The first chapter, “Creating BlueOceans,” introduces their thinking in amanner that is engaging and compelling.Their language of “creating” strategy, ratherthan the more traditional approaches tostrategy development, sets the tone for theentire book. This is not just about strategyanalysis and formulation; it is about usingsolid empirical data, rigorous analysis, and astrong dose of imagination.

According to the authors, a Blue Ocean is a market space that is created byidentifying an unserved set of customers,then delivering to them a compelling newvalue proposition. This is done by reconfig-

38 JULY – SEPTEMBER 2005CSCWORLD

W. Chan Kim and Renée Mauborgnehave made a real contribution to advancingthe thinking on business strategy, and they have done so with clear prose and anengaging style. They offer a set of practicalframeworks and models that enables one toquickly grasp what appear to be intuitivelyobvious points, but are in reality profoundinsights and breakthrough contributions tobusiness strategy literature.

By choosing as the title of their book acolorful metaphor not normally associatedwith strategy, the authors have given us asimple and memorable way of distinguishingtheir approach from more traditional ones.

BookREVIEW

A Blue Ocean is a market space that iscreated by identifying an unserved set of customers, then delivering to them acompelling new value proposition.

This is one small book that packs one big punch. At a mere 216 pages,including appendices, it’s a delightfuland satisfying read. Here’s why.

Blue Ocean StrategyReviewed by R. Lemuel Lasher

R. LEMUEL LASHER is the director of CSC’s Office of Innovation.

JULY – SEPTEMBER 2005 39CSCWORLD

uring what is on offer to better balance customer needs with the economic costs ofdoing so. This is as opposed to a Red Ocean,where the market is well defined and heavilypopulated by the competition. All parties inthese markets are engaged in an intensecompetitive struggle for the same customers,with different and incremental yet easilycomparable, value propositions.

The Blue Ocean is the unserved,unstructured demand that is all around us,if we could only see it. The Blue Oceanstrategy is all about avoiding head-to-headcompetition. Because established marketsin the developed world are saturated, head-to-head competition cannot bring attrac-tive returns.

At first read, it is so easy to understandand so intuitively obvious, that one is leftwondering why everyone doesn’t adopt thisapproach. By the end of the book, you are leftwondering if anyone is able to adopt thisapproach on a systematic basis. For to do sorequires a broad set of multi-disciplinaryskills as well as fresh thinking about even themost mundane and pedestrian options.It requires both discipline and inspiration.

So what is it and what distinguishes itfrom traditional strategy frameworks?

Kim and Mauborgne’s first point in distinguishing this from the traditionalstrategic frameworks is that in the traditionalbusiness literature, the company forms thebasic unit of analysis, and the industry analysisis the means of positioning the company.

Their hypothesis is that since marketsare constantly changing in their levels of favorability, and companies over timevary in their level of performance, it is theparticular strategic move of the company,and not the company itself or the industry,which is the correct criterion for evaluatingthe difference between Red and Blue Oceanstrategies.

This strikes first and foremost at theheart of Michael Porter’s competitive frame-work, and very effectively.

To effect this analysis, the authors intro-duce the concept of “value innovation.” The combination of value with innovation is not

resolves the trade-off dilemma. Instead of compromising the value wanted by thecustomer because of the high costs associatedwith delivering it, costs are eliminated orreduced if there is no or less value placed on the offering by the customer. This is areal win-win resolution that creates thecompelling proposition. Customers getwhat they really want for less, and sellers get a higher rate of return on invested capital byreducing startup and/or operational deliverycosts. The combination of these two is thecatalyst of Blue Ocean market creation.

So how do we sort this all out?To start with, the authors provide a

framework that is called the “strategy canvas.” This framework sets out the currentstate of play of the competition in terms ofwhat they are offering in value, as seen by the

just marketing and taxonomic positioning.It actually means something, and has enormous consequences. According to Kimand Mauborgne, “Value without innovationtends to focus on value creation on an incre-mental scale” and, “Innovation withoutvalue tends to be technology driven, marketpioneering, or futuristic, often overshootingwhat buyers are ready to accept and pay for.”

They continue: “Value innovationoccurs only when companies align innova-tion with utility, price and cost positions”and,“value innovation defies one of the mostcommonly accepted dogmas of competition-based strategy: the value-cost trade-off.”

Value innovation is intensely customerfocused, but not exclusively so. It balancescosts of delivering the value propositionwith what the buyer values, and then

At first, one is left wondering whyeveryone doesn’t adopt this approach.By the end of the book, you are left wondering if anyone is able to adopt this approach on a systematic basis.

BLUE OCEAN

BLUE OCEAN

BLUE OCEAN

INDUSTRY A

INDUSTRY B INDUSTRY C

BLUE OCEAN STRATEGY

customer. The technique for doing so iscalled the “value map.” This is done by iden-tifying the intersection between the particu-lar benefits on offer, and how these benefitsare configured by the competition. The trickof the exercise is to then apply some imagi-nation and creativity by asking “what if?”How can we configure a particular set ofbenefits that would in the aggregate create anattractive enough value proposition to createa new market, or capture a group of as yetun-served customers?

This is done by analyzing all that is onoffer competitively by function/feature,

restaurants. It competes with meals at home,and creates an entirely new way of getting thekids fed. McDonald’s is pure Blue Oceanstrategy. The gap on the map creates the BlueOcean space.

The remainder of the book offers a richset of frameworks and models that allow oneto easily follow and execute the process of“creating” a Blue Ocean strategy. Theseframeworks and models are introduced byciting numerous helpful and practical exam-ples of how other companies have found theBlue Ocean.

If there is one fault I can level againstthe book, it is that one gets the feeling that,by retroactively applying the framework andlanguage of Blue Ocean strategy to examplesof successful companies that have achievedmarket leadership, the authors are layingclaim to higher ground than they are entitled to. There is a point in the bookwhen the reader wonders if there has everbeen a successful business initiative that wasnot a Blue Ocean strategy.

One soon gets over this feeling as thebook progresses, and I found myself evenreading the appendices. It was that good. O

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identifying a subset of an overall value propo-sition where there is a mismatch betweenbuyer value and seller economics, and thenradically altering the proposition. The authorsrecommend four different means to do this:eliminating what is not valued, reducing whatis valued less, raising what is valued more, andcreating what no one else has.

The graph above represents an exampleof a “value curve” for McDonald’s. The pointof the curve is that McDonald’s has a radically different value proposition fromother restaurants. It is not really a restaurantat all, because it does not compete with other

BookREVIEW

In traditional business literature, the companyforms the basic unit of analysis.Their hypothesisis that the particular strategic move of the company, not the company itself, is the correctcriterion for evaluating the difference betweenRed and Blue Ocean strategies.

Key elements of product, service, and delivery