Why are so many CEOs focused on the red ocean, while as you’re claiming, the money is increasingly in the blue ocean?
Kim & Mauborgne: Blue and red oceans have always coexisted and always will. Practical reality, therefore, demands that companies understand the strategic logic of both types of oceans. At present, however, competing in red oceans dominates the field of strategy in theory and in practice. Part of the reason traces back to the historical foundation of business strategy—war—where territory is defined and limited and opponents compete to protect and enlarge their share of limited and existing terrain. This focus on beating the competition in existing market space was exasperated by the meteoric rise of the Japanese in the 1970s and 1980s. Faced with mounting competition in the global marketplace as, for virtually the first time in corporate history, customers were deserting Western companies in droves, the center of strategic thinking gravitated further towards the competition. A slew of competition-based strategies emerged which argued that competition is at the core of the success and failure of firms, and that competition determines the appropriateness of a firm’s activities that can contribute to its performance.
The result has been a fairly good understanding of how to compete skillfully in red waters, from analyzing the underlying economic structure of an existing industry, to choosing a strategic position of low cost or differentiation or focus, to benchmarking the competition. Yet, although some discussions around blue oceans exist, little practical guidance exists to create and capture them. This largely explains why CEOs remain focused on red oceans—it’s the ocean they are familiar with and feel equipped to compete in.
What blue oceans strategy seeks to do is to make the creation and capturing of blue oceans as systematic and actionable as competing in the red waters of known market space. For although blue ocean strategists have always existed, for the most part their strategies have been largely unconscious. Blue ocean strategy seeks to remedy this by not only decoding the pattern and principles behind the successful creation of blue oceans, but also providing the analytical frameworks and tools to act on this insight.