On the contrary, it pioneered a completely new market by addressing an unmet need among men - erectile dysfunction.

Lastly, nestled between these two strategies, there lies a third, commonly overlooked middle way. This strategy comes into play when an existing problem is reframed. Groupe SEB's ActiFry, the innovative french fry maker we mentioned earlier, fits perfectly in this category. In this case, both non-disruptive and disruptive elements come into play. Though the existing industry remained intact, it was certainly given a spin.

To sum it up, you can either develop a revolutionary product that supplants existing ones, pinpoint and address a hitherto unaddressed issue, or redefine your approach to an existing problem.

Next, let's navigate towards the three pivotal elements instrumental in facilitating a blue ocean shift.

Unleashing the magic of a blue ocean strategist's perspective through four defining attributes.

Now that you have a clear grasp on the mechanics of market creation, you're armed to set sail for your own blue ocean. The maiden voyage towards this destination commences with embracing a mindset that transcends boundaries.

Take the example of Comic Relief, a UK-based charity. The charity sector exemplifies a red ocean scenario, marked by cutthroat competition. To put things into perspective, there are 600 cancer charities in London alone. Despite such an environment, Comic Relief pioneered a blue ocean shift by fundamentally redefining how charities operate.

Every alternate year since the 1980s, the charity organizes a Red Nose Day — a unique fundraising event where people engage in hilarious activities to solicit donations. Imagine a CEO conducting a business meeting with a red ball attached to his nose, like a clown! These Red Nose Days have been immensely successful, with the 2017 edition raising a whopping seventy-three million pounds.

At this point, you might be wondering — was Comic Relief devised with a blue ocean perspective in mind? The answer is a resounding yes, and here's how you can discern this.

Firstly, blue ocean strategists perceive industry conditions as malleable, and Comic Relief embodied this mindset perfectly. Rather than adhering to conventional modes of fundraising, such as grand galas, the charity introduced a novel approach.

Secondly, blue ocean strategists don't aim to outdo their competitors, but rather render them irrelevant. In other words, Comic Relief didn't seek to emulate other charities and win the race for donors. In reality, Red Nose Days faced no competition from any other charity, essentially eliminating competition.

Thirdly, blue ocean strategists strive to generate new demand, and Comic Relief accomplished just that. Instead of targeting affluent donors, the organization made charity appealing to everyone, regardless of how small their donations might be.

Lastly, Comic Relief exemplifies a blue ocean perspective as it is both cost-effective and unique simultaneously. With its engaging fundraising approach, the organization distinguishes itself clearly from other charities. Moreover, as a low-cost organization, it doesn't divert donations towards year-round marketing or grant writing.

So, the first step is a change in perspective. In the ensuing parts, you'll discover the indispensable elements of 'humanness' and 'market-creation tools' essential for facilitating your blue ocean shift.

Humanity stands at the heart of the blue ocean transition.

Before we delve into the tools that drive a blue ocean shift, it’s essential to grasp a central tenet of this transformative process: humanity. Humanity plays a pivotal role, as it recognizes the myriad emotions—fears, insecurities, and the innate longing for dignity and purpose—that individuals invariably carry with them.

Humanity will instill in your employees a deep sense of trust in the blue ocean strategy as a means of guiding them and your organization to fresh, invigorating heights.

To actualize humanity within your blue ocean strategy, three elements are crucial. The first among these is atomization. Let’s face it —embarking on a blue ocean shift can appear formidable. It requires a complete reimagining of your industry. The question your team may likely be grappling with is, “Can we even achieve this?”

The answer, unequivocally, is a resounding yes. However, the key lies in deconstructing this overwhelming task into manageable segments, focusing on each one independently.

The second component of humanity is first-hand discovery. Given that a blue ocean shift necessitates novel ways of thinking, it's vital that every individual on your team develops new perspectives based on their experiences. In other words, each member should feel the imperative for change rooted in their personal reflections, rather than as an imposed directive.

Lastly, infusing humanity into the blue ocean process necessitates a fair process. In this context, a fair process adheres to three principles: engagement, explanation, and clear expectations. Engagement implies involving all stakeholders in the decision-making process. Explanation entails offering a lucid analysis of decisions and concepts that are discarded. And clear expectations mean explicitly articulating what people can anticipate and what their responsibilities will involve.

Analyze your present situation before you sail towards your blue ocean.

Armed with the previous two elements—a shift in perspective and a touch of humanity—you're ready to embark on your ambitious journey towards a vast blue ocean. To prime yourself for victory, it's crucial to master five practical blue ocean instruments, one at a time. Let's begin with the pioneer-migrator-settler map.

This tool enables you to evaluate your organization's existing products or services within a simple diagram, thereby providing an understanding of your market standing. The ease of its setup makes it even more valuable. Your ultimate objective in developing this tool is to gain an unbiased view of your products and their worth to a buyer. To achieve this, you merely need to classify them into three categories.

Pioneers are products that embody tangible innovative value. Your customers don't merely buy them; they adore them. Your pioneers are the golden key to your company's unique appeal and future profits.

Contrastingly, settlers are products that mirror your competitors' offerings; they are derivatives of imitating the competition and only slightly enhance existing offerings.

Finally, migrators occupy the middle ground. While these products offer more value than competitors, they lack true innovation.

Drawing your pioneer-migrator-settler map is a breeze. Simply divide a square horizontally into three sections. In the bottom section, depict your settlers as circles, repeat the same with your migrators in the middle, and place your pioneers at the top. Vary the size of the circles to represent the revenue each product generates—the larger the circle, the higher the revenue.

After you've drawn the map, scrutinize the distribution. The more your business relies on settlers, the higher its vulnerability in the future. Hence, your blue ocean initiative will aim to create larger circles of pioneers and ascend your migrators up a notch.

Map out your competitive value vis-à-vis your competitors to gain a crystal-clear understanding of your market position.

The second instrument for navigating a blue ocean approach is termed the strategy canvas, a technique crafted to generate a comprehensive snapshot of your existing business strategy and the competitive factors driving your industry. The strategy canvas delineates the competitive elements in your industry and the value buyers derive from each of these factors.

To put it simply, imagine a graph where the horizontal axis represents the primary competitive elements within your industry and the vertical axis indicates the level of each factor's offerings, ranging from low to high. To visualize this, recall the charity mentioned earlier. The competitive factors in that instance could be the percentage of every dollar that contributes to the cause and the expenses involved in fundraising.

Creating your strategy canvas commences with identifying crucial competitive elements akin to these, selecting anywhere between five and twelve. Subsequently, pick a significant player from your industry for comparison. If feasible, opt for the industry leader to comprehend the benchmark within your field. If that's you, then choose your closest competitor.

Lastly, on a scale from one to five—with one being very low and five being very high—rate both your offerings and those of your competitor for each factor, plotting your graphs as you progress.

Upon its completion, your strategy canvas can provide substantial insights. For instance, if your curve closely mirrors your competitor's, you're swimming in a red ocean of competition. If your curve consistently ranks lower, your offerings are generally subpar.

Thus, the strategy canvas emerges as a potent tool that underscores the necessity for a blue ocean shift. It aligns your entire team and uncovers potential avenues through which your organization can deviate from established industry norms.

Map the customer journey to enhance the accessibility of your product.

The third secret weapon in your market-creation arsenal is the capacity to detect concealed pain points. These are areas in your industry that hinder your product's appeal or deter prospective customers.

Take the United States, for instance, where wine accounts for merely 15 percent of alcohol sales. What contributes to such a low percentage?

Consider the last time you bought a bottle of wine for yourself. Wasn't it taxing to select from a plethora of options? Or the number of people who grapple with opening a wine bottle effortlessly?

Such pain points can restrict the growth of your industry, unless you uncover and address them. To do this, sketch a buyer utility map, a tool conceptualized by the authors.

In essence, this map is a table encompassing six rows and six columns. The columns denote the six stages of the buyer experience cycle: purchase, delivery, use, supplements, maintenance, and disposal. The rows represent the six utility levers: customer productivity, simplicity, convenience, risk reduction, fun and image, and environmental friendliness.

For a wine buyer, the journey would commence with searching for the appropriate bottle, buying it, opening and sharing it, consuming the wine, and ultimately disposing of the empty bottle. At each step, the utility rows can be filled by probing into questions like:

What impedes customer productivity? What obstructs simplicity? How is convenience hampered? What hinders risk reduction? What dampens the fun? And what hampers environmental friendliness? While pondering each of these inquiries, it's crucial to consider why each answer has its respective effect.

After populating all 36 cells in the table, reflect on how many of them your industry addresses. Which pain points can you mitigate?

By discerning the pain points specific to your industry, you'll be equipped to implement changes that attract individuals not currently purchasing your product. Recall the charity, Comic Relief. Their Red Nose Day initiative eliminated the obstacle of making a small donation. Consequently, individuals who typically wouldn't participate in a charitable drive—including children and low-income families—were able to contribute to a worthy cause.

Employ a straightforward framework to discover abundant opportunities.

The fourth instrument in your blue ocean toolbox is termed the six paths framework. It's an excellent method for generating blue ocean opportunities.

The inaugural path involves exploring alternative industries. Your objective here is to understand why customers opt for one industry over another. For example, why would some individuals engage a plumber while others simply visit a hardware store?

The second path necessitates inspecting strategic groups within your industry. The aim here is to discern why buyers might select one product group, like high-value, over another, such as low-cost.

The third path entails an examination of the chain of buyers. This refers to those individuals who purchase your product and subsequently influence others' buying decisions. Take, for instance, a pre-teen girl. She has an ample wardrobe, but her parents foot the bill, and her sartorial choices are likely swayed by her favorite pop star. By pinpointing such a chain of buyers, you can concentrate on the ones your industry presently overlooks.

Next, it's time to contemplate the broader solution that buyers are seeking. For this, analyze the context in which your product functions and identify what transpires before, during, and after its usage.

Take the example of the electric kettle industry in Britain, a classic red ocean.

Britons enjoy their afternoon tea, but before they can brew it, they must rid their kettles of limescale. Observing this issue, the company Philips introduced a filter that automatically removes the scale.

The ensuing path is to rethink the equilibrium between functionality and emotion within your industry. While some industries are purely functional, such as law—where lawyers aren't concerned with invoking positive emotions, but merely accomplishing their task—you could potentially redefine such orientations to open fresh opportunities.

And finally, the sixth path involves molding external trends that impact your industry. Kick off by identifying those trends that influence you. In the context of agriculture, for example, this could be climate change. Once you've identified these, contemplate ways to adapt to these trends—or even better—shape them.

Forge your blue ocean strategy by questioning assumptions with a strategic set of inquiries.

The six paths framework can assist you in pinpointing potential amendments you can implement. However, to leverage these insights, you must condense them into tangible options for blue ocean shifts. The instrument for accomplishing this is named the four actions framework, serving as the concluding portion of step four.

This framework hinges on four inquiries and their corresponding actions. The inaugural question is: what aspects does your industry consider indispensable, yet could actually be eradicated?

Consider the case of citizenM, a hotel chain that enacted a blue ocean shift within the fiercely competitive hospitality industry, providing budget-friendly luxury accommodations.

The method? By eliminating, among other components, the reception desk and concierge services.

These core services have been traditionally deemed vital for luxury hotels, but it appears they're not that essential. At citizenM hotels, guests utilize a self-service check-in kiosk, eliminating waiting lines.

The subsequent question to pose is, what factors should be diminished well below the industry norm? Here again, citizenM offers an insightful instance. They significantly downsized room dimensions, positing that visitors wouldn't spend much time in their rooms except when sleeping.

However, if you're implementing cuts, you need to provide something in return. Consequently, the third question is: which aspect should be escalated well above the industry standard?

For citizenM, the answer was enhancing the opulence of the guests' sleeping surroundings. This entailed providing extra large beds, high-end linens, and complete tranquillity.

Lastly, contemplate which amenities or attributes that have never been provided before should be introduced. For instance, since citizenM eliminated the reception desk, the company rolled out versatile "ambassadors" tasked with addressing guests' queries and resolving minor issues that may arise.

By asking the above questions pertinent to your own business setting, you can swiftly formulate a blue ocean strategy suitable for you. Achieving this brings you to the ultimate step: executing your blue ocean shift. You'll get a handle on this in the following summary.

Assemble your leading talent, pinpoint your prime blue ocean option, and take the plunge.

Upon executing the preceding step, you'll have devised numerous thoroughly developed options for a blue ocean shift. In this ultimate, fifth step, your mission is to identify the most promising one and set it into motion.

To accomplish this, arrange a blue ocean fair and call upon your most distinguished talent, assembling leaders from various departments within your organization. You should, at the very least, invite the head of your main division along with her premier team, the chiefs of marketing, production, human resources, finance, IT, and logistics. You could even extend invitations to customers, partners, and suppliers if you see fit.

During the event, kick off with a recap of your industry, encompassing all its red oceans, followed by a clarification of why a blue ocean shift is necessary. After establishing that, present the assorted blue ocean alternatives you have at your disposal.

For each option, commence with the new product's slogan. Display the strategy you forged in step two using your strategy canvas and guide your audience through the four actions framework you developed in step four. Keep in mind, it's crucial for everyone to comprehend the reasoning supporting your different options.

Once all presentations have concluded, allocate some time for reflection. You might even set up mini stations furnished with posters outlining all the options for participants to contemplate. Finally, prompt everyone to vote on their preferred choice. This could be as straightforward as distributing post-it notes for people to affix to the posters they found most enticing. You can also take this opportunity to gather feedback on why individuals lean towards a specific option.

From there, you'll have your blue ocean option in view and will be prepared to implement your novel concept. With some determination and a touch of good fortune, you'll be navigating the uncharted waters of your blue ocean in no time!

Concluding thoughts

The majority of businesses navigate the red oceans, defined by fierce and ruthless rivalry. However, this isn't the only route. By adopting a systematic approach, you can orchestrate a blue ocean shift that steers you clear of competition and unveils fresh, unexplored market opportunities.