Blue Ocean Strategy in Business

Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market space. Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne Included with this full-text Harvard Business Review article: 70 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 71 Blue Ocean Strategy 80 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications Reprint R0410D Blue Ocean Strategy The Idea in Brief

The best way to drive profitable growth? Stop competing in overcrowded industries.

In those red oceans, companies try to outperform rivals to grab bigger slices of existing demand. As the space gets increasingly crowded, profit and growth prospects shrink. Products become commoditized. Ever-more-intense competition turns the water bloody. How to avoid the fray? Kim and Mauborgne recommend creating blue oceans— uncontested market spaces where the competition is irrelevant. In blue oceans, you invent and capture new demand, and you offer customers a leap in value while also streamlining your costs.

Results?

We chose to show American industries because they represented the largest and leastregulated market during our study period. The pattern of blue ocean creations exempli? ed by these three industries is consistent with what we observed in the other industries in our study. harvard business review • october 2004 page 73 Blue Ocean Strategy Key blue ocean creations Was the blue ocean created by a new Was it driven by entrant or an technology pioneering incumbent? or value pioneering? New entrant Value pioneering* (mostly existing technologies) Value pioneering (some new technologies) Value pioneering (some new technologies)

At the time of the blue ocean creation, was the industry attractive or unattractive? Unattractive Automobiles Ford Model T Unveiled in 1908, the Model T was the ? rst mass-produced car, priced so that many Americans could afford it.

GM’s “car for every purse and purpose” GM created a blue ocean in 1924 by injecting fun and fashion into the car. Incumbent Attractive Japanese fuel-ef? cient autos Japanese automakers created a blue ocean in the mid-1970s with small, reliable lines of cars. Incumbent Unattractive Chrysler minivan

With its 1984 minivan, Chrysler created a new class of automobile that was as easy to use as a car but had the passenger space of a van. Incumbent Value pioneering (mostly existing technologies) Unattractive Computers CTR’s tabulating machine In 1914, CTR created the business machine industry by simplifying, modularizing, and leasing tabulating machines. CTR later changed its name to IBM. Incumbent Value pioneering (some new technologies) Unattractive IBM 650 electronic computer and System/360 In 1952, IBM created the business computer industry by simplifying and reducing the power and price of existing technology.