[Book 14] Blue Ocean Strategy by W. Chan Kim & Renee Maugborne

Blue Ocean Strategy explains how to create differentiated strategies that access untapped markets/consumers (i.e., blue oceans) instead of competing directly, which destroys value.
W. Chan & Renee remind us that the rules of how we compete in established industries are not permanently fixed, and those who strategically deviate from these norms are best positioned to succeed. Sustainable value is created by generating consumer demand with an attractive offfering that previously didn’t exist and/or is difficult for others to replicate, not by sacrificing profit to drive sales. Working in a seemingly established industry, this book reminds me to leverage the organization’s unique position and capabilities and develop strategies that intentionally differentiate from the competition.

You should read this book if you…

• struggle to differentiate your products and/or services
• seek industry-agnostic approaches on how to innovate
• are considering entering new markets

Additional Information

Year Published: 2014
Book Ranking (from 1-10): 9 – Excellent – Broad and very well articulated insights
Ease of Read (from 1-5): 3 – Average

Key Highlights

1. The customer, not competition should be the center of strategic thinking
2. Focus on creating blue oceans – areas of untapped market space and demand creation, where the competition is irrelevant because the rules of the game are waiting to be set
3. We underestimate the capacity to create new industries and rethink existing ones, despite recognizing that industries never stand still
4. The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space
5. Innovation needs to be aligned with utility, cost, and price, otherwise it’s lust laying the eggs for other companies to hatch
6. The strategic canvas has the most opportunity by focusing on alternative products and noncustomers, not the competition and existing customers
7. There is often a chain of “customers” (such as agents and end clients) who hold different definitions of value and what they prefer
8. Challenge two common strategy practices: 1) Focusing only on existing customers, 2) Finer segmentation to accommodate buyer differences
9. 3 Tiers of Noncustomers: a) minimal purchasers out of necessity, b) refuse to use the industry offerings, c) people who have never thought of the market’s offering as an option
10. You should not let costs drive prices. Nor should you scale down utility because high costs block your ability to profit at the strategic price. When the target cost cannot be met, you must either forgo the idea because the blue ocean won’t be profitable, or you must innovate your business model to hit the target cost. The cost side of a company’s business model ensures that it creates a leap in value for itself in the form of profit
11. The greatest blocks to utility often represent the most pressing opportunities to unlock exceptional value
12. Strategic price – profit margin = target cost, not the other way around
13. Four key organizational hurdles for a new strategy: 1) Convincing the need to deviate from the status quo, 2) Limited resources, 3) Motivation, 4) Politics
14. Tipping point leadership: Finding the acts and activities that exercise a disproportionate influence on performance. It’s about spending far fewer resources vs the magnitude of the challenge
15. There’s no substitute for meeting and listening to dissatisfied customers directly
16. Put the spotlight on kingpins (influencers) in a fishbowl to create fair accountability
17. Three Es of fair process: 1) Engagement – involving those affected in the decision, 2) Explanation – Provide reasoning why a decision was made, 3) Expectation – After the decision is made, clarity on the new rules of the game