You may have recently overheard the words “blue ocean” on a business-networking event. Or maybe your company has already caught the “blue ocean” virus. “Blue Ocean Strategy” is a hugely popular management book on strategy innovation written by W. Chan Kim and Renée Mauborgne, two professors of the INSEAD Business School in Fontainebleau, France. The authors argue that tomorrow’s leading companies will succeed not by fighting for higher market share in their highly competitive current industries (the overcrowded “red oceans” that have turned bloody due to the fierce price competition), but by creating “blue oceans” of uncontested new market space through value innovation that allows for profitable growth. The book suggests that if a company uses Kim and Mauborgne’s methodology and toolkit, they are able to create a different value proposition and a new “blue ocean” that allows for superior growth in the new market space.

Being both an academic expert and a practitioner in the domain of “Business Creativity and Innovation”, I am often asked the question: “What do you think about the ‘Blue Ocean Strategy’?” Here are my rather demystifying thoughts on the concept. For me, “Blue Ocean Strategy” is an excellent book to highlight the importance of strategic value innovation for businesses. Based on their extensive research of 150 historic strategic moves covering a time span of a hundred years and thirty industries, the authors demonstrate how value innovation is created: By significantly increasing the buyers’ value and by markedly reducing the company’s cost at the same time. By doing so, a company differentiates itself from its industry peers and redefines and expands the boundaries of the industry through value innovation. Thus is created a “blue ocean”.

So far, so good. From my point of view, however, the downside of the concept lies in the limitations of the toolkit. All cognitive processes in creating a “blue ocean” center around two to three thinking tools only: The “Strategy Canvas” (a visual representation of the typical value propositions and factors of competition in a particular industry), the “Four Actions Framework” (a tool that asks four questions), and the “Buyer-Utility Map”. Kim and Mauborgne explain the use of the tools by citing some great examples of companies that have achieved breakthrough value innovations in recent years (such as Cirque du Soleil, Virgin Atlantic Airlines, Southwest Airlines). However, be aware that those companies did not use the “blue ocean”-tools in the first place to arrive at their innovative ideas! Rather the authors use their three tools to explain the innovation path of these companies post hoc.

There is an even more important imminent danger with “Blue Ocean Strategy”. Every senior manager and business owner who reads the book and applies the methodology to achieve strategic value innovation for his company falls back on the same limited toolkit to come up with ideas. As everyone uses the same 2-3 tools to generate ideas for value innovation, we can expect that most businesses will innovate along the same lines of thinking again. This sameness-effect will be increased as the “blue ocean”-tools rather draw on your analytical thinking capabilities as compared to creativity techniques that truly activate your imagination. In consequence, it is highly likely that in a few years from now, instead of being alone in a wonderful blue ocean, all “blue ocean-innovators” will find themselves back again in a red ocean surrounded by most of their traditional peers.

Due to these shortcomings, I regard the “Strategy Canvas” and the “Four Actions Framework” as de-selection tools. Do you really want to move toward uncontested market territory? Then avoid the “blue ocean”-toolkit or use it alongside many other thinking techniques. There are over 200 creativity techniques and many excellent other analytical thinking tools around, so why do you want to limit yourself to just three analytical tools? Do your own thinking instead of following the herd that blindly falls for the latest management fad.

Some large local corporations in Thailand have started to train their managers and staff in the blue ocean methodology, regarding it as the Holy Grail to generating unique value innovation. I recently learned about a company, which has widely rolled out the “Blue Ocean Strategy” concept across the company — now even the driver talked about blue oceans. “When your maids start to talk about stocks, sell as soon as possible — the bubble is about to burst anytime soon”, is an old piece of advice in investment circles that came to my mind when I heard this story, and it illustrates how worn out the “Blue Ocean Strategy” concept already is. For me, simply using the few tools and methodology of the book to achieve strategic value innovation for your company is a likely way to find yourself back in a — only marginally different — red ocean. So with reference to the Hollywood movie “Back to the Future” I challenge all “Blue Ocean Strategy”-enthusiasts with the question: Do you still want to move “Forward into the Past”?

© Dr. Detlef Reis 2007. This article was published in parallel in the Bangkok Post under the same title on 25 May 2007.