What is Blue Ocean Strategy?

Key Points
BOS is the simultaneous pursuit of differentiation and low cost. The aim of BOS is not to out-perform the competition in the existing

industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers . BOS offers systematic and reproducible methodologies and processes in pursuit of blue oceans by both new and existing firms. BOS frameworks and tools include: Value Innovation, Strategy Canvas, 4 Actions Framework, Eliminate-Reduce-Raise-Create Grid (ERRC) These frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also allow for effective strategy execution through easy communication.

 BOS covers both strategy formulation and strategy

execution. While competitive strategy is a structuralist theory of strategy where structure shapes strategy, BOS is a reconstructionist theory of strategy where strategy shapes structure. As an integrated approach to strategy at the system level, BOS requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition

Value Innovation

 simultaneous pursuit of differentiation and low cost

making the competition irrelevant opening up new and uncontested market space

value to buyers comes from the offerings utility minus

its price value to the company is generated from the offerings price minus its cost value innovation is achieved only when the whole system of utility, price and cost is aligned

value-cost tradeoff
What factors can be eliminated that the industry has

taken for granted? What factors can be reduced well below the industrys standard? What factors can be raised well above the industrys standard? What factors can be created that the industry has never offered?

strategy canvas

 horizontal axis captures the range of factors that the industry

competes vertical axis captures the offering level that buyers receive across all these key competing factors The strategy canvas serves two purposes: Firstly, it captures the current state of play in the known market space. This allows you to understand where the competition is currently investing and the factors that the industry competes on Secondly, it propels you to action by reorienting your focus from competitors to alternatives and from customers to noncustomers of the industry graphic depiction of a company's relative performance across its industry's factors of competition

4 Actions Framework

Eliminate-Reduce-Raise-Create Grid (ERRC)

Red Ocean Strategy

Red oceans are all the industries in existence todaythe known

market space industry boundaries are defined and accepted, and the competitive rules of the game are known companies try to outperform their rivals to grab a greater share of existing demand As the market space gets crowded, prospects for profits and growth are reduced Products become commodities, and cutthroat competition turns the red ocean bloody Blue oceans, in contrast, denote all the industries not in existence todaythe unknown market space, untainted by competition In blue oceans, demand is created rather than fought over