Book Summary

Question Description

Summarized Chapter 1,2,3,6 from the assigned reading.

One and a half page, single space

Due on March 9, 6:00pm

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fran cin e fl eiScher W. Chan Kim is codirector of the INSEAD Blue Ocean Strategy Institute and The Boston Consulting Group Bruce D. Henderson Chair Professor of Strategy and International Management at INSEAD, France. bLue oCean STraTegY The inTernaTionaL beSTSeLLer noW WiTh a neW prefaCe, freSh ChapTerS, and updaTed CaSe STudieS  a beSTSeLLer aCroSS 5 ConTinenTS more Than 3.5 miLLion CopieS SoLd WorLdWide renée mauborgne is the INSEAD Distinguished Fellow and a professor of strategy at INSEAD. She is also codirector of the INSEAD Blue Ocean Strategy Institute. TranSLaTed inTo 43 LanguageS a Wall Street Journal, BuSineSSWeek, and FaSt Company beSTSeLLer To learn more about the power of blue ocean strategy, visit blueoceanstrategy.com. There you’ll find all the resources you need—from ideas in practice and cases from government and private industry, to teaching materials, mobile apps, real-time updates, and tips and tools to help you make your blue ocean journey a success. Kim | mauborgne man age me n t expanded ediTion of The inTernaTional besTseller US$32.00 / CAN$37.00 oVer 3.5 Milli o Copies s n old T bLue oCean STraTegY how to Create uncontested market Space and make the Competition irrelevant ISBN-13: 978-1-62527-449-6 90000 W. Chan Kim | renée mauborgne ViSit hbr.org follow @harVardbiz on twitter find uS on facebook, linkedin, youtube, and google+ hbr.org 9 781625 274496 his global bestseller, embraced by organizations and industries worldwide, challenges everything you thought you knew about the requirements for strategic success. Now updated with fresh content from the authors, Blue Ocean Strategy argues that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. Based on a study of 150 strategic moves (spanning more than 100 years across 30 industries), the authors argue that lasting success comes not from battling competitors but from creating “blue oceans”— untapped new market spaces ripe for growth. Blue Ocean Strategy presents a systematic approach to making the competition irrelevant and outlines principles and tools any organization can use to create and capture their own blue oceans. This expanded edition includes:    jacket d esi gn: ste phani fi nks Stay informed. Join the diScuSSion. The expanded ediTion of The inTernaTional besTseller HARVARD BUSINESS REVIEW PRESS A new preface by the authors: Help! My Ocean Is Turning Red Updates on all cases and examples in the book, bringing their stories up to the present time Two new chapters and an expanded third one—Alignment, Renewal, and Red Ocean Traps—that address the most pressing questions readers have asked over the past 10 years A landmark work that upends traditional thinking about strategy, this bestselling book charts a bold new path to winning the future. Consider this your guide to creating uncontested market space—and making the competition irrelevant. Blue Ocean Strategy 206403_00a_i-xxviii_r2_rk.indd i 28/10/14 4:23 PM 206403_00a_i-xxviii_r2_rk.indd ii 28/10/14 4:23 PM ( ) ( ) ( ) ( ) ( Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant W. Chan Kim Renée Mauborgne H A R VA R D B U S I N E S S R E V I E W P R E S S BOSTON, MASSACHUSETTS 206403_00a_i-xxviii_r2_rk.indd iii 28/10/14 4:23 PM Copyright 2015 Harvard Business School Publishing Corporation All rights reserved No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard. edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. The web addresses referenced in this book were live and correct at the time of the book’s publication but may be subject to change. Kim, W. Chan. Blue ocean strategy : how to create uncontested market space and make the competition irrelevant / W. Chan Kim, Renée Mauborgne. — Expanded edition. pages cm Includes bibliographical references and index. 1. New products. 2. Market segmentation. HF5415.153.K53 2015 658.8'02—dc23 I. Mauborgne, Renée. II. Title. 2014032847 eISBN 978-1-62527-450-2 206403_00a_i-xxviii_r2_rk.indd iv 28/10/14 4:23 PM To friendship and to our families, who make our worlds more meaningful 206403_00a_i-xxviii_r2_rk.indd v 28/10/14 4:23 PM 206403_00a_i-xxviii_r2_rk.indd vi 28/10/14 4:23 PM ( ) ( ) ( ) ( ) Contents Help! My Ocean Is Turning Red ix Preface to the Original Edition xxi Acknowledgments xxv Part One: Blue Ocean Strategy 1 Creating Blue Oceans 2 Analytical Tools and Frameworks 3 25 Part Two: Formulating Blue Ocean Strategy 3 Reconstruct Market Boundaries 49 4 Focus on the Big Picture, Not the Numbers 83 5 Reach Beyond Existing Demand 103 6 Get the Strategic Sequence Right 117 206403_00a_i-xxviii_r2_rk.indd vii 28/10/14 4:23 PM Contents viii Part Three: Executing Blue Ocean Strategy 7 Overcome Key Organizational Hurdles 147 8 Build Execution into Strategy 171 9 Align Value, Profit, and People Propositions 189 10 Renew Blue Oceans 203 11 Avoid Red Ocean Traps 215 Appendix A 225 Appendix B 245 Appendix C 249 Notes 253 Bibliography 263 Index 271 About the Authors 285 206403_00a_i-xxviii_r2_rk.indd viii 28/10/14 4:23 PM ( ) ( ) ( ) ( ) Help! My Ocean Is Turning Red H “ captures the sentiment echoed so frequently by managers around the world. More and more people, whether managers of companies, heads of nonprofits, or leaders of government, find themselves up against an ocean of bloody competition and want to get out. Maybe your business is seeing its margins shrink. Maybe competition is getting more intense, driving commoditization of your offering and rising costs. Maybe you know you are going to announce that salary increases won’t be coming. That’s not a situation any one of us wants to face. And yet that’s a situation that so many do face. How can you address this challenge? The lessons, tools, and frameworks of Blue Ocean Strategy will help you to meet this challenge, whatever industry or economic sector you are in. It shows how you can get out of a red ocean of bloody competition and into a blue ocean of uncontested market space characterized by new demand and strong profitable growth. When we wrote Blue Ocean Strategy, we used the metaphor of red and blue oceans because red oceans seemed to capture the reality that organizations increasingly face, while blue oceans 206403_00a_i-xxviii_r2_rk.indd ix ELP! MY OCEAN IS TURNING RED” 28/10/14 4:23 PM x Help! My Ocean Is Turning Red captured the endless possibility that organizations could create, as industry history has borne out since its inception. Today, ten years later, more than 3.5 million copies of the book have been sold. It has become a bestseller across five continents. It has been translated into a record-breaking forty-three languages. And the term “blue ocean” has entered the business vernacular. Over four thousand articles and blog posts on blue ocean strategy have come out, with new articles continuing to appear daily worldwide. The stories they contain are fascinating. There are articles from small business owners and individuals across the globe that discuss how the book fundamentally changed their perspectives on life and took their professional successes to all new levels. In other articles, executives speak of how blue ocean strategy provided the insight to take their business out of the red ocean and create all new demand. And yet other articles detail how government leaders have applied blue ocean strategy to achieve high impact at low cost with rapid execution in areas of social importance ranging from enhancing the quality of rural and urban lives, to strengthening internal and external securities, to breaking down ministerial and regional silos.1 As we have reached out to organizations that have applied the ideas and have worked with many directly since the publication of the original edition of Blue Ocean Strategy, we have learned a lot by watching the journey people have made with these ideas. Their most pressing questions in executing their blue ocean strategies are: How do we align all of our activities around our blue ocean strategy? What do we do when our blue ocean has become red? How can we avoid the strong gravitational pulls of “red ocean thinking”—we call them “red ocean traps”—even as we’re pursuing a blue ocean strategy? These are the very questions that have motivated this expanded edition. In this new preface, we first outline what’s new here. We then briefly summarize the key points that define and distinguish blue ocean strategy and address why we believe blue ocean strategy is more needed and relevant than ever before. 206403_00a_i-xxviii_r2_rk.indd x 28/10/14 4:23 PM Help! My Ocean Is Turning Red xi What’s New in This Expanded Edition? This edition adds two new chapters and expands a third. Here are the highlights that show the gist of managers’ key challenges and trouble spots and how we address them. Alignment: What it means, why it’s essential, and how to achieve it. A challenge we have been told about and have seen organizations struggle with is how they can align their system of activities—including a potential web of external partners—to create a sustainable blue ocean strategy in practice. Is there a simple yet 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? This is important as companies all too often focus on certain dimensions of their organizations, paying less heed to other dimensions that must support the strategy to make it a sustainable success. In recognition, this expanded edition expressly explores the issue of alignment in the context of blue oceans. We present cases of success and failure in alignment to show not only how it is achieved in action but also how it can be missed. Chapter 9 addresses this alignment challenge. Renewal: When and how to renew blue oceans over time. All companies rise and fall based on the strategic moves they make or don’t make. A challenge organizations face is how to renew blue oceans over time, as every blue ocean will eventually be imitated and turn red. Understanding the process of renewal is key to ensure that the creation of blue oceans is not a one-off occurrence but can be institutionalized as a repeatable process in an organization. In this expanded edition, we tackle how leaders can turn the creation of blue oceans from a static achievement into a dynamic renewal process both at the business level and at the corporate level for multibusiness firms. Here we articulate the dynamic renewal process for creating sustainable economic performance both for a single business that has reached for a blue ocean and for a multibusiness organization that has to balance both red and blue 206403_00a_i-xxviii_r2_rk.indd xi 28/10/14 4:23 PM Help! My Ocean Is Turning Red xii ocean initiatives. In so doing, we also highlight the complementary roles that red and blue ocean strategies play in managing a company’s profit for today while building strong growth and brand value for tomorrow. Chapter 10 addresses this renewal challenge. Red Ocean Traps: What they are and why they should be avoided. Lastly, we show the ten most-common red ocean traps we see companies fall into as they put blue ocean strategy into practice. These traps keep companies anchored in the red even as they attempt to set sail for the blue. Addressing these traps is critical to getting people’s framing right to create blue oceans. With the proper grasp of the concept, one can avoid the traps and apply its associated tools and methodologies with accuracy so that right strategic actions can be produced to sail toward clear blue waters. Chapter 11 addresses the challenge of red ocean traps. What Are the Main Points of Distinction? The aim of blue ocean strategy was straightforward: to allow any organization—large or small, new or incumbent—to step up to the challenge of creating blue oceans in an opportunity-maximizing, risk-minimizing way. The book challenges several long-held beliefs in the field of strategy. If we had to zoom in on five key points of distinction that make the book worthy of consideration, it would be these. Competition should not occupy the center of strategic thinking. Too many companies let competition drive their strategies. What blue ocean strategy brings to life, however, is that this focus on the competition all too often keeps companies anchored in the red ocean. It puts the competition, not the customer, at the core of strategy. As a result, companies’ time and attention get focused on benchmarking rivals and responding to their strategic moves, rather than on understanding how to deliver a leap in value to buyers— which is not the same thing. 206403_00a_i-xxviii_r2_rk.indd xii 28/10/14 4:23 PM Help! My Ocean Is Turning Red xiii Blue ocean strategy breaks from the stranglehold of competition. At the book’s core is the notion of a shift from competing to creating new market space and hence making the competition irrelevant. We first made this point all the way back in 1997 in “Value Innovation,” the first of our series of Harvard Business Review articles that form the basis of this book.2 We observed that companies that break away from the competition pay little heed to matching or beating rivals or carving out a favorable competitive position. Their aim was not to outperform competitors. It was to offer a quantum leap in value that made the competition irrelevant. The focus on innovating at value, not positioning against competitors, drives companies to challenge all the factors an industry competes on and to not assume that just because the competition is doing something means it is connected to buyer value. In this way, blue ocean strategy makes sense of the strategic paradox many organizations face: the more they focus on coping with the competition, and striving to match and beat their advantages, the more they ironically tend to look like the competition. To which blue ocean strategy would respond, stop looking to the competition. Value-innovate and let the competition worry about you. Industry structure is not given; it can be shaped. The field of strategy has long assumed that industry structure is given. With industry structure seen as fixed, firms are driven to build their strategies based on it. And so strategy, as is commonly practiced, tees off with industry analysis—think five forces or its distant precursor SWOT analysis—where strategy is about matching a company’s strengths and weaknesses to the opportunities and threats present in the existing industry. Here strategy perforce becomes a zero-sum game where one company’s gain is another company’s loss, as firms are bound by existing market space. Blue ocean strategy, by contrast, shows how strategy can shape structure in an organization’s favor to create new market space. It is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and 206403_00a_i-xxviii_r2_rk.indd xiii 28/10/14 4:23 PM xiv Help! My Ocean Is Turning Red beliefs of industry players. As industry history shows, new market spaces are being created every day and are fluid with imagination. Buyers prove that as they trade across alternative industries, refusing to see or be constrained by the cognitive boundaries industries impose upon themselves. And firms prove that as they invent and reinvent industries, collapsing, altering, and going beyond existing market boundaries to create all new demand. In this way, strategy moves from a zero-sum to a non-zero-sum game, and even an unattractive industry can be made attractive by companies’ conscious efforts. Which is to say a red ocean need not stay red. This brings us to a third point of distinction. Strategic creativity can be unlocked systematically. Ever since Schumpeter’s vision of the lone and creative entrepreneur, innovation and creativity have been essentially viewed as a black box, unknowable and random.3 Not surprisingly, with innovation and creativity viewed as such, the field of strategy predominantly focused on how to compete in established markets, creating an arsenal of analytic tools and frameworks to skillfully achieve this. But is creativity a black box? When it comes to artistic creativity or scientific breakthroughs—think Gaudi’s majestic art or Marie Curie’s radium discovery—the answer may be yes. But is the same true for strategic creativity that drives value innovation that opens up new market spaces? Think Ford’s Model T in autos, Starbucks in coffee, or Salesforce.com in CRM software. Our research suggests no. It revealed common strategic patterns behind the successful creation of blue oceans. These patterns allowed us to develop underlying analytic frameworks, tools, and methodologies to systematically link innovation to value and reconstruct industry boundaries in an opportunity-maximizing, risk-minimizing way. While luck, of course, will always play a role, as it does with all strategies, these tools—like the strategy canvas, four actions framework, and six paths to reconstruct market boundaries—bring structure to what has historically been an unstructured problem in strategy, informing organizations’ ability to create blue oceans systematically. 206403_00a_i-xxviii_r2_rk.indd xiv 28/10/14 4:23 PM Help! My Ocean Is Turning Red xv Execution can be built into strategy formulation. Blue ocean strategy is a strategy that joins analytics with the human dimension of organizations. It recognizes and pays respect to the importance of aligning people’s minds and hearts with a new strategy so that at the level of the individual, people embrace it of their own accord and willingly go beyond compulsory execution to voluntary cooperation in carrying it out. To achieve this, blue ocean strategy does not separate strategy formulation from execution. Although this disconnect may be a hallmark of most companies’ practices, our research shows it is also a hallmark of slow and questionable implementation and mechanical follow-through at best. Instead, blue ocean strategy builds execution into strategy from the start through the practice of fair process in the making and rolling out of strategy. Over twenty-five years, we have written about the impact of fair process on the quality of execution of decisions through many academic and managerial publications.4 As blue ocean strategy brings to light, fair process prepares the ground for implementation by invoking the most fundamental basis of action: trust, commitment, and the voluntary cooperation of people deep in an organization. Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They are intangible capital. They allow companies to stand apart in the speed, quality, and consistency of their execution and to implement strategic shifts fast at low cost. A step-by-step model for creating strategy. The field of strategy has produced a wealth of knowledge on the content of strategy. However, what it has remained virtually silent on is the key question of how to create a strategy to begin with. Of course, we know how to produce plans. But, as we all know, the planning process doesn’t produce strategy. In short, we don’t have a theory of strategy creation. While there are many theories that explain why companies fail and succeed, the ...
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Running Head: BOOK SUMMARY


Book Summary Blue Ocean Strategy
Student Name
Institutional Affiliation


Blue Ocean Strategy

Chapter one of the book describes how to create a blue ocean whereby Blue Ocean is
created by ensuring that the business focuses on the interest of the customer while avoiding what
the customer does not need. Red Oceans exist where the new business faces stiff competitions
from existing businesses as well as emerging ones. In such a case, the businesses strategies focus
on winning customers from the existing businesses and outdoing them in businesses in order to
get some of the market-share.
Blue Ocean strategy creates a new type of customer that had not existed within the
market. In the first phase of the business existence, the strategies focus includes the SWOT
analysis as well as Porter’s five forces. Through these analyses, the red Oceans are identified and
the new business has to put strategies in place to ensure that they take all the opportunities and
out in the existing businesses in order to create their own customer base within the markets.
These strate...

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