Blue Ocean Strategy

Go where the profits and growth are - and where the competition isn’t

W. Chan Kim & Renée Mauborgne

Smaller Regional Circus

Ringling Brothers

The Strategy Canvas of Cirque du Soleil

hi

offe

ring

leve

l

loPrice

Fun & Humor Unique VenueAisle Concessions

Multiple Show Arenas Thrills & DangerAnimal Shows

Star Performers

Theme

Refined Viewing Environment

MultipleProductions

Artistic Music & Dance

Cirque du Soleil

© Kim & Mauborgne 2006

The Strategy Canvas of Cirque du Soleil

hi

offe

ring

leve

l

loPrice

Fun & Humor Unique VenueAisle Concessions

Multiple Show Arenas Thrills & DangerAnimal Shows

Star Performers

Theme

Refined Viewing Environment

MultipleProductions

Artistic Music & Dance

Cirque du Soleil

ReduceEliminate Raise Create

© Kim & Mauborgne 2006

Ringling Brothers

Smaller Regional Circus

Personal Finance Software

The Pencil

Personal Finance Software Industry

hi

offe

ring

leve

l

lo

Price Speed AccuracyOptional FeaturesEase of Use

Quicken

© Kim & Mauborgne 2006

Red Ocean VersusBlue Ocean Strategy

Differentiation or low cost Differentiation and low cost

Compete in existing market space Create uncontested market space

Segment existing customers Attract noncustomers

Beat the competition Make the competition irrelevant

Blue Ocean StrategyRed Ocean Strategy

Competitive Advantage Value Innovation

Exploit existing demand Create and capture new demand

© Kim & Mauborgne 2006

39%

86%

62%

61%

14%

38%

Substantially Higher Returns from Investments in Blue Oceans

Business Launch

Revenue Impact

Profit Impact

Red OceansMarket-Competing Business Launches

Blue OceansMarket-Creating Business Launches

© Kim & Mauborgne 2006

© Kim & Mauborgne 2006

Is there a pattern to blue ocean

creation?

Researching the History ofBlue Ocean Creation

• Data: 150 blue ocean creations, more than 30 industries, over 100 years (1880-2000)

• hotel, cinema, retailing, airline, energy, computer, broadcasting, home construction, automobile, steel manufacturing, chemicals, cosmetics, software, etc.

• Variables considered: industrial, organizational, strategic variables

© Kim & Mauborgne 2006

Value Innovation School

• Trial & Error

• Pattern• Entrepreneur

• A way of Thinking

• Theory

• Methodologies

• Analytical Frameworks• Opportunity Maximizing & Risk Minimizing

• Entrepreneurial Risk

• Learning from Failures

• DNA / Culture

• Units for Experimentations (Spin-offs)

• Risk Taking or Risk Avoiding

Schumpeterian School

Innovation

Random Systematic

© Kim & Mauborgne 2006

Minimizing Risks and Maximizing Opportunities in Formulating and Executing Blue Ocean Strategy

Formulation Risks

Execution Risks

Search Risk

Planning Risk

Scale Risk

Business Model Risk

Organizational Risk

Management Risk

Formulation Principles

Reconstruct market boundaries

Reach beyond existing demand

Get the strategic sequence right

Execution Principles

Focus on the big picture, not the numbers

Overcome key organizational hurdles

Build execution into strategy

© Kim & Mauborgne 2006