What is the Blue Ocean Method?
The Blue Ocean Strategy (or Blue Ocean Method) is a strategic framework developed by W. Chan Kim and Renée Mauborgne, introduced in their 2005 book of the same name. It distinguishes between "red oceans" — existing markets full of fierce competition that turns the water red — and "blue oceans" — unexplored market spaces where competition is absent or irrelevant.
The central idea is that instead of competing harder in a crowded market (red ocean), businesses should focus on creating new value that opens up entirely new demand, rendering the competitive question largely moot.
Key tools of Blue Ocean Strategy
The Blue Ocean framework provides several tools for discovering and creating blue oceans. The Strategy Canvas is a visual tool that maps the competitive factors in an industry and shows how different players — including your own business — perform against each factor. This reveals where competition clusters and where opportunities for differentiation exist.
The Four Actions Framework asks four questions: Which factors can be eliminated? Which can be reduced? Which should be raised above industry standards? And which new factors should be created that the industry has never offered? Applying this framework creates a new value curve distinct from the competition.
Value innovation — the cornerstone of Blue Ocean
At the heart of Blue Ocean Strategy is the concept of value innovation — pursuing differentiation and low cost simultaneously. Traditional strategic thinking presents these as a trade-off: you can either be different (and charge more) or be cheap (and sacrifice difference). Blue Ocean challenges this assumption.
Value innovation occurs when a company creates a quantum leap in buyer value while simultaneously reducing costs — by eliminating or reducing factors that the industry has competed on for years but that buyers do not actually value highly.
Blue Ocean examples
Cirque du Soleil is one of the most frequently cited Blue Ocean examples. By eliminating animals and star performers (expensive elements of traditional circus) and adding theatrical storytelling and elegant venues, Cirque du Soleil created a new form of entertainment that appealed to a new and willing-to-pay audience — adults and corporate clients who would never have attended a traditional circus.
Other examples include Southwest Airlines (low-cost, no-frills air travel targeting car travellers rather than competing with full-service airlines) and Nintendo Wii (physical, family-friendly gaming targeting non-gamers rather than competing with Sony and Microsoft on technical performance).
How Empiraa relates to Blue Ocean thinking
Blue Ocean thinking is a valuable input into the strategic planning process that Empiraa supports. For advisors using Empiraa GPS who want to help clients break out of a commoditised competitive environment, facilitating a Blue Ocean analysis can open up new strategic options that a traditional competitive analysis would miss.
The goal-setting and execution tools in Empiraa then help translate the Blue Ocean strategy into a concrete plan for creating and capturing the new market space identified.