"The only way to beat the competition is to stop trying to beat the competition." - W. Chan Kim & Renée Mauborgne
BUSINESS IS WAR
Business is a competition, now more than ever. Some people would even say it is war. In fact, the terminology of the business world overlaps with the military. For example, chief executive “officers” operate at “headquarters” and gather “intelligence” on their competitors. Traditional
business strategy is all about stealing your competitors' business. CEOs call this preserving market share (aka your "territory").
But what if there was a strategy that allowed managers to transcend this military paradigm and make their competition totally irrelevant? There is such strategy, and it is called Blue Ocean Strategy. W. Chan Kim and Renée Mauborgne of INSEAD have articulated this strategy by dividing the market universe into two groups – red oceans and blue oceans. These groups differ in their focus, how they treat demand, and how they view the pressures of competition.
Red oceans represent what is already known - the companies, markets, and industries that exist today. Red oceans are red because stagnant companies are fighting each other to the death to maintain their share of the market. The fight to preserve your share of the market is so fierce that companies symbolically draw blood from each other; this is where the red comes from in red oceans.
- The focus is on keeping the customers you have, and stealing customers from your competitors.
- The strategy is to exploit consumer demand that already exists.
- The competition is within existing market space, companies are battling over perceived limited resources.
Blue oceans represent the unknown - the companies, markets, and industries not yet in existence. Blue oceans are blue because innovative companies have utilized this new strategy to free themselves from the competitive pressures of more established markets. The authors define Blue Ocean Strategy as a way "to make the competition irrelevant by creating a leap in value for both the company and its customers."
- The focus is on non-customers, people who haven't purchased the product or have actively chosen not to purchase the red-ocean version of the product.
- Because of the potential in these blue oceans, the competition is irrelevant. Rules of the game have yet to be defined.
- Within a blue ocean there are unlimited opportunities to create new markets and new demand.