Pictured are authors of Blue Ocean Strategy and INSEAD professors W. Kim Chan and Renee Mauborgne. Courtesy photo
What do Cirque Du Soleil, Yellow Tail wine, an iPod, and Air Asia all have in common? Besides the potential for nearly endless entertainment, they are all brands or products that have had enormous growth in new or unlikely markets. They all resulted from firms’ taking advantage of what authors W. Chan Kim and Renee Mauborgne coined “blue oceans” 10 years ago. The book, a bestseller in multiple countries, was re-released earlier this year with a couple additional chapters and updates to the examples used of companies swimming in blue oceans (previously unexploited markets) and companies drowning in red oceans (existing and over-saturated industries and markets).
The book has sold over three million copies and has been translated into 43 languages. The theory, which originated at INSEAD Business School, is seemingly taking over at least a portion of business education curriculum everywhere. It is being taught at more than 1,700 universities in more than 100 countries. It has even been adopted into a statewide business competition for Maryland high school students.
An example that was used a decade ago continues to thrive in blue oceans. Cirque Du Soleil is perhaps still the best example of Blue Ocean Strategy at work. Who goes to the circus anymore? In a world of YouTube, Xbox, professional and collegiate athletics, and Minecraft, children (the main circus audience) don’t really have a shortage of entertainment. It’s an increasingly crowded market. With established circus goliaths Barnum & Bailey and Ringling Bros., it seems pretty unlikely at best, and foolish at worst, for a new circus company to expect any success.
COMPETING OUTSIDE THE CONFINES OF AN EXISTING INDUSTRY
Nevertheless, Cirque Du Soleil, which was created in 1984 by a group of street performers, continues to thrive and is one of Canada’s largest cultural exports. It has grown its revenue by a factor of 22 in the past decade. “Cirque did not make its money by competing within the confines of the existing industry or by stealing customers from Ringling and the others,” the authors said in a Harvard Business Review article. “Instead it created uncontested market space that made the competition irrelevant.”
According to the authors, Cirque Du Soleil created a new market, or blue ocean, instead of competing in an established market, or red ocean. Cirque combined the circus with theater and ballet. They took a little from the fun and randomness of the circus and combined it with the class, athleticism and awe of the ballet to create a high-end theatrical circus experience and thus, a lucrative blue ocean.
NEW CHAPTERS AND UPDATED EXAMPLES, TOO
Despite the age of the theory, the authors are still seeing companies emerging in blue oceans. Products such as the iPod and companies like Apple prove the theory still very much rings pertinent and true—perhaps more so than ever.
In the new edition, readers will find a new chapter on alignment, an expanded discussion on how and when to renew blue oceans, and a new chapter on red ocean traps that companies often fall into.
“A challenge organizations struggle with is how to align their system of activities—including a potential web of external partners—to create a sustainable blue ocean strategy in practice,” the authors said in an email interview. “In the expanded edition we provide a simple but comprehensive method to ensure that the key components of an organization, from value to profit to people, are aligned to support the strategic shift blue ocean strategy requires.”
AN MBA MUST-DO
The two INSEAD professors believe now is the time for all business schools to adopt the theory into curricula. INSEAD has three courses at the MBA level dedicated to just Blue Ocean Strategy. Additionally, the school offers a Blue Ocean Strategy certificate program through the Blue Ocean Strategy Institute. Kim and Mauborgne head up a team of 14 faculty members at INSEAD that teach the theory.
“We do see strengths for MBAs who focus on BOS based on the trajectory of where the global economy is moving,” the authors said. “Today organizations across the world face intense competition, shrinking profit margins and declining brand power. As competitive pressure continues to heighten, especially with the rise of social media and user ratings that reduce the living space of ‘me-too’ offerings, understanding how organizations can break away from the competition and achieve differentiation and lower costs become increasingly key.”
However, the strategy has even more influence at the executive education level, where INSEAD runs a total of 15 dedicated Blue Ocean Strategy programs, including the INSEAD Blue Ocean Strategy open enrollment program, offered three times a year, and 11 Blue Ocean Strategy customized programs. The programs take place at each of the school’s three campuses (Fontainebleau, Singapore, and Abu Dhabi).
NO SECTOR OR INDUSTRIES BOUNDARIES
The authors see no boundaries to the industry in which blue ocean strategy can be successful. After all, if something as random as a high-end circus can set sail in the blue ocean, many other services or products can. “Whether it’s healthcare, financial services, the construction industry, consumer electronics, the non-profit sector or the furniture industry almost all are up against a red ocean of bloody competition and need to get out,” they said.
The authors also see the strategy as a way for entrepreneurs to differentiate their startups. “For MBAs aiming to create start-ups, Blue Ocean Strategy is equally valuable,” the authors explained. “Consider the U.S. where only 50 percent of start-ups survive beyond five years and less than 20 percent survive more than ten years. To significantly raise these odds and generate the free buzz of social media, start-ups need to understand how to simultaneously achieve differentiation and low costs to stand apart and create new customers – the precise focus of Blue Ocean Strategy.”
What’s more, the authors believe the strategy can and should be adopted outside of the business environment into non-profit, social, and government sectors. The theory “provides students with a strategic logic, tools and frameworks to directly address this challenge, strengthens the value MBAs can bring to organizations.”
An example of this is Malaysia. The country is using Blue Ocean Strategy to become a “high-income, advanced nation by 2020,” according to an INSEAD report. In 2009, Malaysia’s Prime Minister Najib Razak hosted a National Blue Ocean Strategy Summit to unite private sector leaders, civil servants, and key stakeholders to address economic and social issues. Today, more than 80 ministries and agencies in the country have adopted the strategy for more than 60 initiatives.
WHAT EMPLOYERS ARE LOOKING FOR
Consequently, the authors see blue ocean training as incredibly attractive to employers. “Beyond the red oceans of known market space that most companies fight intensely over, Blue Ocean Strategy highlights the possibility and the process and methodology to create blue oceans of new market space—skills that we believe are increasingly indispensable for MBAs and executives today and in the future,” the authors explained.
“Employers in most sectors and industries today are looking for fresh thinking, striving for ways to break away from the competition while lowering costs, and are seeking to stimulate new demand,” the authors continue. “They are also in search of processes, tools and methodologies to achieve this. That makes employers across sectors increasingly receptive to MBAs with a background in Blue Ocean Strategy. It is our hope, and the reason why we have dedicated the last twenty years to this topic, that through these ideas and frameworks, MBAs will be able to make an even greater contribution to improving the state of the world, shifting organizations out of red oceans of bloody competition into blue oceans of new market space.”
DON’T MISS: THE SHIFT AWAY FROM GENERAL MANAGEMENT IN EMBAs
Questions about this article? Email us or leave a comment below.