Op-ed: Diving into the ‘Blue Ocean’ of market growth

Former Telfer dean Micheal Kelly reviews the steps for creating uncontested market space
Micheal Kelly

Book review: Blue Ocean Shift: Beyond Competing — Proven Steps to Inspire Confidence and Seize New Growth by W. Chan and Renee Maubornge. New York: Hachette Books, 2017.

In 2005, two professors – W. Chan Kim and Renée Mauborgne – at France-based private business school INSEAD introduced us to the concept of “Blue Oceans” in their international bestseller Blue Ocean Strategy.

“Blue Oceans” are defined as uncontested market space in which companies can dominate emerging opportunities, in contrast to “Red Oceans” – as in red with the blood of competitors – where companies fight for share and market position.   

In articulating the “Blue Ocean” concept, the authors challenged traditional business strategy assumptions that industry conditions and market boundaries are a given and that competitive strategy is ultimately a choice between low cost and differentiation. They encouraged companies to expand their thinking beyond competing to making competition irrelevant.

Book coverWhile the book introduced “Blue Oceans” to the business lexicon and provided a number of useful tools and examples, it did not provide much in the way of a process for making the transition from red to blue oceans.

Blue Ocean Shift closes the loop. Drawing on research undertaken since the first book that analyzed the successes and failures of numerous “Blue Ocean” projects, the book provides concrete steps and a systematic process for creating uncontested market space.

A successful transition from red to blue oceans starts with the right perspective. This includes a recognition that industry conditions can be shaped and that the primary goal of strategy should be creating new demand, not fighting over existing customers. It also means setting aside the cost-value tradeoff to explore new value-cost frontiers.

In addition, it involves a recognition that creative destruction and disruption are not the only ways to create new markets, as tends to be the accepted wisdom in “Red Ocean” strategy. In the view of the authors, non-disruptive creation can produce growth without necessarily disrupting or displacing business or industries by providing breakthrough solutions for an industry’s existing problem, solving a brand new problem or seizing a brand new opportunity.   

In many cases, the creation of new markets means focusing on attracting customers who don’t currently patronize your industry. Most organizations are focused on their industry’s existing customers and never think about those who don’t buy their product or service. It is these non-customers, however, who often hold the greatest insights into the pain points limiting the boundaries of an industry.

Salesforce and Square

Two examples provided to support this assertion are Salesforce.com, which created CRM software that removed many of the pain points keeping SMEs from using existing CRM products, and Square, which did the same in opening up the credit card market for many new and small businesses.  

The second element in making the transition to Blue Oceans is having practical tools for market creation with proper guidance on how to use them. The book provides a number of strategy tools and templates, as well as examples of their use.

A couple of these are particularly useful. The first is the Strategy Canvas. This tool helps identify the current state of play in your industry by providing a picture of the major factors that the industry competes on and invests in, as well as what value customers receive and the profiles of the major players. The canvass helps you understand where you are positioned in the industry and to identify how you adopt a differentiated strategic position.

Add to this the buyer utility map, which helps identify the specific pain points that your current or target industry is imposing on buyers throughout their entire experience, highlighting both unexplored opportunities and opportunities to change the playing field.

A third tool helps you identify and understand the various tiers of non-customers in your industry, while a fourth provides six pathways to opening a new value-cost frontier that pursues both low cost and differentiation.

The final part of the book outlines a step-by-step process for making the transition to a “Blue Ocean,” a process that identifies new market opportunities and builds the confidence in your organization to create and execute your growth strategy.  

This book is well worth reading. Not only will it help broaden your perspective on business strategy, it will provide some useful tools for identifying and creating new market space.

Micheál Kelly is dean of the Lazaridis School of Business and Economics at Wilfrid Laurier University in Waterloo and the former dean of the University of Ottawa’s Telfer School of Management.