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Book Review: Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne

“Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost”

The idea behind Blue Ocean Strategy is that most businesses operate in a Red Ocean – red from bleeding from the competition. The price squeeze and commoditization forces are causing companies to compete for every dollar and at lower and lower margins.

The authors suggest another approach which is to create your own industry – a Blue Ocean where you define the industry and therefore there is no competition. Interestingly there are a number of excellent examples of companies that created a Blue Ocean Strategy out of a dying industry.

One example is Cirque du Soleil which emerged from the dying Circus Industry. Cirque du Soleil’s owners identified some of the key attributes that created the Circus experience (The Big Tent), as well as what the current challenges were (controversy of animal acts, highly paid star performers) and used that to create a new business model that has been wildly successful with consistently sold out performances and permanent shows in Las Vegas.

Part One is a good read with business examples demonstrating companies that created their own Blue Ocean.

Part Two and Three delve into an analysis of how to identify and apply their Blue Ocean Strategy. I personally found their approach too “corporate”. I recommend reading these sections as a way to generate ideas rather than trying to follow all of their models – for example redefining what your market is.

The two main points of the book are the model of creating your own Blue Ocean, and their Value Innovation Model (which I think is brilliant!).

Value Innovation is when what you offer your customers creates greater value for them than what they pay you – either by increased results or decreased cost. Putting Value Innovation into action means that you present your business offering in such a way that the purchase is a no brainer for your target audience – they can’t afford to not buy what you are offering because of what you are going to enable them to create, do or save.

Value Innovation is the cornerstone of the Profit Accelerator Formula