Blue Ocean Strategy

Author: Daniel A. Frische
twitter: @DFrische5151

In 2005 W. Chan Kim and Reneé Mauborgne published the book “Blue Ocean Strategy”. They argue that whilst companies must fight for their share of existing market with traditional competition based strategies (Red Ocean Strategies), their performance will be limited by sticking to these strategies.

The Blue Ocean Strategy is based on the concept of creating a new market space with no (or little) competition. The book studied over 150 strategic moves made by various companies to move or create a business in the “Blue Ocean”. Companies did this by creating a new markets (Starbucks) or by innovating to make the competition irrelevant (MacIntosh Graphic User Interface).

In 1971 Starbucks charge $3 for a coffee in a touristy market place in Seattle. Considering the number of coffee you could make at home for $3 (£1.86) the idea of spend it on just one cup of coffee seemed absurd, but customers didn’t just come for the coffee. What Starbucks offered was a relaxing and sociable coffee bar where they could meet friends, buy a coffee and sit down to talk. Starbuck created a market for coffee shop focusing on a social and relaxed atmosphere that didn’t exist at the time.

Using Command-Line Interface (CPI) took lots of training and practise to perfect, so when MacIntosh created the first Graphic User Interface (GUI) it was set to obsolete it predecessor. MacIntosh released the first commercially computers using a GUI meaning most people could use a personal computer without being formally trained making it far more appealing than other systems, which later disappeared from the market.

Of course “Blue Oceans” attract many people to have a look and take a swim. Now, Starbucks is just one of a long list of successful coffee shop chains and the MacIntosh GUI is not alone either. An attractive market will always interest others to seek a stake in it, but it is necessary for firms to differentiated themselves from others and seek the blue oceans of new market if they want to sustain a high performance and competitive edge.