Book Review : Blue Ocean Strategy by W.Chan Kim & Renee Mauborgne

This Book is one of  The Ibnu Sutowo library's collection . I was presented this book review at our english forum session.  Blue Ocean Strategy is a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, professors at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim & Mauborgne argue that companies can succeed not by battling competitors, but rather by creating ″blue oceans″ of uncontested market space.

Since Blue Ocean Strategy was published in 2005 it has been translated into 43 languages and has sold over 3.5 million copies. 

Blue ocean strategy focuses on the ability to create new market space where there is no competition and where the demand for the services becomes uncontested.

Blue oceans are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Red oceans represent all of the industries in existence today. We can summarized Red ocean vs blue ocean strategy using this table : 

The blue ocean strategy is best illustrated by the performance of Cirque du Soleil. Cirque du Soleil (pronounced: [siʁk dy sɔ.lɛj], "Circus of the Sun") is a Canadian entertainment company. It is the largest theatrical producer in the world. Based in Montreal, Quebec, Canada, and located in the inner-city area of Saint-Michel, it was founded in Baie-Saint-Paul in 1984 by two former street performers, Guy Laliberté and Gilles Ste-Croix. Cirque du Soleil expanded rapidly through the 1990s and 2000s, going from one show to 19 shows in over 271 cities on every continent except Antarctica. The shows employ approximately 4,000 people from over 40 countries and generate an estimated annual revenue exceeding US$810 million. The multiple permanent Las Vegas shows alone play to more than 9,000 people a night, 5% of the city's visitors, adding to the 90 million people who have experienced Cirque du Soleil's shows worldwide.

What makes this rapid growth all the more remarkable is that it was not achieved in an attractive industry,but rather, in an industry with declining revenue for potential growth.

Cirque du Soleil’s success was not attained by taking customers from the already shrinking circus industry (which had historically catered to children) but instead, they were successful because they created a new marketplace in which to compete. Their offering appealed to a whole new group of customers – namely, adults and corporate clients that were prepared to pay a price several times as great as traditional circuses for an unprecedented entertainment experience.

Cirque du Soleil succeeded because it realized that to win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition on the current playing field.

What consistently separated winners from losers in creating blue oceans was their approach to strategy.  The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry. 

The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that is called ‘Value Innovation.’ Value Innovation is the cornerstone of blue ocean strategy. 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. 

Reconstruct Buyer Value

To reconstruct buyer value elements in crafting a new value curve, there are four actions that must be taken: 

• Which of the factors that the industry takes for granted should be eliminated? 
• Which factors should be reduced well below the industry standard? 
• Which factors should be raised well above the industry standard? 
• Which factors should be created that the industry has never offered? 

The Right Strategic Sequence

As shown in the diagram below, companies need to build their blue ocean strategy in the sequence of

buyer utility, price, cost and adoption.

• The starting point is buyer utility. Does your offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it?
• Is your offering priced to attract the mass of target buyers so that they have a compelling ability to pay for your offering?
• Can you produce your offering at the target price and still earn a healthy profit margin? Can you profit at the strategic price – the price easily accessible to the mass of target buyers?
• What are the adoption hurdles in rolling out your idea?

In Indonesia, there are some example of company and business implemented a blue ocean strategy :

1. PT Pertamina ( Persero) with Pertalite idea : Pertalite is a product with a specification between Pertamax and Premium
2. PT Lion Air with an idea to make everyone can fly with a low fare price

Reference : 

http://www.blueoceanstrategy.com/