Blue Ocean Strategy

It is important to distinguish between value innovation as opposed to technology innovation and market pioneering. Value without innovation tends to focus on value creation that is not sufficient to make you stand out in the marketplace…Innovation without value tends to be technology-driven…often shooting beyond what buyers are ready to accept and pay for.

Value innovation defies one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. It is conventially believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost…In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously. (13)

Our research found that customers can scarcely imagine how to create uncontested market space. Their insight also tends toward the familiar “offer me more for less.” And what customers typically want “more” of are those product and service features that the industry currently offers. (27)

To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry. (28)

The Four Actions Framework:

1) Which of the factors that the industry takes for granted should be eliminated?

2) Which factors should be reduced well below the industry’s standard?

3) Which factors should be raised well above the industry’s standard?

4) Which factors should be created that the industry has never offered?

It is by pursuing the first two questions that you gain insight into how to drop your cost structure vis-a-vis competitors. The second two factors, by contrast, provide you with insight into how to lift buyer value and create new demand. (30)

When expressed through a value curve, an effective blue ocean strategy has three complementary qualities: focus, divergence, and a compelling tagline. (37)

Example: Southwest Airlines (38)

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