Magazine

Head For Virgin Territory


BLUE OCEAN STRATEGY

How to Create Uncontested Market Space and

Make the Competition Irrelevant

By W. Chan Kim and Ren?e Mauborgne

Harvard Business School Press -- 240pp -- $27.95

(Readers'

Reviews below)

Editor's Review

The Good A useful consideration of how companies can sail into virgin territory.

The Bad Some of the author's examples will be familiar to business readers.

The Bottom Line A fresh take on addressing customers' unmet needs.

Successful businesses, from multinationals with big brands to neighborhood eateries, are often built on the idea of filling an unmet need. A majority of new products and services, however, simply copy a competitor's or category leader's example, with the result that most of them fail. As the authors of Blue Ocean Strategy put it, these businesses are just jumping into "the red ocean of bloody competition." Instead, authors W. Chan Kim and Ren?e Mauborgne recommend seeking out blue waters -- virgin territory devoid of me-too brand propositions and cutthroat pricing. An archetype: Starbucks Corp. (SBUX), which based its business model on a cup of coffee priced two to four times what others charged, but sold that cup in an appealing environment.

The authors, both of whom teach at business school INSEAD near Paris, are at their best when offering less well-known examples gathered from around the world. For instance, Mexican cement manufacturer Cemex' business took off in 1998 when, unbelievably enough, it successfully positioned bags of cement as an appropriate wedding "gift of dreams" -- the ingredient necessary to add a room onto a house. In 1993, Hungarian bus maker NABI turned the $1-billion-a-year U.S. municipal-bus industry on its head by building lighter-weight, cheaper-to-maintain fiberglass vehicles. Instead of competing with established steel bus makers on sticker price, NABI appealed to city purchasers with the lower long-term repair and fuel costs of NABI buses.

The authors deal with more familiar examples as well. Yet these, too, seem fresh when offered in the context of the blue-ocean idea. Even readers who care little about the circus, for example, will appreciate learning how Montreal-based Cirque du Soleil became a smashing financial and critical success. Eschewing Ringling Bros.-like animals, sawdust, and three-ring format, Cirque du Soleil put together a unique -- and much lower-cost -- blend of music, clowns, acrobats, and theater. Curves -- the gym-franchise phenomenon that appeals to many women who feel uncomfortable in traditional health clubs -- is examined for its common-sense approach to finding out what customers really want.

Such stories support the authors' business-planning advice. Kim and Mauborgne avoid excessive charting and diagramming of brand attributes, but those they do include are genuinely helpful. Blue Ocean Strategy will have you wondering why companies need so much persuasion to stay out of shark-infested waters.

By David Kiley


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