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

Atomization is the process of setting small, achievable goals to encourage daily effort. Its main purpose is to break down a larger goal into easier-to-manage pieces.

Blue oceans are uncontested market spaces characterized by little to no competition and potential for exponential growth. They are often contrasted with red oceans, which are not as desirable for businesses seeking to significantly increase profit.

Buyer value measures the utility a product or service provides to their customers. To generate mass demand in blue oceans, businesses must find ways to increase the buyer value of their product to appeal to a broader audience.

Cold spots are defined as aspects in an organization’s budgeting that take up unnecessary resources. They often drive costs up and prevent companies from breaking away from competition.

Fishbowl management is a style of management that promotes transparency and accountability. It typically includes regular meetings in which different levels of an organization come together to discuss their performances.

The four-action principle, also called the four-action framework, is a method that allows businesses to significantly increase buyer value without incurring high costs. It does this by shifting the value curve of a product to differ significantly from that of competitors to reach new customers. At the same time, it keeps costs down by eliminating and reducing values that are nonessential or inadequate while increasing or creating values that expand beyond the traditional boundaries of the industry.

Horse trading is a process in which two companies or departments trade away their surplus to save on production costs. This is an efficient way to budget for companies attempting to break away from red oceans.

Hot spots are aspects of an organization’s budgeting characterized by high performance and low costs. They are key to a successful blue ocean strategy because they significantly cut down costs while providing great value.

Kingpins are capable leaders who hold a strategic position in an organization; they are responsible for motivating employees and ensuring that lower levels of an organization effectively work toward a common goal.

The PMS map is a table that effectively illustrates when a company should consider renewing blue oceans. Pioneer products occupy blue ocean spaces; migrators are products for which competition is rising; and settlers are items in red oceans because they only offer comparable value to their competitors. Businesses can evaluate their current products, chart a PMS map, and pursue blue oceans when the balance disproportionately favors settler and migrator products.

Red oceans are market spaces characterized by bloody competition between rival companies. Traditional economic principles encourage companies to cut costs or provide higher product value to stay relevant in red ocean spaces. However, this typically prevents any company from capturing a higher market share than the others and traps them in a system with little possibility of growing profit.

The six paths framework is a tool developed by the authors to help businesses reconstruct market boundaries. They are each discussed in turn in Chapter 3.

There are six stages to the buyer’s experience, which can affect their evaluation of a product’s worth. These stages are purchase, delivery, use, supplements, maintenance, and disposal. Each of these can present a barrier to entry, and companies that wish to break into blue oceans must attempt to maximize buyer value in each of these categories.

There are six utility levers to a product that can prevent or encourage customers to purchase it. These levers include customer productivity, simplicity, convenience, risk, fun and image, and environmental friendliness. These levers apply to each of the six stages of the buyer circle above in turn, and maximizing each lever will in turn maximize buyer value.

A strategy canvas involves sketching a table of a product’s value curve and comparing it with that of competing businesses. When drawn adequately, the strategy canvas can quickly demonstrate points of convergence in value curves, and too much convergence can lead to bloody competition in red waters. For companies to break into blue oceans, then, they must shift their value curve to reflect something unique, such as through reducing or eliminating values that are inconsequential while innovating on others that may attract a wider range of customers.

Substitutes are products that have the same functionality but take different forms. For example, a computer and a keyboard serve the same function of writing as paper and pen, but they do it in a digital rather than traditional format. Blue ocean strategy asks businesses to consider the value offered by substitute products to expand industry boundaries or value innovate.

Tipping point leadership is a style of management by which companies maximize their profit by identifying factors that disproportionately affect performance and address them specifically to conserve resources. When used correctly, tipping point leadership should result in a great performance boost without incurring high costs.

A value curve is comprised of several points that indicate a product’s key marketing focus. For example, it can include elements such as ease of use, speed, and flexibility. When value curves converge between products, businesses end up competing along the same lines, and therefore are trapped in bloody red oceans with little prospect for substantive profit growth. To break into blue oceans, businesses must look to shift their value curves away from the competition.