Chan Kim & Renée Mauborgne: If a company’s sole business is flailing in a red ocean and has no promise for profit and growth, it is time to look for the blue ocean. But companies with a diverse portfolio of businesses (such as General Electric, Johnson & Johnson, or Procter & Gamble) will always need to navigate both red and blue oceans at any given point in time.
The key is to maintain a healthy balance between the profit of today and the growth of tomorrow. Consider Apple, which has maintained strong profitable growth over decades by successfully balancing its pioneers, migrators, and settlers. As Macintosh products sank into the red ocean, Apple launched the value-innovative iMac, the colorful, Internet-friendly desktop computer that transformed the company’s Macintosh division into a high migrator. Apple quickly followed with the iPod, which created an uncontested blue ocean within the digital music market. And when the iPod inevitably sank toward migrator status, Apple launched its next blue ocean, the iPhone.
Yet Apple also illustrates how blue-ocean companies sometimes need to follow the more competition-based principles of red ocean strategy: once the iPod began to be imitated, Apple rapidly launched a range of variants at different price points: iPod mini, shuffle, nano, touch and so on. This not only served to keep encroaching competitors at arm’s length, but also expanded the size of the ocean it had created, allowing Apple, rather than its imitators, to capture the lion’s share of the profit and growth of the market. As Apple shows, red and blue ocean strategies are complementary in managing a company’s profit today while building strong growth and brand value for tomorrow.