What is Blue Ocean Strategy?

Concept overview

Blue ocean strategy advocates creating uncontested market space — a "blue ocean" — rather than competing in saturated existing markets ("red oceans"). Value innovation, the simultaneous pursuit of differentiation and low cost, is the cornerstone.

How it works

The framework uses tools like the Strategy Canvas (which plots competing factors against value offered) and the Four Actions framework: which factors should be eliminated, reduced, raised, or created? Blue oceans are typically opened by reframing the buyer (non-customers become customers), reframing the product's job, redefining substitute industries, or shifting from functional to emotional appeal.

Quick example

Cirque du Soleil's classic example: by eliminating expensive animal acts and famous performers (cost reduction), reducing children-only appeal, raising venue and theme sophistication (differentiation), and creating an artistic narrative experience, it pulled audiences from theater rather than competing in the traditional circus market.

Why students get it wrong

Blue ocean thinking can become an excuse to avoid hard competitive choices in an existing market. Many "blue oceans" are simply markets too small or too risky to attract attention; that is not the same as defensible new space.

Bottom line

Test blue ocean candidates with two questions: are non-customers actually willing to pay for the new offer, and is the cost structure low enough that value innovation is profitable? Many "blue oceans" fail one of these.

Source basis: Open Textbook Library: READ MORE