This book has a few good insights. The core premise: as a business, you should minimize time spent in “red oceans,” where fierce, bloody competition has turned the waters red, and instead look for “blue oceans” where you create a new market that is uncontested. Instead of beating the competition, you look to make them irrelevant; instead of squabbling over existing demand, you create and capture new demand; instead of incrementally tweaking the value-cost trade-off, you break the value-cost trade-off curve entirely; and so on.
To some extent, this is an obvious idea, but the reality is that most businesses don’t make seeking out blue oceans an explicit goal. The tips in this book offer a useful mental model for making this happen, and I’ve already found that merely having these ideas in your head gives you a new perspective when thinking about products and businesses. The main downside to the book is that it uses a lot of business jargon, including many of its own buzzwords, so parts off it can be painful to read. But overall, it has lots of useful ideas in it. Here are a few of the top ones from my notes:
Blue oceans are created all the time
It may be hard to see what these blue oceans are today, but when you look back at the great businesses of each decade, you realize that many of them succeeded precisely by creating totally new markets and not by out-competing other companies in existing markets. Examples:
- Cirque du Soleil avoided the red ocean of competing with traditional circuses (e.g., Ringling Brothers) and created a totally new market for itself
- Netjets created a new market by offering fractional ownership of a private jet (e.g., you get it for X days per year) rather than competing with other companies that sold private jets
- Southwest Airlines created a totally new market in air travel by using secondary airports to offer flights that were so cheap that they were comparable to bus travel
6 paths for finding blue oceans
To find blue oceans, you’ll need to think about what your industry is competing on that no longer matters and what it’s not competing on that now does matter. Here are 6 concepts to explore to find blue oceans:
- Look to other industries. If you own a movie theater, instead of focusing on how to compete with other movie theaters, you may look to other industries for ideas. For example, the restaurant and sports industries may seem different, but in many cases, they serve the same purpose as movie theaters: giving people a way to enjoy a night out. A few movie theater chains have started to explore blue oceans in precisely these directions, combining fine dining (more than just popcorn) with movie and showing live sports events on the big screen at the theater (with all the other fans there too).
- Look at strategic groups within an industry. For example, luxury cars and economy cars are different strategic groups in the same industry. Most groupings happen by offering different combinations of price and performance. You may be able to find a blue ocean by offering a novel combination of price and performance: e.g., the first minivans and the first SUVs each created blue oceans for the automakers that brought them to market.
- Look at different buyer groups. For example, if you’re in the medical industry, does your product target the doctor or the patient? You can find blue oceans by targeting a different buyer group than other companies do: e.g., getting into enterprise software by targeting end users rather than the CIO.
- Look at complementary products and services. Another way to create blue oceans is to solve the entire problem for a customer, rather than just part off it, by offering complementary products and services. For example, if you’re a movie theater owner, two of the things that could create a blue ocean for you are (a) offering free parking and (b) offering child care. This could unlock a massive new market of busy parents who never would’ve otherwise gone to see a movie, but if they can drive up, easily park, and have someone watch their kids for a few hours, they might flood to your theater.
- Look across functional and emotional appeal to buyers. Most industries focus mostly on either functional appeal (what the product can do) or emotional appeal (how the product makes you feel). You may be able to create a blue ocean by focusing on whichever aspect your industry typically ignores. For example, one company that produced cement—an industry that’s all about functional appeal—created a massive blue ocean by focusing on family traditions around building and extending houses. Their cement was no better from a functional perspective than anyone else’s, but because the company was part of family tradition, it created massive emotional demand.
- Look across time. Another path to blue oceans is to take advantage of macro market trends that are decisive and irreversible. For example, as a technology such as the Internet appeared on the scene, most business made small, incremental changes to adopt it (e.g., “check out our website” instead of “call us at…”), but the ones that created blue oceans figured out how this new trend completely changed the value proposition for the customer (e.g., creating an 100% online store, such as Amazon).
Blue ocean create a leap in value for both buyers and the company
It’s not enough to offer something slightly better or slightly cheaper than the competition. You have to make radical changes to completely transform the cost-value curve, focusing on what customers really value and throwing away the rest. For example, when the car industry was just starting, most cars were built-to-order, with lots of customizations, so they were extremely expensive, took a long time to assemble, were hard to learn, and hard to maintain. Then came along the Ford Model T, which unlocked a massive new market by offering a huge leap in value: they got rid of all the customizations (there was just one model, in one color, with essentially no options) but in exchange, the car was cheap, fast to build, easy to learn, and easy to maintain. To create this sort of leap in value, you need to ask the following questions:
- Which of the factors that the industry takes for granted should be eliminated?
- Which factors should be reduced well below the industry’s standard?
- What factors should be raised well above the industry’s standard?
- What factors should be created that the industry has never offered?
Focus on how to find non-customers
Blue oceans are all about finding non-customers, those who don’t currently buy products from your industry, and deeply understanding why. There are generally three types of non-customers:
- “Soon-to-be” non-customers: aware of your market and right on the edge of buying
- “Refusing” non-customers: aware of your market and consciously choose not to buy from it
- “Unexplored” non-customers: not aware of your market at all.
If you can find what those non-customers have in common, you may be able to create a blue ocean by unlocking all of their demand.
