The Blue Ocean Theory is a popular business strategy book that first saw the light of day in 2005. Its authors were Renee Moborn and Kim Chan, employees of the European top business school and the Institute of Blue Ocean Strategy. This handbook for aspiring entrepreneurs and businessmen describes in detail how to achieve high profitability and rapid growth of a company that can generate its own effective business ideas, forming in the existing market (it is called the "blue ocean") a previously non-existent demand. A big advantage is the practical absence of competitors. Companies in this case intentionally refuse to participate in a business with a large number of business opponents in low-profit markets, which are called the "scarlet ocean". So, we begin to study!
About the book
The Blue Ocean Theory is written on the basis of fifteen years of economic research in business and finance. As illustrative examples, the authors use about one and a half hundred successful strategies, while taking about thirty of the most diverse industries and a time span of approximately 120 years. With their help, they make their strategy a reality.
Since its publication in 2005, the book has already been published with a total circulation of about three and a half million copies, during which time it has been translated into 43 languages ​​of the world, including Russian. For our reader, it was adapted by the translator Irina Yushchenko. This manual for businessmen became a bestseller according to several authoritative publications at once, some even chose it as the best business book of 2005.
Kim chan
One of the authors of The Blue Oceans Theory was South Korean economist Kim Chan. He is a professor and currently leads the Department of Strategic Management based on the French business school INSEAD. He is also an advisor to Malaysia, the European Union and the World Economic Forum in Davos on business and entrepreneurship. Experts include him in the top five most famous and effective thinkers in the world. His articles and publications appeared in the most rated and popular publications on management.
Kim Chan was born in the South Korean city of Jinju in 1951. His father was a famous fighter for the independence of his country, defended her right to liberation from Japan. For these merits, he was buried at the National Cemetery of the Republic of South Korea.
Kim Chan himself is a graduate of Seoul National University. Has a bachelor of arts degree. After that he graduated from the Asian Institute of Management in the Philippines, which has existed since 1968 under the patronage of the Harvard Business School. In this educational institution, he received a master's degree in management and business.
After that, the author of The Blue Ocean Theory became a Ph.D. in international and strategic management at the Stephen Ross School of Business, founded at the University of Michigan. In the same educational institution, he began his teaching career, receiving a degree in international and strategic management. Actively engaged in advising government agencies and companies.
For Kim Chan, the book "Theories of the Blue Ocean" was the most successful work, which was distributed in the world in millions of copies.
Renee Moborn
In the photo above, a woman who also runs the Blue Ocean Strategy Institute. In addition, she is a professor at the French business school INSEAD. But it’s more interesting for us that she is the second author of The Blue Ocean Theory.
Rene Moborn was born in the United States in 1963. She managed to build a successful career, for example, she entered the Presidential Advisory Board on universities and colleges, which historically had a black contingent of students. Repeated participant in the World Economic Forum in Davos.
Her authorship owns a large number of works on management and business development strategies.
Basic concepts
In The Blue Ocean Theory, Kim Chan and Rene Moborn introduce two key concepts. It is on them that all further research is based. We are talking about the blue and red oceans.
Under the blue oceans, scientists understand all industries that can currently be considered non-existent, they are unknown to market participants. In contrast to them, there are scarlet oceans, the borders of the neighborhood in which have long been agreed upon and defined, the rules of competition known to everyone work there. In the red oceans, the main task of the company becomes to establish superiority over the business adversary in order to draw most of the demand to its side. After some time, it becomes too crowded in such a market, the opportunities for profit and growth are rapidly declining, and most of the products are turning into ordinary consumer goods. As the authors of the book “The Blue Ocean Theory” note, market participants are actively “gnawing each other's throats”, pouring red blood on everything around. That sounds awful, but very true.
At the same time, the blue oceans remain almost untouched parts of the market in which there is no competition. In these areas, it is possible to grow and develop, making a profit. The main condition for their development is a creative approach.
Moreover, most of the blue oceans appear inside the scarlet, as if pushing the boundaries of a particular industry. But what’s interesting is that part of the blue oceans is created beyond the borders of all known borders.
Justification of the main idea
The main thesis, which is set forth in The Blue Ocean Theory, is that the only way to defeat competition is to stop trying to do it.
The authors note that the comparison of market competition with military confrontation is already firmly rooted in the mass consciousness. Blue oceans in this regard differ favorably. In this field no competition threatens anyone, and the rules of the game are still being established.
To illustrate the blue ocean theory, the authors cite as an example the circus industry, which has recently lost its relevance among children due to the emergence of a large number of more modern hobbies.
In this regard, the real breakthrough was the activity of the company Cirque du Soleil. She managed to succeed in an industry that many considered completely hopeless. After all, the leadership decided not to follow the well-known path, abandoning the use of classical elements of the circus, for example, performances of clowns and animals, round arenas. Instead, the project incorporated the most spectacular and popular circus elements that exist. These are conceptual representations, acrobatics of the highest level. But he got rid of everything that did not fit into the framework of the concept.
Moreover, the company changed its target audience, relying not on children, but on wealthy adults. Due to the original approach, a unique niche was opened that was not previously occupied by anyone.
The creation of the blue ocean
Thanks to the book Blue Ocean Strategy in Russian, you can now also learn that to create a blue ocean it is not necessary to open a new industry. It is necessary to push the boundaries of existing scarlet oceans. At the core of this strategy is value innovation.
Under this concept, the book “The Theory of the Blue Oceans” describes what makes competition simply unnecessary due to the company reaching a whole new level.
Strategy
The main tool is the strategic canvas. It represents the most simplified model of the industry, which is clearly reflected in the form of a graph. With its help, you can evaluate the differences and similarities of your own strategy with the strategies of competitors.
To build such a canvas, you should first highlight the key factors of the industry. Then evaluate the supply volume and estimated costs. Finally, it is important to connect the resulting points on the graph for each company individually. The result should be the so-called value curves, which are visual representations of the strategy for a particular company.
To create a blue ocean, it is important to reorient from competition to the search for alternatives, not try to satisfy the average clients of this industry, but make customers those who had no relation to it before.
Four Action Model
This is another strategically important concept in the content of The Blue Ocean Theory. In fact, it is a logical continuation of the strategic canvas.
After analyzing the current situation on the market, you need to ask yourself the question: “Which competition factors can be eliminated, which should be reduced compared to accepted standards in a certain sulfur, and which should be increased” For example, we need new factors that have never been proposed by this industry before.
Principles
Six principles are needed to create a blue ocean. The first concerns revising the boundaries of the existing market. It can be implemented in several ways:
- analyze alternative industries;
- consider companies with similar strategies;
- pay attention to consumers;
- develop opportunities for introducing additional services and products;
- evaluate the emotional and functional attractiveness of the product;
- try to look into the future by analyzing how the industry will develop.
The second principle is based on focusing not on numbers, but on a holistic picture. This requires the construction of a strategic canvas graph.
The third principle is to go beyond the current demand.
The fourth principle is based on the right strategic sequence. Its essence is to verify the commercial viability of the idea, to determine whether the proposal developed is a true value innovation.
The fifth principle is overcoming organizational contradictions.
The sixth principle is the ability to integrate the implementation process itself into an existing strategy.
What could be in the way?
At the same time, the authors pay attention to contradictions that may interfere with the implementation of the blue ocean strategy.
Firstly, it is internal resistance to everything new from the side of employees. It is important to convince them of the need for a change of strategy. To do this, you need to use focused leadership that allows you to quickly implement fundamental changes.
Secondly, this is limited resources. It is a common belief that global change requires large expenditures.
Thirdly, the need to properly motivate key employees to actions that will contribute to success.
Finally, fourthly, the danger of political intrigue, that is, the emergence of opposition from forces whose interests will be affected by these transformations.
Life cycle
Each blue ocean has its own life cycle, you need to be prepared for the fact that your competitors are not asleep, the blue ocean you created can soon become scarlet again.
To prevent this, you need to constantly monitor changes in the value curve. As soon as it begins to merge with the curves of competitors, something urgently needs to be changed.