Overview
Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne, professors at INSEAD, first published as an article in Harvard Business Review in October 2004 and expanded in their book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (2005, Harvard Business School Press; expanded edition 2015). A follow-up, Blue Ocean Shift (2017, Hachette Books), provides more practical implementation guidance.
The core distinction:
- Red oceans: existing industries where competitors fight for the same customers — the competitive rules are known, differentiation is incremental, margins are compressed, and the water is figuratively bloody
- Blue oceans: new, uncontested market spaces — either entirely new industries or new pockets of demand within or adjacent to existing industries — where the competitive rules haven't been set and the opportunity for profitable growth is high
The strategic logic is value innovation: simultaneously pursuing differentiation and low cost, rather than accepting the traditional trade-off between them. Value innovation creates a leap in value for buyers while reducing costs — making the competitive comparison moot rather than fighting it.
Two key analytical tools:
The Strategy Canvas: a line graph plotting how an industry's players perform on the key factors of competition (price, features, service, etc.). A company's "value curve" shows where it competes along these dimensions. Blue Ocean strategies produce value curves that diverge visibly from the industry norm.
The Four Actions Framework: a systematic way to reconstruct a value curve by asking:
- Eliminate: which factors that the industry takes for granted should be removed entirely?
- Reduce: which factors should be brought well below the industry standard?
- Raise: which factors should be elevated well above the industry standard?
- Create: which factors should be created that the industry has never offered?
Kim and Mauborgne's recurring examples: Cirque du Soleil (eliminated animals and star performers from circus, created theatrical experience); Southwest Airlines (eliminated meals and hub connections, raised frequency and friendliness); [yellow tail] wine (eliminated complexity and prestige, created approachable simplicity).
When to Use It
When a client faces intense competitive pressure in a mature market and is looking to escape rather than fight harder. Also valuable for product strategy, market entry, and innovation sessions where the client is stuck thinking within the existing competitive frame. Blue Ocean is most useful as a generative tool — it helps teams see new possibilities by systematically questioning what the industry takes for granted.
How It Works
- Draw the current Strategy Canvas — identify the key factors of competition in the industry; plot the industry average and the client's current value curve.
- Identify where value is concentrated and wasted — which factors are expensive but not valued by the target customer? Which are underinvested but matter a great deal?
- Apply the Four Actions Framework — for each factor: Eliminate? Reduce? Raise? Create? Force genuine choices; do not simply raise everything.
- Define the target non-customer — Blue Ocean strategies often succeed by serving people who are not current customers of the industry. Who is being excluded by the current model? What would bring them in?
- Draw the new value curve — what does the client's profile look like after the Four Actions? Does it diverge meaningfully from the industry standard?
- Test for viability — does the new model create sufficient value that customers would switch? Does the cost structure work at the required price point?
Running It in a Session
Blue Ocean is best used as a generative lens, not an analytical one — its job is to open possibility space. Use the Four Actions Framework in the development phase when the team is generating strategic options. The Skeptic's most important role here is pushing back on Eliminate and Reduce: these are the moves teams most resist, and they're often where the real innovation and cost advantage are hidden.
The deliverable is usually a sketched Strategy Canvas showing the current state and a proposed future value curve, with the strategic logic explained: "We're proposing to eliminate X, significantly reduce Y, raise Z, and create W — and here's why we believe that unlocks a customer segment we're currently not reaching."
Common Pitfalls
- Misidentifying permanence — every market eventually turns red; a blue ocean today is contested in five years; the framework is about how to find and create new space, not a permanent strategic state
- Only raising and creating — the power of the Four Actions Framework comes from the Eliminate and Reduce moves; a "blue ocean strategy" that only raises and creates is expensive differentiation, not value innovation
- Ignoring execution — the framework is better at generating strategy options than at implementation; a brilliant value canvas that the organization can't actually build is not a strategy
- Over-relying on the examples — Cirque du Soleil and Southwest are compelling but exceptional; most applications are more modest; don't oversell the transformation potential
References & Further Reading
- Kim, W. Chan and Mauborgne, Renée. "Blue Ocean Strategy." Harvard Business Review (October 2004)
- Kim, W. Chan and Mauborgne, Renée. Blue Ocean Strategy (2005; expanded edition 2015, Harvard Business School Press)
- Kim, W. Chan and Mauborgne, Renée. Blue Ocean Shift (2017, Hachette Books)
Recommended Books
- Blue Ocean Strategy — Kim & Mauborgne
- Blue Ocean Shift — Kim & Mauborgne
- Good Strategy Bad Strategy — Richard Rumelt