Blue Ocean Strategy

Creating New Markets by Making Competition Irrelevant

Imagine your business is facing shrinking margins and intense competition that turns your products into mere commodities. This is the reality of the "red ocean," a place where organizations fight over a shrinking pool of profits. To escape this cycle, you must look toward "blue oceans," which represent uncontested market spaces defined by new demand and the opportunity for strong, profitable growth.

This shift was powerfully demonstrated by Guy Laliberté, who began as a street performer before founding Cirque du Soleil. When he started, the circus industry was in steep decline, losing audiences to video games and facing pressure from animal rights groups. Instead of trying to compete with established giants, Laliberté decided to make them irrelevant. He created a new form of entertainment that combined the thrill of the circus with the intellectual depth and artistic sophistication of the theater.

This move from a red to a blue ocean is the essence of market-creating strategy. Red oceans are the known market spaces where industry boundaries are defined and the rules of competition are clear. In these waters, companies try to outperform rivals to grab a larger share of existing demand. As the space gets crowded, profits and growth drop. Blue oceans, by contrast, are untapped market spaces where demand is created rather than fought over. In these clear waters, the rules of the game are yours to set.

The creation of these new spaces is a constant feature of business history. A century ago, industries like automobiles and aviation were unknown, and even forty years ago, sectors like cell phones and biotechnology did not exist in any meaningful way. This shows that the market universe is not fixed but is continuously expanding. High performance comes not from a specific company or industry, but from the "strategic move"—the set of actions that result in a major market-creating business offering.

The engine of this success is value innovation. Conventional strategy assumes a trade-off: a company can either create more value for customers at a higher cost or create reasonable value at a lower cost. Value innovation defies this logic by pursuing differentiation and low cost simultaneously. It focuses on making the competition irrelevant by creating a leap in value for both the buyers and the company. This happens when you align innovation with utility, price, and cost. For example, Cirque du Soleil eliminated expensive animal acts and star performers, which lowered costs. At the same time, it added artistic music and storylines that increased the show's value and appeal to a new audience of adults.

This approach requires a reconstructionist view of the market, which assumes that industry structures are not given but can be reshaped. By looking across alternative industries and different buyer groups, you can discover new opportunities. Instead of focusing on the differences between current customers, you look for the commonalities among non-customers to aggregate demand and create a much larger market. However, a great strategy is useless if people don't believe in it. Execution must be built in from the start by involving your team and ensuring the process is fair, which cultivates the trust needed to implement big changes quickly. In a world of global competition and instant feedback via social media, the need to consistently seek out these clear waters is more urgent than ever.