Chan Kim Quotes

Blue oceans are right next to you in every industry.

Focus on innovating at value, not positioning against competitors

stop looking to the competition. Value-innovate and let the competition worry about you.

Create. Don't Compete.

Competition is only good up to a point. When supply exceeds demand

While good strategy content is based on a compelling value proposition for buyers with a robust profit proposition for the organization, sustainable strategy execution is based largely on a motivating-people proposition.

Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space. Value innovation places equal emphasis on value.

senior managers’ goal here should be to manage their portfolio of businesses to wisely balance between profitable growth and cash flow at a given point in time.

Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves.

Simply put, there is no substitute for meeting and listening to dissatisfied customers directly.

Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

To tip the cognitive hurdle fast, tipping point leaders such as Bratton zoom in on the act of disproportionate influence: making people see and experience harsh reality firsthand.

The planning process doesn’t produce strategy

Blue ocean strategy is not about being first to market. Rather it’s about being first to get it right by linking innovation to value.

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 company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. The same is true for great strategists.

innovative ideas will be profitable only if they are linked to what buyers are willing to pay for.

Experiences that don’t involve touching, seeing, or feeling actual results, such as being presented with an abstract sheet of numbers, are shown to be non-impactful and easily forgotten.

Executives are paralyzed by the muddle. Few employees deep down in the company even know what the strategy is. And a closer look reveals that most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart—let alone makes the competition irrelevant. Does this sound like the strategic plans in your company?

Harvard Business Review that he said reminded him of me. The article—“Parables of Leadership” by W. Chan Kim and Renée A. Mauborgne—was composed of a series of ancient parables that focused on what the authors called “the unseen space of leadership.

Blue ocean shift is a systematic process to move your organization from cutthroat markets with bloody competition—what we think of as red oceans full of sharks—to wide-open blue oceans, or new markets devoid of competition, in a way that brings your people along.

An Incoherent Strategy When a company’s value curve looks like a bowl of spaghetti—a zigzag with no rhyme or reason, where the offering can be described as “low-high-low-low-high-low-high”—it signals that the company doesn’t have a coherent strategy. Its strategy is likely based on independent substrategies. These may individually make sense and keep the business running and everyone busy, but collectively they do little to distinguish the company from the best competitor or to provide a clear strategic vision. This is often a reflection of an organization with divisional or functional silos.

As companies compete to embrace customer preferences through finer segmentation, they often risk creating too-small target markets.

Salespeople on commission, for example, are seldom sensitive to the costs of the sales they produce.

Every company wants one, yet few companies have one: a compelling strategy.

Blue ocean strategists do not seek to beat the competition. Instead they aim to make the competition irrelevant.

strategic planning should be more about collective wisdom building than top-down or bottom-up planning.

Shift from convergence to divergence

The hardest battle is simply to make people aware of the need for a strategic shift and to agree on its causes

Don’t rely on market surveys.

the strategic price you set for your offering must not only attract buyers in large numbers but also help you to retain them.

brand building increasingly relies heavily on word-of-mouth recommendations spreading rapidly through our networked society.

Focus on the big picture, not the numbers.

Every blue ocean will eventually be imitated and turn red

to win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition.

Value innovation is the cornerstone of blue ocean strategy

Technology is not a defining feature. You can create blue oceans with or without it.

What is the chain of buyers in your industry? Which buyer group does your industry typically focus on? If you shifted the buyer group of your industry, how could you unlock new value?

The key here is not to pursue pricing against the competition within an industry but rather to pursue pricing against substitutes and alternatives across industries and nonindustries.

To reach your organization’s tipping point and execute blue ocean strategy, you must alert employees to the need for a strategic shift and identify how it can be achieved with limited resources. For a new strategy to become a movement, people must not only recognize what needs to be done, but they must also act on that insight in a sustained and meaningful way. How

Drawing a strategy canvas is never easy. Even identifying the key factors of competition is far from straightforward. As you will see, the final list is usually very different from the first draft

It immediately flags companies that are focused only on raising and creating and thereby lifting their cost structure and often overengineering products and services—a common plight in many companies.

Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, it will not attract the masses no matter how many awards it wins.

If you can move people by inspiring and building their confidence to own and drive your new strategy, they will be committed to seeing change through and overcoming the organizational constraints you confront.

Given the high potential for free riding, an offering’s reputation must be earned on day one, because brand building increasingly relies heavily on word-of-mouth recommendations spreading rapidly through our networked society.

What is the context in which your product or service is used? What happens before, during, and after? Can you identify the pain points? How can you eliminate these pain points through a complementary product or service offering?

What a blue ocean strategist recognizes, and what most of us all too often forget, is that while industry conditions exist, individual firms created them. And just as individual firms created them, individual firms can shape them too,

Instead of drilling down and finding ways to creatively meet the target cost as Ford did, if companies give in to the tempting route of either bumping up the strategic price or cutting back on utility, they are not on the path to lucrative blue waters.

Untapped value is often hidden in complementary products and services. The key is to define the total solution buyers seek when they choose a product or service. A simple way to do so is to think about what happens before, during, and after your product is used.

What are the alternative industries to your industry? Why do customers trade across them? By focusing on the key factors that lead buyers to trade across alternative industries and eliminating or reducing everything else, you can create a blue ocean of new market space.

The Pivotal Lever: Disproportionate Influence Factors The key to tipping point leadership is concentration, not diffusion. Tipping point leadership builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise

We call this atomization after Einstein’s reflection that if you deconstruct any challenge into its basic components, or atoms, and focus on solving them one at a time, even the largest challenge shifts from being overwhelming to being intellectually and psychologically solvable.

Voluntary cooperation is more than mechanical execution, where people do only what it takes to get by. It involves going beyond the call of duty, wherein individuals exert energy and initiative to the best of their abilities—even subordinating personal self-interest—to execute resulting strategies.3

The cost side of a company’s business model ensures that it creates a leap in value for itself in the form of profit—that is, the price of the offering minus the cost of production. It is the combination of exceptional utility, strategic pricing, and target costing that allows companies to achieve value innovation—a

It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost.21 In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously.

Partnering, however, provides a way for companies to secure needed capabilities fast and effectively while dropping their cost structure. It allows a company to leverage other companies’ expertise and economies of scale. Partnering includes closing gaps in capabilities through making small acquisitions when doing so is faster and cheaper, providing access to needed expertise that has already been mastered.

The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities. This is especially true in the face of competitive pressure. Although this might be a good way to gain a focused competitive advantage and increase share of the existing market space, it is not likely to produce a blue ocean that expands the market and creates new demand.

Yet few leaders exploit the power of this rapid wake-up call. Rather, they do the opposite. They try to garner support based on a numbers case that lacks urgency and emotional impetus. Or they try to put forth the most exemplary case of their operational excellence to garner support. Although these alternatives may work, neither leads to tipping superiors’ cognitive hurdle as fast and stunningly as showing the worst. When

To tip the cognitive hurdle fast, tipping point leaders such as Bratton zoom in on the act of disproportionate influence: making people see and experience harsh reality firsthand. Research in neuroscience and cognitive science shows that people remember and respond most effectively to what they see and experience: “Seeing is believing.” In the realm of experience, positive stimuli reinforce behavior, whereas negative stimuli change attitudes and behavior. Simply

The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark.17 Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

As shown in figure 2-2, to break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry’s strategic logic and business model: Which of the factors that the industry takes for granted should be eliminated? Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered?

Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace.18 Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for.19 In this sense, it is important to distinguish between value innovation as opposed to technology innovation and market pioneering.

The key questions answered by tipping point leaders are as follows: What factors or acts exercise a disproportionately positive influence on breaking the status quo? On getting the maximum bang out of each buck of resources? On motivating key players to aggressively move forward with change? And on knocking down political roadblocks that often trip up even the best strategies? By single-mindedly focusing on points of disproportionate influence, tipping point leaders can topple the four hurdles that limit execution of blue ocean strategy. They can do this fast and at low cost. Let

As Steve Jobs put it, “You tend to get told that the world is the way it is… But that’s a very limited [view]. Life can be much broader once you discover one simple fact. And that is everything around you that you call life was made up by people that were no smarter than you. And you can change it. You can influence it. You can build your own things that other people can use. And the minute you understand that you can poke life… that you can change it. You can mold it. That’s maybe the most important thing—to shake off this erroneous notion that life is there and you’re just going to live in it.… And once you learn that, you’ll never be the same again.

The first involves streamlining operations and introducing cost innovations from manufacturing to distribution. Can the product’s or service’s raw materials be replaced by unconventional, less expensive ones—such as switching from metal to plastic or shifting a call center from the UK to Bangalore? Can high-cost, low-value-added activities in your value chain be significantly eliminated, reduced, or outsourced? Can the physical location of your product or service be shifted from prime real estate locations to lower-cost locations, as The Home Depot, IKEA, and Walmart have done in retail or Southwest Airlines has done by shifting from major to secondary airports? Can you truncate the number of parts or steps used in production by shifting the way things are made, as Ford did by introducing the assembly line? Can you digitize activities to reduce costs? By

Beyond streamlining operations and introducing cost innovations, a second lever companies can pull to meet their target cost is partnering. In bringing a new product or service to market, many companies mistakenly try to carry out all the production and distribution activities themselves. Sometimes that’s because they see the product or service as a platform for developing new capabilities. Other times it is simply a matter of not considering other outside options. Partnering, however, provides a way for companies to secure needed capabilities fast and effectively while dropping their cost structure. It allows a company to leverage other companies’ expertise and economies of scale. Partnering includes closing gaps in capabilities through making small acquisitions when doing so is faster and cheaper, providing access to needed expertise that has already been mastered. A

By probing questions such as these, the Swiss watch company Swatch, for example, was able to arrive at a cost structure some 30 percent lower than any other watch company in the world. At the start, Nicolas Hayek, chairman of Swatch, set up a project team to determine the strategic price for the Swatch. At the time, cheap (about $75), high-precision quartz watches from Japan and Hong Kong were capturing the mass market. Swatch set the price at $40, a price at which people could buy multiple Swatches as fashion accessories. The low price left no profit margin for Japanese or Hong Kong–based companies to copy Swatch and undercut its price. Directed to sell the Swatch for that price and not a penny more, the Swatch project team worked backwards to arrive at the target cost, a process that involved determining the margin Swatch needed to support marketing and services and earn a profit. Given

Instead of focusing on getting more resources, tipping point leaders concentrate on multiplying the value of the resources they have. When it comes to scarce resources, there are three factors of disproportionate influence that executives can leverage to dramatically free resources, on the one hand, and multiply the value of resources, on the other. These are hot spots, cold spots, and horse trading. Hot spots are activities that have low resource input but high potential performance gains. In contrast, cold spots are activities that have high resource input but low performance impact. In every organization, hot spots and cold spots typically abound. Horse trading involves trading your unit’s excess resources in one area for another unit’s excess resources to fill remaining resource gaps. By learning to use their current resources right, companies often find they can tip the resource hurdle outright. What

Different form, same function. Many companies that create blue oceans attract customers from other industries who use a product or service that performs the same function or bears the same core utility as the new one but takes a very different physical form. In the case of Ford’s Model T, Ford looked to the horse-drawn carriage. The horse-drawn carriage had the same core utility as the car: transportation for individuals and families. But it had a very different form: a live animal versus a machine. Ford effectively converted the majority of noncustomers of the auto industry, namely customers of horse-drawn carriages, into customers of its own blue ocean by pricing its Model T against horse-drawn carriages and not the cars of other automakers. In the case of the school lunch catering industry, raising this question led to an interesting insight. Suddenly those parents who make their children’s lunches came into the equation. For many children, parents had the same function: making their child’s lunch. But they had a very different form: mom or dad versus a lunch line in the cafeteria. Different form and function, same objective. Some companies lure customers from even further away. Cirque du Soleil, for example, has diverted customers from a wide range of evening activities. Its growth came in part through drawing people away from other activities that differed in both form and function. For example, bars and restaurants have few physical features in common with a circus. They also serve a distinct function by providing conversational and gastronomical pleasure, a very different experience from the visual entertainment that a circus offers. Yet despite these differences in form and function, people have the same objective in undertaking these three activities: to enjoy a night out.

Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant.

What are the strategic groups in your industry? Why do customers trade up for the higher group, and why do they trade down for the lower one?

Does your industry compete on functionality or emotional appeal? If you compete on emotional appeal, what elements can you strip out to make it functional? If you compete on functionality, what elements can be added to make it emotional?

What trends have a high probability of impacting your industry, are irreversible, and are evolving in a clear trajectory? How will these trends impact your industry? Given this, how can you open up unprecedented customer utility?

Never use the competition as a benchmark

Strategy is heavily influenced by its roots in military strategy. The very language of strategy is deeply imbued with military references— chief executive “officers” in “headquarters,” “troops” on the “front lines.” Described this way, strategy is all about red ocean competition. It is about confronting an opponent and driving him off a battlefield of limited territory.

Today, one hardly talks about strategy without using the language of competition.

blue oceans were seldom the result of technological innovation per se;

Most blue oceans are created from within, not beyond, red oceans of existing industries

There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.

we have observed a consistent pattern of strategic thinking behind the creation of new markets and industries, what we call blue ocean strategy.

The traditional units of strategic analysis—company and industry—have little explanatory power when it comes to analyzing how and why blue oceans are created. (..) The most appropriate unit of analysis for explaining the creation of blue oceans is the strategic move—the set of managerial actions and decisions involved in making a major market creating business offering.

adopting a blue ocean creator’s business model is easier to imagine than to do. Because blue ocean creators immediately attract customers in large volumes, they are able to generate scale economies very rapidly, putting would-be imitators at an immediate and continuing cost disadvantage.

Attempts to imitate a blue ocean creator conflict with the imitator’s existing brand image.

A blue ocean strategic move can create brand equity that lasts for decades

Large R&D budgets are not the key to creating new market space. The key is making the right strategic moves.

Strategic move will be well placed to create multiple blue oceans over time, thereby continuing to deliver high growth and profits over a sustained period.

The creation of blue oceans, in other words, is a product of strategy and as such is very much a product of managerial action.

Moreover, when you ask existing customers, “How can we make you happier?” their insights tend toward the familiar, such as “Offer me more for less.” But this focus almost always drives you to merely offer better solutions to your industry’s existing problem, keeping you trapped in the red ocean.

Organizational leaders often accept and act on two fundamental assumptions. One is that market boundaries and industry conditions are given. You cannot change them. You have to build your strategy based on them. 4 The other is that, to succeed within these environmental constraints, an organization must make a strategic choice between differentiation and low cost. Either it can deliver greater value to customers at a greater cost and hence a higher price, or it can deliver reasonable value at a lower cost. But it can’t do both. Hence, the essence of strategy is seen as making a value-cost trade-off.

In a study of business launches in 108 companies, we found that 86% of those new ventures were line extensions—incremental improvements to existing industry offerings—and a mere 14% were aimed at creating new markets or industries.

blue ocean strategy is a theory of market creation

...os próprios clientes não são capazes de imaginar como criar novos espaços de mercado inexplorado.

The only way to beat the competition is to stop trying to beat the competition.

your offering needs to stand out as never before.

A rising call for creative new solutions. Just look at a broad swath of industries that matter fundamentally to who we are: health care,

It appears, then, that neither the company nor the industry is the best unit of analysis in studying the roots of profitable growth. Consistent with this observation, our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering.

Blue ocean strategy, by contrast, shows how strategy can shape structure in an organization’s favor to create new market space.

In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.

To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry.

For value innovation to be a sustainable strategy, then, the alignment of the company’s utility, price, cost, and people is needed.