Blue Ocean Strategy

The original Blue Ocean Strategy, in brief

Created by W. Chan Kim and Renée Mauborgne of INSEAD. Named in "Blue Ocean Strategy" (Harvard Business Review, October 2004) and the 2005 book of the same name, expanded in 2015. "Blue Ocean Shift" (2017) added a step-by-step process.

W. Chan Kim and Renée Mauborgne, professors of strategy at INSEAD, named the idea in "Blue Ocean Strategy," in Harvard Business Review in October 2004¹. It built on their earlier HBR work. "Value Innovation" set out the four questions about what to drop, cut, raise and add². "Charting Your Company's Future" (2002) introduced the strategy canvas, a picture of how a company invests across the factors its industry competes on³. The book Blue Ocean Strategy followed in 2005, with an expanded edition in 2015⁴.

The core idea is a contrast. Red oceans are the industries that exist today, where the boundaries and rules are known and rivals fight over the same customers. Blue oceans are market space nobody is serving yet¹. The authors argued that the right thing to study is not the company or the industry but the strategic move: the set of decisions behind opening a new market¹. Their central claim is that such moves pursue difference and low cost at the same time, which they called value innovation¹. Their lead case was Cirque du Soleil. It kept the tent, the clowns and the acrobats, dropped the most expensive parts of the circus, and drew in adults and corporate clients who had stopped going¹.

Three tools carry the method. The strategy canvas plots how much each player offers on each factor, and the line for one company is its value curve³⁵. The four actions framework asks which factors to eliminate, reduce, raise and create²⁶. The ERRC grid is where a team writes its answers to those four questions⁷. Blue Ocean Shift (2017) later added a step-by-step process for teams⁸. Kim and Mauborgne list Blue Ocean Strategy, Blue Ocean Shift and Red Ocean among their registered trademarks⁹.

Common misreadings

• "A blue ocean is an empty market you go and find." The 2004 article says most blue oceans are made from inside existing industries, by changing where the industry's boundaries sit¹.
• "It needs a new technology." In the authors' own review of cases, the moves were mostly built on technology that already existed¹. They later called confusing the two a trap¹⁰.
• "It is only for start-ups." The 2004 article found that established companies often created blue oceans, usually in their core business¹.
• "Ask your customers what they want." The authors point the other way: the people who do not buy from your industry show where its limits are¹⁰.
• "It means going premium," or "it means going cheap." It means both at once. The authors named each half on its own as a separate trap¹⁰.
• "It is the same as disruption." The authors separate opening a new market from destroying an old one, and call treating them as the same a trap¹⁰.

Blue Ocean Strategy examples

When Blue Ocean Strategy fits, where it struggles, and what it does not answer

How to implement Blue Ocean Strategy

1. Draw today's picture. List the eight to twelve factors your industry competes on, including price. Score yourself and two or three rivals on each, low to high, and draw the lines. If they look alike, you are in a red ocean.
2. Go and look outside your customers. Talk to people who could buy from your industry but do not, and to buyers of alternatives. Ask what puts them off. Do this before the workshop, not during it.
3. Work the four actions. For each factor ask: can it go, can it shrink, should it rise? Then ask what the industry has never offered. Eliminate and reduce as hard as you raise and create, or cost goes up.
4. Draw the new curve and test it. A strong curve focuses on a few factors, differs clearly from rivals, and fits a short tagline. Show it to buyers and noncustomers and watch their reaction.
5. Check it makes business sense. Is it clearly more useful to buyers? Is the price one the mass of buyers will pay? Can you deliver it at a cost that leaves profit? What will stop people adopting it?
6. Choose the first moves. Pick two or three moves to test small, each with an owner, a date and a measure of what would prove it.

Adopting Blue Ocean Strategy: the first cycle and the rhythm

First cycle. The 2002 article laid out four steps: draw your current canvas against rivals, go into the field to see alternatives and people who do not buy, show the draft canvases to buyers and noncustomers for their reaction, then share the final picture across the company³. In practice that means two to four weeks of interviews and observation, then one or two days of working sessions to write the four actions and draw the new curve.

Rhythm. The method has no built-in cadence. Redraw the canvas once a year at your planning retreat, or when a rival changes its offer. When your curve starts to look like everyone else's, it is time for a new move.

How long it takes to pay off. A new offer can take years to prove itself. Test the riskiest parts small first: a pilot, a new price with a few customers, a trial with one group of noncustomers. The book stresses checking buyer value, price, cost and how people will adopt it before you commit⁴.

What derails it. Doing the ERRC grid in a room with no field work. Adding new factors without cutting any, which raises cost. Choosing moves the organization will resist without explaining why; the authors argue for a fair process that people see as fair even when the answer hurts them⁴. Stopping at the picture, with no owners or dates.

Common Blue Ocean Strategy mistakes

• Hunting for an empty market. Most new market space is made by redrawing an existing industry. Start from the factors it competes on, not from a search for somewhere with no rivals.
• Doing it in the room. Without interviews with people who do not buy, the canvas repeats what the leadership team already believes.
• Only adding. Raising and creating without eliminating and reducing makes the offer better and more expensive. That is still a red ocean move.
• Confusing it with new technology. A new feature or invention is not a new market. The question is whether it opens demand that was not there, at a price people will pay.
• Skipping the business check. A striking curve can still fail on price, cost or adoption. Test those before you commit.
• Stopping at the picture. The session should end with moves to test, owners and dates, not only a new chart.

Does Blue Ocean Strategy work? The evidence

Most of the support comes from the authors. In the 2004 article they reported a study of business launches at 108 companies. According to Kim and Mauborgne (HBR, 2004), 86% of launches were improvements to existing offers and produced 62% of revenue and 39% of profit. The other 14%, aimed at new markets, produced 38% of revenue and 61% of profit¹. They also said they had studied more than 150 cases of blue ocean creation in over 30 industries, using data going back more than 100 years¹.

Read those figures with care. The article does not say how the 108 companies were chosen or how profit was measured¹. And case studies picked after the fact see the winners. A study built that way cannot show how often the same kind of move fails.

Independent tests are few. Andrew Burke, André van Stel and Roy Thurik studied 41 kinds of Dutch shops from 1982 to 2000 and reported the results in Harvard Business Review in 2010. Profits and the number of firms rose and fell together, which fits the claim that new formats create room for more business. Competition wore those profits down over about 15 years. The authors said one study is not proof, and suggested a blend of the two approaches¹¹. Their working paper concluded that the two overlap, so managers do not face an either-or choice¹³. A 2012 paper in Research Policy tested the ideas on fast-growing Slovenian firms and Amazon.com, a small sample aimed at economic policy¹⁴.

Use looks lower than talk. A 2019 review in Social Sciences read Blue Ocean Strategy as a management fashion. It found far more attention to the idea than evidence that organizations put it to work¹⁵.

The research for this page found no study that compares companies using the method with similar companies that do not, and shows better results. Treat Blue Ocean Strategy as a disciplined way to generate and test options, backed by striking cases and one supportive industry study. It is not a proven route to profit.

Blue Ocean Strategy compared

Blue Ocean Strategy glossary

Red ocean

An existing industry, with known boundaries and rules, where rivals fight over the same demand¹.

Blue ocean

Market space nobody is serving yet, usually opened by changing the boundaries of an existing industry¹.

Value innovation

Raising value for buyers and lowering cost at the same time, instead of choosing one¹.

Strategic move

The set of decisions and actions behind opening a new market. The authors' unit of study¹.

Strategy canvas

A chart with the factors an industry competes on along the bottom and how much each player offers on each³⁵.

Value curve

One company's line on the strategy canvas. A good one shows focus, differs from rivals, and can be summed up in a short tagline³.

Four actions framework

Four questions: what to eliminate, what to reduce, what to raise and what to create²⁶.

ERRC grid

Four boxes, one per action, where a team writes the factors it will eliminate, reduce, raise and create⁷.

Noncustomers

People who could use what an industry offers but choose not to. The authors say they hold the best clues to new demand¹⁰.

Free tools that help