In 2005 Kim and Mauborgne developed the idea of blue and red oceans to describe the market, where blue oceans represent untapped, unknown market spaces and red oceans represent “all the industries in existence today” – that is, known market spaces (p. 106). According to some researchers, Kim and Mauborgne’s work on blue ocean strategy (BOS) is an extension of the First Mover Approach (Buisson & Silberzahn, 2010). The first mover approach describes how a business enters “first into a new market” and “setting up a strong differentiation strategy” (Buisson & Silberzahn, 2010, p. 360). By being first in the new market, the first mover is able to “dominate a new area where profits abound” (Buisson & Silberzahn, 2010, p. 360).
Kim and Mauborgne (2005) describe BOS as having many different parts and principles. They characterize BOS as reconstructionist in terms of strategy. This means that market boundaries and industry structures “can be reconstructed by the actions and beliefs of industry players” (Kim & Mauborgne, 2005, p. 108). While other approaches to market innovation may look to competitors to determine how to develop strategies, BOS simply looks for areas where the market is virtually untouched or untapped and moves into that area. In a way, it demands innovation on the part of the organization attempting to, in essence, create a new market. However, Buisson and Silberzahn (2010) assert that “it is not necessary to create a market to end up dominating it,” offering Google as an example (p. 363). Regardless, BOS does demand innovation. BOS also contains a tool called the strategy canvas, “a diagnostic and an action framework” used as its name suggests: to identify or create strategy (Kim & Mauborgne, 2005, p. 110). Another tool is the four actions framework which contains four questions that consider and confront the established strategy-based logic and business model of a given industry (Kim & Mauborgne, 2005).
Considering its emphasis on innovation and not using the competition as a benchmark, the main importance of BOS is that it forces organizations to reconsider to how they view potential areas of development. Rather than focusing only on potential or actual competition, BOS requires organizations to reconsider the way they approach the market, innovation, and strategy.
In their assessment of BOS and Fast-Second Approach, Buisson and Silberzahn (2010) describe how several established organizations in established industries created innovations that can be described as BOS. One of the examples they include is Gillette. While they acknowledge that Gillette is by no means the first (or last) entrant into the razor/shaver market, the fact that it was the first in terms of “shavers with disposable blades” makes that approach a BOS one (Buisson & Silberzahn, 2010, p. 363). At a time when shavers did not use disposable blades, Gillette saw an untapped market and introduced the idea of disposable blades which were more convenient. No one else was offering such a product, and their product also represented an innovation in terms of an existing product.
A red ocean strategy for shavers/razors would be to offer existing products at cheaper or better prices than the competition, or alternatively to offer customization of existing products. Pros of this approach include no need for innovation and research and development (R&D), meaning that money applied toward R&D could be used elsewhere (such as marketing); an appeal to customers based on consumer preferences for customization; and the safety of an established product and market. Cons the fact that competitors could likewise offer cheaper/better prices for their products or offer customization of existing products; the stagnation of product and brand; and the fact that at the time prior to Gillette’s entrance into the disposable shaver market, the razor/shaver market was rather saturated, pretty much making it a red ocean.
- Buisson, B., & Silberzahn, P. (2010). Blue Ocean or Fast-Second innovation? A four-breakthrough model to explain successful market domination. International Journal of Innovation Management, 14(3), 359-378. doi:10.1142/S1363919610002684
- Kim, W.C., & Mauborgne, R. (2005). Blue ocean strategy: From theory to practice. California Management Review, 47(3), 105-121.