Creating Blue Oceans

The Four Steps of Visualizing Strategy: Step Two — Visual Exploration

Continuing in our series which takes a closer look at each step in creating a Blue Ocean Strategy Canvas, our focus advances to the second step — Visual Exploration. Once featured, each step is made accessible through the Blue Ocean Strategy Basics archive .  For the second step, we turn to pages 88 — 89 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):



The next step is to send a team into the field, putting managers face-to-face with what they must make sense of: how people use or don’t use their products or services. This step may seem obvious, but we have found that managers often outsource this part of the strategy-making process.  They rely on reports that other people (often at one or two removes from the world they report on) have put together.

A company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. The same is true for great strategists. Michael Bloomberg, before becoming mayor of New York City, was hailed as a business visionary for his realization that the providers of financial information also needed to provide online analytics to help users make sense of the data. But he would be the first to tell you that the idea should have been obvious to anyone who had ever watched traders using Reuters or Dow Jones Telerate. Before Bloomberg, traders used paper, pencil, and handheld calculators to write down price quotes and figure fair market values before making buy and sell decisions, a practice that cost them time and money as well as built-in errors.

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The Four Steps of Visualizing Strategy: Step One — Visual Awakening

Continuing with weekly insights on Blue Ocean Strategy fundamentals, we advance to the Strategy Canvas.  This visual process has four steps.  Today we focus on the first step — Visual Awakening, which, along with each step to follow, will be made accessible through the Blue Ocean Strategy Basics archive.  For the first step in visualizing strategy, we turn to pages 84 - 85 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

A common mistake is to discuss changes in strategy before resolving differences of opinion about the current state of play. Another problem is that executives are often reluctant to accept the need for change; they may have a vested interest in the status quo, or they may feel that time will eventually vindicate their previous choices. Indeed, when we ask executives what prompts them to seek out blue oceans and introduce change, they usually say that it takes a highly determined leader or a serious crisis.

Fortunately, we’ve found that asking executives to draw the value curve of their company’s strategy brings home the need for change. It serves as a forceful wake-up call for companies to challenge their existing strategies. That was the experience at EFS (a European Financial Services Co.).  A detailed illustration of EFS’ visual awakening is provided on pages 85-87 of Blue Ocean Strategy.

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Blue Ocean Strategy Path 6: Look across time

Continuing in our series which takes a closer look at each of the paths in Blue Ocean Strategy’s Six Paths Framework, our focus advances to the sixth and final path — looking across time.  This path, along with each previously highlighted path, is made accessible through the Blue Ocean Strategy Basics archive.  For our highlight of the sixth path, we turn to pages 75 - 78 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

All industries are subject to external trends that affect their businesses over time. Think of the rapid rise of the Internet or the global movement toward protecting the environment. Looking at these trends with the right perspective can show you how to create blue ocean opportunities.

Most companies adapt incrementally and somewhat passively as events unfold. Whether it’s the emergence of new technologies or major regulatory changes, managers tend to focus on projecting the trend itself. That is, they ask in which direction a technology will evolve, how it will be adopted, whether it will become scalable. They pace their own actions to keep up with the development of the trends they’re tracking.

But key insights into blue ocean strategy rarely come from projecting the trend itself. Instead they arise from business insights into how the trend will change value to customers and impact the company’s business model. By looking across time — from the value a market delivers today to the value it might deliver tomorrow — managers can actively shape their future and lay claim to a new blue ocean. Looking across time is perhaps more difficult than the previous approaches we’ve discussed, but it can be made subject to the same disciplined approach. We’re not talking about predicting the future, something that is inherently impossible. Rather, we’re talking about finding insight in trends that are observable today.

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Blue Ocean Strategy Path 5: Look across functional or emotional appeal to buyers

This week we advance to the fifth path in the Blue Ocean Six Paths Framwork, which involves looking across functional or emotional appeal to buyers. As each path is highlighted, it becomes available in our Blue Ocean Strategy Basics archive.   For the fifth path, we turn to pages 69 - 70 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space. We have observed two common patterns. Emotionally oriented industries offer many extras that add price without enhancing functionality. Stripping away those extras may create a fundamentally simpler, lower priced, lower-cost business model that customers would welcome. Conversely, functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion and, in so doing, can stimulate new demand.

Two well-known examples are Swatch, which transformed the functionally driven budget watch industry into an emotionally driven fashion statement, or The Body Shop, which did the reverse, transforming the emotionally driven industry of cosmetics into a functional, no-nonsense cosmetics house.

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Blue Ocean Strategy Path 4: Look across complementary products and service offerings

Continuing in our series which takes a closer look at each of the paths in Blue Ocean Strategy’s Six Paths Framework, our focus shifts to the fourth path — looking across complementary products and service offerings.  During the upcoming weeks we will highlight the remaining two paths, with each becoming accessible in the Blue Ocean Strategy Basics archives.  Today, for the fourth path, we turn to page 65 - 66 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):


Few products and services are used in a vacuum. In most cases, other products and services affect their value. But in most industries, rivals converge within the bounds of their industry’s product and service offerings. Take movie theaters. The ease and cost of getting a babysitter and parking the car affect the perceived value of going to the movies. Yet these complementary services are beyond the bounds of the movie theater industry as it has been traditionally defined. Few cinema operators worry about how hard or costly it is for people to get babysitters. But they should, because it affects demand for their business. Imagine a movie theater with a babysitting service.

Untapped value is often hidden in complementary products and services. The key is to define the total solution buyers seek when they choose a product or service. A simple way to do so is to think about what happens before, during, and after your product is used. Babysitting and parking the car are needed before people can go to the movies. Operating and application software are used along with computer hardware. In the airline industry, ground transportation is used after the flight but is clearly part of what the customer needs to travel from one place to another.

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Blue Ocean Strategy Path 3: Look across the chain of buyers

Moving ahead in our Blue Ocean Strategy Six Paths Framework series, our focus advances to the third path — looking across the chain of buyers.  As we continue to highlight the remaining paths, each will become accessible in the Blue Ocean Strategy Basics archives section.  Today, for the third path, we turn to page 61 - 62 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

Individual companies in an industry often target different customer segments — for example, large versus small customers. But an industry typically converges on a single buyer group. The pharmaceutical industry, for example, focuses overridingly on influencers: doctors. The office equipment industry focuses heavily on purchasers: corporate purchasing departments. And the clothing industry sells predominantly to users. Sometimes there is a strong economic rationale for this focus. But often it is the result of industry practices that have never been questioned. Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of new blue ocean. By looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers.

Think of Novo Nordisk, the Danish insulin producer that created a blue ocean in the insulin industry….  [Novo Nordisk] saw that it could break away from the competition and create a blue ocean by shifting the industry’s longstanding focus on doctors to the users — patients themselves. In focusing on patients, Novo Nordisk found that insulin, which was supplied to diabetes patients in vials, presented significant challenges in administering. Vials left the patient with the complex and unpleasant task of handling syringes, needles, and insulin, and of administering doses according to his or her needs. Needles and syringes also evoked unpleasant feelings of social stigmatism for patients. And patients did not want to fiddle with syringes and needles outside their homes, a frequent occurrence because many patients must inject insulin several times a day. This led Novo Nordisk to the blue ocean opportunity of NovoPen, launched in 1985. NovoPen, the first user-friendly insulin delivery solution, was designed to remove the hassle and embarrassment of administering insulin.

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Blue Ocean Strategy Path 2: Look Across Strategic Groups Within Industries

Continuing in our series which takes a closer look at each of the paths in Blue Ocean Strategy’s Six Paths Framework, our focus shifts to the second path — looking across strategic groups within industries.  During the upcoming weeks we will highlight the remaining four paths, with each becoming accessible in the Blue Ocean Strategy Basics archives.  Today we turn to page 56 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

The key to creating a blue ocean across existing strategic groups is to break out of this narrow tunnel vision by understanding which factors determine customers’ decisions to trade up or down from one group to another.

Consider Curves, the Texas-based women’s fitness company. Since franchising began in 1995, Curves has grown like wildfire, acquiring more than two million members in more than six thousand locations, with total revenues exceeding the US$ 1 billion mark. A new Curves opens, on average, every four hours somewhere in the world.

What’s more, this growth was triggered almost entirely through word of mouth and buddy referrals. Yet, at its inception, Curves was seen as entering an oversaturated market, gearing its offering to customers who would not want it, and making its offering significantly blander than the competition’s. In reality, however, Curves exploded demand in the U.S. fitness industry, unlocking a huge untapped market, a veritable blue ocean of women struggling and failing to keep in shape through sound fitness. Curves built on the decisive advantages of two strategic groups in the U.S. fitness industry — traditional health clubs and home exercise programs — and eliminated or reduced everything else.

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Blue Ocean Strategy Path 1: Look Across Alternative Industries

As part of our Blue Ocean Strategy Basics series, over the course of the next six weeks we will highlight each of the Six Paths. These paths challenge the six fundamental assumptions underlying many companies’ strategies.  Once published, each path will then become accessible in the Blue Ocean Strategy Basics archives.  Today we turn to page 49 – 50 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne) for the first Path:

In making every purchase decision, buyers implicitly weigh alternatives, often unconsciously. Do you need a self-indulgent two hours? What should you do to achieve it? Do you go to movie, have a massage, or enjoy reading a favorite book at a local café? The thought process is intuitive for individual consumers and industrial buyers alike.

For some reason, we often abandon this intuitive thinking when we become sellers. Rarely do sellers think consciously about how their customers make trade-offs across alternative industries. A shift in price, a change in model, even a new ad campaign can elicit a tremendous response from rivals within an industry, but the same actions in an alternative industry usually go unnoticed. Trade journals, trade shows, and consumer rating reports reinforce the vertical walls between one industry and another. Often, however, the space between alternative industries provides opportunities for value innovation.

Consider NetJets, which created the blue ocean of fractional jet ownership. In less than twenty years NetJets has grown larger than many airlines, with more than five hundred aircraft, operating more than two hundred fifty thousand flights to more than one hundred forty countries. Purchased by Berkshire Hathaway in 1998, today NetJets is a multibillion-dollar business, with revenues growing at 30–35 percent per year from 1993 to 2000. NetJets’ success has been attributed to its flexibility, shortened travel time, hasslefree travel experience, increased reliability, and strategic pricing. The reality is that NetJets reconstructed market boundaries to create this blue ocean by looking across alternative industries.

By offering the best of commercial air travel and private jets and eliminating and reducing everything else, NetJets opened up a multibillion-dollar blue ocean wherein customers get the convenience and speed of a private jet with a low fixed cost and the low variable cost of commercial airline travel.

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Blue Ocean Strategy Wisdom: Six Paths Framework

What is the Six Paths Framework, and how can it be used to reconstruct market boundaries in order to break from competition and create Blue Oceans?  As part of our ongoing series, Blue Ocean Strategy Wisdom, we turn to pages 47 – 48 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne), for the origin of the Six Paths Framework:

We found clear patterns for creating blue oceans. Specifically, we found six basic approaches to remaking market boundaries. We call this the six paths framework. These paths have general applicability across industry sectors, and they lead companies into the corridor of commercially viable blue ocean ideas. None of these paths requires special vision or foresight about the future. All are based on looking at familiar data from a new perspective.

These paths challenge the six fundamental assumptions underlying many companies’ strategies. These six assumptions, on which most companies hypnotically build their strategies, keep companies trapped competing in red oceans. Specifically, companies tend to do the following:

• Define their industry similarly and focus on being the best within it

• Look at their industries through the lens of generally accepted strategic groups (such as luxury automobiles, economy cars, and family vehicles), and strive to stand out in the strategic group they play in

• Focus on the same buyer group, be it the purchaser (as in the office equipment industry), the user (as in the clothing industry), or the influencer (as in the pharmaceutical industry)

• Define the scope of the products and services offered by their industry similarly

• Accept their industry’s functional or emotional orientation

• Focus on the same point in time — and often on current competitive threats — in formulating strategy 

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Blue Ocean Strategy Action #4: Create

Continuing with the next installment in our Blue Ocean Strategy Wisdom series, this week we move to the fourth and final action in the Four Actions Framework.  Once featured, each entry in this series is made accessible through the Blue Ocean Strategy Basics archive of this site.  For an overview of the fourth action, 'Create,' we continue with the example of Cirque du Soleil, as depicted on pages 36 - 37 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Cirque du Soleil created a refined environment, multiple productions, artistic music, dance, and pageantry, thus appealing to a whole new, massive group of customers — adults and corporate clients prepared to pay a price that is several times that of traditional circuses for an unprecedented entertainment experience.

By tapping into this new Blue Ocean marketspace, Cirque managed not only to create a whole new brand of live entertainment, but also to become one of the most recognized global brands in the world.

You can read more about the Cirque’s Blue Ocean Strategy journey in the Blue Ocean Strategy book itself, or in this article from Fast Company Magazine, as a way of inspiring you to take the four actions and chart the course of your business towards blue oceans.

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