Executive Interviews: Interview with W Chan Kim & Renee Mauborgne on Blue Ocean Strategy
December 2008 - By Dr. Nagendra V Chowdary

W Chan Kim & Renee Mauborgne
Co-Founders and Co-Directors of the INSEAD Blue Ocean Strategy Institute.

Recognizing that structure and market boundaries exist only in managers minds, companies that hold this view do not let existing industry or market structures limit their thinking.

• How should firms go about creating new market spaces? What should be the road map and the level of external intervention (for example, from consultants) required for getting BOS journey right?
  The goal for the firm is to pursue value innovation a leap in value for buyers and company alike. This comes from the simultaneous pursuit of differentiation and low cost. The following questions are helpful in looking for blue ocean opportunities:

1. Which of the factors that the industry takes for granted should be eliminated?
2. Which factors should be reduced well below the industrys standard?
3. Which factors should be raised well above the industrys standard?
4. Which factors should be created that the industry has never offered before? Blue ocean strategy then asks how can I create exceptional buyer utility that will change the lives of the mass of the market? Once answered, they ask, what is the price that will unlock the mass of buyers? Here you have achieved your value proposition. Next, given the strategic price,what is the cost target I need to achieve to make a tidy profit? This is the profit proposition. Finally they ask, what are the adoption hurdles to executing my strategy and how do I overcome them? This is the people proposition. The moment you sit back and say how you can create a whole new industry, by asking just a few simple questions, then you start to shift your strategic mindset. All industries are created not by big resources but by big ideas. Blue Ocean Strategy proposes a different approach whereby a new market space is built by cognitively reordering and reconstructing the existing market realities and existing data in a fundamentally new way.

• The entire strategy edifice is built on competition and how to stay ahead of competition. A lot has been written on these themes. Bruce D Henderson, whose chair professorship you hold at INSEAD, in one of his articles (The Origin of Strategy , HBR, Nov Dec, 1989) made a clear distinction between natural competition and business competition and exhorted the companies to look for differentiating factors to stay ahead of competition. However, one of the strongest advocated themes of BOS is making competition irrelevant. Is it also not true that a healthy competition can propel better value innovations and benchmarking practices?
  First, we must say that practicing competitive strategy, or what we call Red Ocean Strategy, is essential to the success of a business. One still must compete in the marketplace. However, competitive strategy often makes companies too focused on benchmarking against the competition, focusing on their existing assets and capabilities, and generally trying to react to the circumstances of their industry. These are the most common mistakes companies make in formulating their strategies. To avoid these mistakes, we ask companies who want to go through the Blue Ocean Strategy process to first put aside any preconceived notions of their own assets, capabilities, geographical, or macroeconomic constraints. We believe that the moment you take an environmentally deterministic view of your company you are a captive of your environment. Companies find this challenge inspiring. Learning to think differently about opportunities and risks, daring to move forward into the future, that is what keeps people and companies alive, young, and growing.

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