Sample frameDay 028·Strategy · Competition

Morning. The goal isn't to beat the competition. It's to make the competition irrelevant.

Strategy.

Blue Ocean Strategy

6 min read·Apply by lunch

The question

Is your strategy defined by what your competitors are doing — or by the value you're creating for customers they aren't reaching?

The idea

Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne, professors at INSEAD, published in the Harvard Business Review and then in their 2004 book. The central metaphor: red oceans are known markets where competitors fight for existing demand, cutting prices and improving features in an increasingly brutal competition that leaves the water bloody. Blue oceans are uncontested market spaces — created, not discovered — where a company reconstructs market boundaries to make the competition irrelevant. The key distinction is value innovation: instead of choosing between differentiation and low cost (Porter's trade-off), blue ocean strategy pursues both simultaneously by eliminating and reducing factors the industry over-invests in, while raising and creating factors customers would value if they existed. Kim and Mauborgne's research across 150 strategic moves found that while blue ocean moves represented only 14% of new business launches, they generated 38% of revenue and 61% of profits. The tools they developed — the Strategy Canvas and the ERRC (Eliminate–Reduce–Raise–Create) grid — make the framework operational: they force companies to see where they're competing on the same variables as everyone else, and to find the dimensions of value that are being systematically ignored.

The framework

01
Draw the Strategy Canvas — map where you and your competitors are competing.
The Strategy Canvas plots key industry factors on the horizontal axis (price, product quality, service, speed, range, etc.) and the level of offering across each factor on the vertical axis. Plotting your offering and your competitors' reveals the pattern of strategic investment in your industry. If your curve looks like everyone else's — high on the same factors, low on the same factors — you're in the red ocean, differentiating on the margin. A blue ocean strategy produces a curve that looks visibly different: high on factors competitors ignore, low on factors the industry over-invests in. The canvas is simultaneously a diagnosis and a design tool.
02
Apply the ERRC Grid: Eliminate, Reduce, Raise, Create.
The ERRC Grid is the operational tool for designing the blue ocean move. Eliminate: which factors that the industry takes for granted should be eliminated entirely? (Cirque du Soleil eliminated animals, star performers, and multiple arenas.) Reduce: which factors should be reduced well below the industry standard? Raise: which factors should be raised well above the industry standard? Create: which factors should be introduced that the industry has never offered? The discipline is to make explicit choices on all four dimensions simultaneously — not just add features (raise and create), but remove the assumptions that make the category expensive to compete in.
03
Target non-customers — there are three tiers.
Blue ocean thinking distinguishes three tiers of non-customers: 'soon-to-be' non-customers who are at the edge of your market and reluctantly using your solution; 'refusing' non-customers who have consciously chosen not to engage with the industry; and 'unexplored' non-customers in markets that have never been considered adjacent. The largest blue oceans are typically created by targeting the second and third tiers — the people who looked at your industry's offering and walked away. Understanding why they left (or why they never came) usually points directly at the factors to eliminate or create.
04
Test for tipping point leadership before you commit.
Blue ocean moves fail not just in design but in execution — specifically at the tipping point where internal resistance, partner inertia, and market scepticism converge. Kim and Mauborgne identify four hurdles: cognitive (is the organisation convinced the old model is obsolete?), resource (does the move require more than is available?), motivational (are key influencers on board?), and political (are powerful stakeholders blocking the shift?). A blue ocean strategy that hasn't cleared these hurdles internally will be diluted back into the red ocean by the time it reaches the market.

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