For the contents of this book, W. Chan Kim and Renee Mauborgne had researched more than fifteen (15) years, spanned from more than a hundred (100) years of data and reviewed a series of Harvard Business Review articles. The authors came up with the idea of “blue oceans” and “red oceans” in the marketing world. Their research reveals that when the market space is crowded and becomes very competitive, the potential for one to grow and make profit is very much reduced and this area is defined as the “red oceans”.
“Blue oceans”, on the other hand, are created new market space where success is achieved through innovation, and defined by identifying new demands with significant opportunity for highly profitable growth. The companies that focus on ‘value innovation’, implement the blue ocean approach, and offer the customers with new reasons to purchase, are able to enjoy the increase in their sales. W. Chan Kim and Renee Mauborgne agree that to find a blue ocean is not an easy task. But in this book, the authors explain how to systematically create and capture blue oceans.
One of their case studies focusses on the success story of Cirque du Soleil, an entertainment company in the circus industry which was established in 1984. For hundreds of years, circuses offer the tents, lions, tigers, bears, clowns, and acrobatic acts. Ringling Bros. and Barnum & Bailey, the global champion of circus industry, was in the red ocean and in a declining circus industry and struggled to survive. Cirque du Soleil developed a blue ocean by offering the audience with fun of the circus and sophistication of the theater, artistic music and dance.
Cirque du Soleil created a new market space, by blending opera and ballet with the circus format while eliminating star performers and animals. It earned billions and created a blue ocean. Kim and Mauborgne argue that companies that remain in the area where many industries are competing with each other and always make improvements on the products and services to gain greater share from the customers, will be unable to sustain in the market for long unless they opt to plunge into blue oceans. In the book the authors present six (6) principles of creating the blue ocean strategy.
The explanation of the six principles and description of the adoption of these principles by companies, build the main content of this book. Kim and Mauborgne identified six (6) principles to be adopted in order for industries to generate growth and profit. The first four (4) principles are the steps required to formulate the blue ocean strategy. They are: i. Reconstruct market boundaries ii. Focus on the big picture, not the numbers iii. Reach beyond existing demand iv. Get the strategic sequence right
The last two (2) principles provide the tools to implement the new strategies. They are: v. Overcome key organizational hurdles vi. Build execution into strategy In the book the authors describe each of the six principles in detail and draw the attention of the readers to the relationship between the success stories and the strategy that is being formulated and executed which Kim and Mauborgne termed as “Blue Ocean Strategy”. In this review I extract some of the concepts narrated by Kim and Mauborgne. Reconstruct Market Boundaries is the first principle.
This principle requires a reevaluation of the industry’s surroundings, and creation of uncontested market space for the company’s business. This is to open up a blue ocean. Kim and Mauborgne elaborate the six paths to remaking market boundaries i. e. looking across alternative industries, looking across strategic groups, looking across buyer groups, looking across complementary product and service offerings, looking across the functional-emotional orientation of an industry, and looking across time. Focus On The Big Picture, Not the Numbers is the second principle.
According to Kim and Mauborgne, many existing companies focus on the numbers (i. e. the cost of marketing and the projected profit margins) and too involve into making changes that keep them competing in the red oceans. Kim and Mauborgne suggest that to create blue oceans, the managers have to think what the customers really want from the organization and how the organization processes can provide the customers with successful outcomes. Kim and Mauborgne believe that the managers should focus on the big picture, using an approach which they termed as visualizing approach.
This principle proposes a four-step strategy planning to create blue ocean. The visual approach involves visual awakening, visual exploration, visual strategy fair, and visual communication. Reach Beyond Existing Demand is the third principle which addresses scale risk. The conventional strategy practice is more focus on segmenting the existing customers into smaller groups so as to better meet their needs. To maximize the size of the blue ocean, Kim and Mauborgne suggest to focus on the commonalities across noncustomers and not to dwell into customers’ differences.
Get The Strategic Sequence Right is the fourth principle. This principle addresses business model risk. Kim and Mauborgne describe in detail the strategic sequence of validating the blue ocean ideas. This is to ensure that the business model that is planned will be profitable. The strategic sequence mentioned is as follows: buyer utility, price, cost, and lastly adoption hurdles. Overcome Key Organizational Hurdles is the fifth principle. This principle addresses the organizational risk.
Kim and Mauborgne point out that to execute the blue ocean strategy successfully, the managers need to overcome the four (4) organizational hurdles that are very challenging. The first hurdle is cognitive hurdle of the company’s staff readiness to accept the need for change, the shift into blue ocean strategy, the second is limited resources hurdle, the third hurdle is motivation hurdle on how to handle the unmotivated staff especially the company key personnel to move fast and determinedly, and the final hurdle is politics.
Successful execution of the blue ocean can only be achieved when all internal departmental differences is resolved. Build Execution Into Strategy is the sixth principle. This principle addresses the management risk. The organization needs to create a culture of trust and commitment that can motivate the people to implement and accept the blue oceans strategy whole heartedly. Kim and Mauborgne research shows that fair process is vital to the success of blue oceans implementation.
Everyone in the organization, at all levels, have important role to play in the success execution of the blue oceans strategy. After reading the book, I can summarize the idea behind the Blue Ocean Strategy in two main statements which are: ( a) instead of competing in a crowded and competitive market (red oceans), companies should turn to explore new uncontested market space (blue oceans), (b) Value Innovation is a process that can create value to the customers and the company. These ideas are fine to me, and I like it.
As I’ve mentioned earlier in the 1st paragraph, the only thing that I’m not fond of the book is that there’s too many repetitive statements, whereas the whole idea in the book is just as I’ve summarized in the earlier statement of this paragraph. It is too tiresome to complete the book. One thing I like about the book is that Kim and Mauborgne use many examples and cases of successful companies executing excellent strategies that are exemplary. The stories of the success of the industries are very inspiring as compared to the theories of the Blue Oceans.
Kim and Mauborgne strongly believe that the success of the industries that are studied demonstrate how to get out of the red oceans and dive into the blue oceans strategic thinking. In the book Kim and Mauborgne only elaborate on the blue ocean strategic thinking based on many successful industries. I begin to wonder how many companies that formulate and execute blue ocean strategy fail to grow their companies’ demands and profits, in other words the blue ocean strategy FAILS!!!
If it does, then the theory is not fully grounded. The book does not make case studies or make any deduction on companies that execute blue ocean strategy but fail. Nevertheless the successful stories of the companies are very inspiring to me. Anyway, I wish to include in this review of my country, Malaysia, using the principles suggested by Kim and Mauborgne to formulate and execute blue ocean strategy , customized to the Government’s mission and vision, in the Government’s Transformation Program (GTP).
In order to achieve the goal of Malaysia becoming a high-income, low-tax and happy country, the government adopted a unique Malaysian model of national development which is based on the reconstruction approach of Blue Ocean Strategy (BOS). The National Blue Ocean Strategy (NBOS) was developed with the intention to motivate the economic growth and happiness simultaneously through the multiplication of resources and the reconstruction of borders, while lowering taxes for people.
About fifty five (55) initiatives involving more than eighty (80) government agencies have been implemented using the National Blue Ocean Strategy (NBOS) concept to date, which have benefited the people and touched their lives at a more personal level. The Finance Ministry, in its 2013/2014 Economic Report, said that the NBOS was boldly introduced into the civil service by Prime Minister Datuk Seri Najib Razak in 2009 to advocate ‘thinking out of the box’ to implement projects and programs, as well as address issues confronting the economy.
Among the ongoing NBOS initiatives were urban transformation centres (UTC), rural transformation centres (RTC), collaboration between military and police to fight crime, 1Malaysia for Youth (1M4U), 1Malaysia Family Care (1MFC) and My Beautiful Neighbourhood (MyBN) (Times, 2013). Initiative using NBOS was also introduced in the collaboration between the police and armed forces in combating crime while at the same time reducing government expenditure and maximizing resources
The joint military-police program saw policemen undergoing training in military camps. The Home Minister Datuk Seri Dr Ahmad Zahid Hamidi said that more measures would be in place to strengthen the police and armed forces collaboration as part of the National Blue Ocean Strategy. There are currently seventeen (17) National Blue Ocean strategies in place and several new measures to further strengthen collaboration between the Home and Defence ministries are also the initiatives using.