Should Strategy Shift to Blue Oceans?

With its military roots and its focus on gaining and sustaining a competitive advantage, strategy has long been about beating and outperforming the competition. Since Chan Kim & Renée Mauborgne’s ‘Blue Ocean Strategy’ (2005), however, the trend is to shift the focus away from competitors and 'make them irrelevant'. Instead, we are supposed to focus more on creating customer value - a trend that we also find back in the enormous uptake of the notion of a 'business model' in which competitive analysis has been replaced by customer development, empathic design thinking and value proposition design.

Along the lines of two earlier articles on the trend towards agility and the trend towards execution in strategy, the question however is whether moving the attention away from competition is a good idea. With over 3.5 million copies sold, 'Blue Ocean Strategy' is one of the most popular strategy texts today. And given that their recent follow-up book 'Blue Ocean Shift' (2017) turned into an instant bestseller too, I assume the idea of a blue ocean is still as attractive as it was a decade ago. But does this mean it is a good idea?

The basic message of Blue Ocean Strategy is that organizations should not try to compete in existing markets (red oceans) but rather create or find new markets where competition does not yet exist (blue oceans). Or in other words, it tells companies to be entrepreneurial, to find and create their own opportunities and differentiate themselves from others, rather than to take opportunities already taken by others. 

The blue and red ocean metaphor is a powerful one: we can easily visualize a bloody red ocean with aggressive sharks eating you alive. And the tranquil silence of the sunset over a blue ocean is readily depicted in our mind as well. Furthermore, Kim & Mauborgne’s book contains a host of examples and some handy tools helping managers facing the challenge of developing new strategy.

Yet, the blue ocean metaphor is also a bit misleading, since it suggests that the red vs. blue distinction is the main differentiating feature and new contribution of the book. This suggests that strategy texts before Blue Ocean Strategy were predominantly fostering competition in existing markets, in red oceans. This, though, is not an accurate depiction of the older strategy literature and doesn’t give it sufficient credit.

This is most evident when we compare Blue Ocean Strategy to Michael Porter’s work. In their book, Kim & Mauborgne position their approach repeatedly against Porter’s strategy approach: his five forces framework, his three generic strategies and the like. In doing so, they suggest that Porter’s approach is aimed at competing in existing markets whilst their own approach to the creation of new markets. Yet, Blue Ocean Strategy resembles Porter’s approach quite strikingly, and at their core the message of both approaches is the same: if you can do it, go for uncontested market spaces.

Porter’s five forces framework, for example, doesn’t tell companies to go where the competition is – the red ocean. Rather, it tells them to be creative and find ways to avoid and limit competition as much as possible; to go to industries where the five forces are least powerful – a message not that different from Blue Ocean Strategy. Along the same line, Porter’s generic strategies framework (cost leadership, differentiation, and focus) does not tell companies to develop strategies equal to their competitors. On the contrary, it advises companies to differentiate themselves from others. Furthermore, the focus on uniqueness and differentiation is so important to Porter, that he even defines strategy as “being different. It means deliberately choosing a different set of activities to deliver a unique mix of value”. Can it be more Blue Ocean?

The argument also goes the other way around. If we look at how Blue Ocean Strategy works, we find a variety of tools. Three core ones are the 'Strategy Canvas', the 'Four Actions Framework', and the 'Eliminate-Reduce-Raise-Create (ERRC) Grid'. With the Strategy Canvas you map out on which value dimensions the current industry is competing (price, features, design, durability, etc.) and how main groups of competitors are scoring on these dimensions. With the Four Actions Framework you subsequently identify actions to come up with a unique value mix by evaluating which dimensions can be eliminated, reduced, raised, or created. Finally, the results of this exercise are presented in the ERRC Grid. So, using some of Blue Ocean Strategy's key tools, we start with modelling the competition and develop a unique position compared to what is already there. Can it be more Porterian?

If the basic message of Blue Ocean Strategy is not that new, does this mean we should discard it as just another management fad? Not entirely. The newness of Blue Ocean Strategy lies in the tools it provides for facilitating companies actually delivering a unique mix of value. Porter’s five forces framework is helpful in understanding the structure of an industry and the competitive dynamics within it. Furthermore, his generic strategies made companies aware that strategy making implies making some fundamental choices. As Kim & Mauborgne correctly remark, these existing frameworks are not very well-suited to foster the kind of creativity needed for actually developing unique strategies. The frameworks offered in Blue Ocean Strategy, on the other hand, (such as the strategy canvas and the four actions framework), are specifically aimed at helping companies to come up with new strategies. So, Blue Ocean Strategy is not that novel or distinct as a concept, but it does offer some handy tools to generate new strategy.

There are risks as well, however, especially when the core idea of creating blue oceans is taken as extreme as it is presented:

1. Being eaten. The main advice of Blue Ocean Strategy is to ‘create uncontested market space’ and ‘make competition irrelevant’. When taken too serious, this advice may lead to companies ignoring relevant competition. Many executives and especially entrepreneurs already tend to assume that they have no competitors, that they have the best product or technology in the world and that there is an ocean of impatient customers waiting for their product. To avoid being eaten by the competition while on their way to a possibly blue ocean, the best advice to these companies is, perhaps, to make competition more relevant and to think more about contested market spaces than they currently. This may help them avoid quite a few naivety mistakes.
2. Swimming too far. A second risk with taking Blue Ocean Strategy too serious is that it may stimulate companies to go into markets that are too far off their own competences. By being stimulated to be creative and think different, companies following a Blue Ocean Strategy are pushed to forget about their own history, strengths, and path dependent competencies. In the past, they may have built up particular competencies that were the basis of their success so far. When reaching out to new industries these competencies may not suffice, implying a great amount of risk for failure since others might be much better equipped.
3. No fish. A final risk of Blue Ocean Strategy is that it can lead companies to oceans that are blue for a very good reason. Oceans can be dead, empty, and impossible for most species to survive in. Along the same lines, ‘markets’ may be uncontested for a very good reason: because there actually is no market or because the challenges are so big that survival is hardly possible. The implication is that Blue Ocean Strategy needs to come with a serious disclaimer and reality check whether the opportunity found is real, or can be made real by the company.

The verdict: Although not really new, Blue Ocean Strategy promotes a nevertheless useful and existing idea of moving away from the competition. It does so with an attractive metaphor and it contains a number of practical tools to develop innovative strategies. At the same time though, it involves quite some risks that make that it should be adopted with caution and certainly not as a universal approach to strategy or a complete overhaul of everything we knew about strategy before.