Blue Ocean Strategy

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Blue Ocean Strategy is a book which promises to deliver readers the tools they require to help them create businesses with strong growth potential. The opposite of a blue ocean is a red ocean, where companies compete in a bloody fight for market share. Those companies that can head for the blue ocean will leave their competitors duking it out, while they luxuriate in uncontested market space.

The book is split into two parts: the first provides the analytical tools to examine the marketplace, and to seek out the ways in which a company can break away from the competition. The second part is slightly more theoretical, comparing this mode of thinking with traditional competition-based strategic planning.

There are six overriding principles of Blue Ocean Strategy. The first four are guidelines for formulating strategy, whilst points five and six focus more on how you execute against your new strategy:

• Reconstruct market boundaries
• Focus on the big picture, not the numbers
• Reach beyond existing demand
• Get the strategic sequence right
• Overcome key organizational hurdles
• Build execution into strategy

My favourite tool that the book provides is the strategy canvas. This is a very visual tool that lets you compare strategies against competitors – both substitutes and alternatives. As I read it though, I thought that it all seemed a bit familiar. Then I realised that I’d previously read an article by the authors a few years back in the Financial Times, and had recently been using the technique in a plan I was writing! Reading the book provided a more in-depth understanding of how they work, so I’m already revisiting the charts. The chart below (taken from here) illustrates how Southwest’s strategy clearly separates them from the rest of the domestic US airlines.

Whereas the other airlines try to be great at everything, Southwest eliminated several aspects (which allowed them to reduce their cost base) and introduced an entirely new feature to compete against airlines with: frequent departures. You can also see how Southwest’s strategy compares against an alternative their customers have: cars. In fact, Southwest’s value line looks more like the car’s line than the other airlines. The book’s authors maintain that you need to have a distinct shape to the strategy like this in order to provide focus, and I can’t argue with that. The chart also provides a handy reference for employees to make sure that what they’re doing matches with what the organisation is striving for.

The book works well because although it is obviously about high-level strategic planning, it doesn’t come across as being too high-level. The tools provided are very practical and easy to understand, if not easy to apply — though if it was easy I’m sure everyone would be doing it. I read it in about 3 hours, and I felt I understood both how the toolkit could be applied, and the underlying theory of it all. Although a lot of my thinking is typically around high-tech businesses, the framework is not limited to that space. Indeed, Cirque du Soleil is the exemplar company used most often, so I think it’s safe to say that you can utilise the thoughts laid out here no matter your business.

Tags: bookreview, books, businessbooks, strategy