Chan Kim & Renée Mauborgne: For any business strategy to be successful and sustainable, the key divisions within an organization — those focused on value, on profit, and on people — must work together towards a strategic objective or “in alignment.” At the highest level, there are three propositions essential to the success of strategy: the value proposition (developing an offering that attracts buyers), the profit proposition (creating a business model that enables the company to make money through its offering) and the people proposition (motivating the people working for or with the company to execute the strategy).
Creating a full set of consistent strategy propositions is essential whether a firm follows blue ocean or red ocean strategy. Where the two approaches diverge is in how organizations align their strategy propositions. Under red ocean strategy, an organization’s three strategy propositions need to be aligned with the distinctive choice of pursuing either differentiation or low cost within given industry conditions. Under blue ocean strategy, an organization succeeds when all three strategy propositions pursue both differentiation and low cost. It is this alignment in support of differentiation and low cost that ensures a successful blue ocean strategy that has sustainability.