Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

W. Chan Kim & Renée Mauborgne’s blue ocean model departs from traditional market strategy because it asks businesses who wish to break out of the red waters of bloody competition to redefine the boundaries of the industry. In other words, they should not focus on outcompeting their rivals, but create a product so fundamentally different and attractive as to completely disregard the presence of competitors. To this end, they coined the term “value innovation,” which is defined as the ability to innovate on the utility a product provides its buyers without incurring high costs.

According to traditional market models, this was considered an impossible feat: Businesses locked in breakneck competition could only pursue either differentiation or low costs. On one hand, if they wished to provide additional value to customers and improve their product beyond that of their rivals, they usually did so by investing in costly research and development and running the risk of failing. On the other hand, if they hoped to gain a greater share of the market over their rivals without increasing their costs, they would need to find ways to work more efficiently and reduce the price of the product, since undifferentiated products only appeal to customers if they are cheaper than the rest.