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Meet the MasterMinds: W. Chan Kim and Renée Mauborgne

How to Make Your Competition Irrelevant

Professor W. Chan Kim and Professor Renée Mauborgne are research partners and coauthors of Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. They are members of the faculty at INSEAD, an international graduate business school.

Professors Kim and Mauborgne are on the Thinkers 50 list of the most influential business thinkers of our time. They are also co-founders of the Value Innovation Institute, a global center for connecting innovative ideas with commercial opportunities. The articles they have published in the Harvard Business Review have sold more than half a million reprints.

MCNews: How do you define blue ocean strategy, and why is it important for executives to embrace the idea?

Number one: stop benchmarking the competition. The more you benchmark your competitors, the more you tend to look like them.

Kim: Blue ocean strategy is about creating uncontested market space. Too many companies are swimming in the red ocean of bloody competition where there is limited room for real growth. The image of the vast blue ocean conveys the infinite possibilities for profitable growth that exist with this strategy.

MCNews: Can you explain your concept of “value innovation” and how it relates to creating a blue ocean strategy?

Mauborgne: Value innovation is a strategic move that allows a company to create a blue ocean. Typically, companies in the red ocean pursue incremental improvements for customers through either low cost or differentiation. Value innovation helps companies make giant leaps in the value provided to customers through the simultaneous pursuit of differentiation and low cost.

It shouldn’t be a trade off between the two; exceptional value and innovation should be inseparable. Offer buyers a huge leap in value, and that will give rise to new markets. That’s how you make the competition irrelevant.

MCNews: When you look at the state of strategic planning in companies, what do you think works well, and what doesn’t?

Kim: Most companies are too numbers-driven. They do lots of comparative industry analysis—especially on the competition—but that blinds them to the big picture.

The focus on numbers does produce some accountability, though. You develop numbers and then make somebody accountable for them. But that approach keeps companies in the red ocean because of the narrow focus on the competition.

MCNews: The numbers-driven process is familiar and comfortable for many executives. Have you found that successful companies resist rethinking strategic planning?

Mauborgne: I think most companies know that strategic planning is an imperfect process. There are certainly many books and articles criticizing it. But they have not had an alternative to it, so companies have kept on using it because it does allow for some degree of accountability.

We offer a compelling alternative. We begin by giving companies three pointers on how to break out of the red and into the blue ocean. Number one: stop benchmarking the competition. The more you benchmark your competitors, the more you tend to look like them. That makes you a me-too organization, which is the opposite of what you want to achieve.

Second: stop being content to swim in the red ocean. Many companies are caught up in competing and don’t even look to the horizon of the blue ocean. And third: don’t count on your customers for growth. Look to non-customers; they provide the most insights into how you can create new, uncontested opportunities—new demand for your products or services.

MCNews: What are the first few steps to help executives see the light about this new way of thinking about a business?

Kim: The most important part is to help people realize that a company is in the red ocean to begin with. People think they are in the blue ocean when they really aren’t. When you show them the true picture, they are always surprised.

The next step is to turn their attention away from the competition and, as Renée said, get them to focus on non-customers—those in the marketplace who are not using the company’s products or services at all. Then people start to get a lot of blue ocean ideas.

MCNews: Putting a new strategy in place eventually translates into day-to-day business activities that affect everyone in the organization. Do you have any suggestions for insuring organization-wide acceptance or buy-in for a blue ocean strategy?

Mauborgne: Building on Chan’s points, we create a willingness in people to change by making them see the limitations of the red ocean. That gets them to listen. Then, we set the aspiration to create a blue ocean by showing how other companies have accomplished that.

We stress how to build a blue ocean strategy through dialog that is inclusive. We talk about how to build execution into strategy from the beginning by getting not only the top few people involved, but people across the organization. Then they are all part of it, have ownership of it, and therefore feel a commitment to execute on the ideas.

MCNews: What are some examples of red and blue ocean companies?

Kim: If you look at the airline industry, the airlines that are either in bankruptcy or close to it remain stuck in the red ocean of competition. Southwest Airlines, on the other hand, created a totally blue ocean by attracting car drivers.

Southwest did not compete head-on against other airlines by offering better meals or other incentives. Instead, they attracted car drivers by making flying closer to the car-driving experience. They offered the speed of the airplane with the economics and flexibility of driving.

Starbucks and IKEA are other examples of companies that have created new markets for their products through value innovation.

MCNews: What advice would you give companies if they want to get out of the red ocean?

In any industry, no matter how competitive it is, a company can create a blue ocean of uncontested market space.

Mauborgne: In any industry, no matter how competitive it is, a company can create a blue ocean of uncontested market space. For instance, the auto industry has generally been a red ocean industry. But when Chrysler came out with the minivan, they created a blue ocean and soaring new demand.

For us, that’s the excitement of blue ocean strategy. You can create a blue ocean within a red one. In the airline industry, another good example is Virgin Atlantic Airways, which went for the high end market. Virgin redefined the travel experience for business and first-class travelers. It’s not just getting from airport A to B, but the experience you have from when you leave your home to when you arrive. So it includes ground transportation, and options like taking a shower on arrival instead of going to a hotel.

MCNews: They offer the opposite of the car driving experience?

Mauborgne: Absolutely. And that’s a key point. You can create a blue ocean at the high end of an industry as Virgin did, or at the economy end as Southwest did. Blue oceans can also be created at the middle point of an industry like Borders and Barnes & Noble have done. There are multiple entry points to create a blue ocean in any industry.

MCNews: I guess the challenge is to have the method and the talent somewhere in your organization to help identify where your opportunities are for a blue ocean strategy.

Kim: That’s right.

MCNews: With more than 6,000 books on business strategy in the market, do you have a blue ocean strategy for your book?

Kim: Unlike other books on strategy, this book is the result of more than a decade of research and practice. Many strategy books conceptualize without providing a framework for what and how to do things. In our book, we generate action steps based on our experience of putting theory into practice.

We are saying that we found a pattern in the way innovation creates new markets. It’s not random, so we can structure it. The book presents the pattern for doing so. That message is actually counterintuitive.

MCNews: Thanks to both of you for your time today.

Find out more about Kim and Mauborgne at www.blueoceanstrategy.com.