ROI【🔒Classified File】 No. X034 | What is Blue Ocean Strategy

Detective Notes: The ultimate market creation theory "Blue Ocean Strategy" decoded by INSEAD professors W. Chan Kim and Renée Mauborgne. Many understand it merely as "an evolution of differentiation strategy," but its true identity is a "value innovation system that fundamentally overturns the logic of competition." Why did Cirque du Soleil achieve great success by ignoring the existing circus industry, and what was the reason Nintendo Wii dominated the market by escaping the high-performance competition? While companies exhaust themselves in Red Ocean (bloody competitive waters) warfare, the strategic thinking of those who create entirely new market spaces. Uncover the truth behind the contradiction-solving method that achieves both competition avoidance and value creation through the four actions of "eliminate, reduce, raise, and create."

What is Blue Ocean Strategy - Case Overview

Blue Ocean Strategy, formally known as the "Value Innovation Strategy for Creating Uncontested Market Space," is a revolutionary business strategy theory published in 2005 by INSEAD's W. Chan Kim and Renée Mauborgne. It is recognized among our clients as a methodology that escapes competition in existing markets (Red Ocean) and creates unexplored market spaces (Blue Ocean), thereby making competition irrelevant and simultaneously achieving differentiation and low cost. However, in actual practice, it is often superficially understood as a "new differentiation technique," with most companies unable to grasp the original revolutionary value of redefining industry boundaries and creating new demand that transcends existing customer segments.

Investigation Notes: Blue Ocean is not merely a "competition avoidance strategy" but a "value innovation system that redefines markets themselves." Why does it reject the traditional either/or choice of "differentiation or low cost," and how do the Strategy Canvas and Four Actions Framework enable the creation of new value curves? We need to clarify these mechanisms.

Basic Structure of Blue Ocean Strategy - Evidence Analysis

Core Evidence: Market Creation System through Value Innovation

Red Ocean vs Blue Ocean

【Red Ocean (Existing Market Competition)】
・Compete in existing market space
・Beat the competition as the goal
・Exploit existing demand through rivalry
・Make the value-cost trade-off (differentiation OR low cost)
・Align the whole system of activities with strategic choice of differentiation or low cost
・Competition constrains value creation possibilities

【Blue Ocean (Uncontested Market Creation)】
・Create uncontested market space
・Make competition irrelevant as the goal
・Create and capture new demand
・Break the value-cost trade-off (differentiation AND low cost)
・Align the whole system of activities in pursuit of differentiation and low cost
・Value innovation creates new competitive rules

Value Innovation Principles:
・Simultaneous pursuit of differentiation and low cost
・Fundamental review of industry assumptions and conventions
・Creation and delivery of new customer value
・Change or invalidation of competitive dimensions

Strategy Canvas

"Analytical tool to visualize industry competitive factors"

Components:
・Horizontal axis: Industry competitive factors (price, quality, service, features, etc.)
・Vertical axis: Level of offering to customers (high → low)
・Value curve: Line showing how much each company invests in competitive factors

Analytical perspectives:
・Industry conventions: Competitive factors all companies focus on
・Differentiation points: Factors where offering levels differ between companies
・Over-investment areas: Factors with excessive investment relative to customer value
・Unexplored areas: Potential value factors no one focuses on

Strategy Canvas applications:
・Current state analysis: Drawing value curves of own company and competitors
・Opportunity discovery: Exploring possibilities for new value curves
・Strategy design: Setting target new value curves
・Execution management: Progress management of value curve realization

Four Actions Framework

"Execution methodology for creating new value curves"

1. Eliminate
"Which factors that the industry takes for granted should be eliminated?"
・Excessive services/features customers don't value
・Wasteful cost factors continued as industry customs
・Non-essential elements continued through competitive following
・Redundant choices causing complexity

2. Reduce
"Which factors should be reduced well below the industry standard?"
・Over-quality/over-specification elements
・High-cost factors disproportionate to customer value
・Features/services unnecessarily complicated
・Investment areas significantly exceeding industry average

3. Raise
"Which factors should be raised well above the industry standard?"
・Elements customers truly value
・Important value delivery competitors overlook
・Factors expected to increase in importance in the future
・Elements that dramatically improve customer experience

4. Create
"Which new value factors should be created that the industry has never offered?"
・Completely new value dimensions never existed before
・Innovative elements inspired by other industries
・Value delivery addressing latent needs
・Added value creation beyond industry frameworks

Execution principles:
・Consider all four actions simultaneously in parallel
・Value redefinition, not mere cost reduction
・Independent thinking escaping competitive imitation traps
・Apply customer-perspective value judgment criteria

Evidence Analysis: The innovation of Blue Ocean Strategy lies in enabling the simultaneous achievement of differentiation and low cost, previously considered impossible, through "shifting from competition to value creation" and "fundamental review of industry conventions."

Blue Ocean Strategy Implementation Procedures - Investigation Methods

Investigation Finding 1: Classical Success Case Analysis (Cirque du Soleil's Market Creation)

Case Evidence (Complete redefinition of the circus industry):

【Traditional Circus Industry Analysis】
Competitive factors (Strategy Canvas):
・Star animal performances (high)
・Famous performers/clowns (high)
・Multiple ring simultaneous progression (high)
・Thrills and danger (high)
・Concession sales (high)
・Low-price tickets (high)

Industry assumptions and conventions:
・Circus = children's entertainment
・Low-price mass entertainment
・Three pillars: animals, clowns, acrobats
・Casual experience for the whole family

【Cirque du Soleil's Four Actions】

Eliminate:
・Animal performances (animal welfare issues, high costs)
・Star performer system (high fees, scheduling constraints)
・Multiple rings (attention dispersion, experience quality degradation)
・Concession sales (dependence on non-show revenue)

Reduce:
・Dangerous and thrilling acts (safety priority)
・Comedy/clown elements (shift toward adults)
・Large number of performers (quality focus, cost efficiency)

Raise:
・Artistry/aesthetic expression (theater/dance elements strengthened)
・Music/musical quality (original music, live performance)
・Costumes/stage design (high quality, artistic design)
・Direction/storytelling (thematic, consistency)

Create:
・Sophisticated entertainment experience for adults
・Theater experience (single ring, concentrated viewing)
・Artistry/intellectual stimulation as comprehensive art
・Premium value delivery at premium prices

【Created New Value Curve】
Target customer expansion:
・Traditional: families with children
・New: adult couples, corporate entertainment, cultural experience seekers

Competition axis change:
・Traditional: low-price, mass entertainment competition
・New: artistic value, experience quality competition

Value innovation results:
・Differentiation: Unique artistic circus experience
・Low cost: Operational efficiency through elimination of animals and stars
・New market: Adult premium entertainment creation
・Industry redefinition: Circus → contemporary circus art

Investigation Finding 2: Specific Implementation Process (B2B Software Company Case)

Case Evidence (Blue Ocean creation in CRM industry):

【Phase 1: Current State Analysis/Strategy Canvas Creation】(2 weeks)

Industry competitive factor identification:
・Feature richness (high-function, multi-function competition)
・Customization support (individual requirement response)
・Data analysis/reporting functions (BI function enhancement)
・Security/compliance (enterprise necessity)
・Implementation/operational support (consulting/training)
・Price competitiveness (cost-effectiveness relative to features)

Competitive analysis results:
・Salesforce: Feature-rich, high-price, complex
・HubSpot: User-friendly, mid-price, marketing integration
・Zoho: Multi-function, low-price, complex
・Microsoft Dynamics: Enterprise-focused, high-price, complex

Industry common issues discovered:
・Implementation complexity and time length
・Learning costs until mastery
・Excessive functions/high costs for SMEs
・Input burden/resistance from sales staff

【Phase 2: Four Actions Application】(3 weeks)

Eliminate:
・Complex customization functions
・Advanced BI/analysis functions (handled through external tool integration)
・Enterprise management functions (simplification)
・Long implementation/training processes

Reduce:
・Number of functions (focus on truly used functions)
・Setting items (immediate use with default settings)
・Administrator functions (simple field-driven operation)
・Price (pricing accessible to SMEs)

Raise:
・Usability/intuitiveness (thorough UI/UX improvement)
・Implementation speed (same-day use start possible)
・Mobile support (ease of use in sales field)
・Customer support (immediate support via chat/video)

Create:
・"Sales staff want to use it" experience design
・Gamification elements (achievement/competition elements)
・AI automatic input assistance (significant manual input reduction)
・Performance visualization dashboard (field achievement enhancement)

【Phase 3: New Value Curve Design/Verification】(4 weeks)

New target customers:
・SMEs that had given up on CRM implementation
・Companies frustrated with complex CRMs
・Companies prioritizing sales field productivity improvement
・Companies wanting to minimize IT burden

New competitive axis:
・Traditional: feature richness, customization competition
・New: usability, implementation speed, field satisfaction competition

Value proposition innovation:
・"CRM you can start in 1 day"
・"CRM sales staff enjoy using"
・"No-setup, no-management CRM"
・"SME-dedicated design CRM"

【Phase 4: Market Launch/Effect Verification】(6 months)

Results measurement:
・Implementing companies: 150% of plan achieved
・Implementation period: Traditional 3 months → 3 days (96% reduction)
・Usage continuation rate: Industry average 60% → 85% (+42%)
・Customer satisfaction: NPS 45 → 72 (+60%)
・Revenue growth rate: 280% growth compared to previous year

Competitive environment changes:
・Existing competitors' slow response (complexity curse)
・New market segment establishment
・"Simple CRM" category creation
・Successful escape from price competition

Investigation Finding 3: Blue Ocean Thinking Introduction in Organizations

Phased introduction approach:

Step 1: Mindset transformation (1 month)
Current recognition transformation:
・"Competitive analysis" → "Industry convention doubt"
・"Differentiation vs low cost" → "Value innovation"
・"Market share competition" → "New market creation"
・"Best practice following" → "Industry assumption review"

Internal workshops:
・Strategy Canvas creation experience
・Industry convention identification/questioning
・Other industry success case studies
・Existing business four actions application practice

Step 2: Analysis skill building (2 months)
Strategy Canvas creation techniques:
・Competitive factor identification/organization methods
・Value curve drawing/comparative analysis
・Industry boundary recognition/redefinition
・Essential customer value understanding

Four Actions practice:
・"Obvious" identification/elimination thinking
・Over-investment area discovery/reduction consideration
・True value creation factor enhancement design
・Unexplored value area creation ideation

Step 3: Strategy experimentation (3-6 months)
Small-scale experiment verification:
・Partial implementation of new value curves
・Customer reaction/market reaction measurement
・Hypothesis correction/improvement cycle execution
・Scale-up possibility evaluation

Organizational capability accumulation:
・Blue Ocean thinking habituation
・Value innovation problem-solving culture
・Industry convention-free thinking ability
・Continuous market creation capability building

The Power of Blue Ocean Strategy - Hidden Truths

Alert File 1: Profit maximization through competition avoidance Escaping direct competition avoids price competition, securing high profit margins through unique value. Gaining overwhelming advantage by establishing new rules while competitors compete under existing rules.

Alert File 2: Simultaneous achievement of differentiation and low cost Achieving the previously impossible "differentiation AND low cost" through value innovation. Revolutionary approach realizing low cost through elimination/reduction of unnecessary elements and differentiation through enhancement/addition of value creation elements.

Alert File 3: New demand creation and expansion Market expansion by incorporating segments that previously didn't participate in the market, rather than competing for existing customers. Maximizing growth opportunities through latent demand manifestation and new customer segment creation.

Alert File 4: Sustainable competitive advantage security While mere differentiation is easily imitated, changing industry-wide assumptions and conventions builds imitation-resistant competitive advantage. Securing long-term advantage through industry standard redefinition via value innovation.

Blue Ocean Strategy Limitations and Precautions - Potential Dangers

Alert File 1: Market creation uncertainty risk The greatest challenge. New market creation carries higher uncertainty than existing market attack, constantly risking that assumed demand doesn't exist or can't be created. Careful hypothesis verification and phased investment required.

Alert File 2: Organizational change resistance and inertia Industry convention review may mean denial of existing organizational capabilities, investments, and culture, easily generating internal resistance. Vested interests and expertise fixation can hinder transformation.

Alert File 3: Customer education and market development costs Creating new value dimensions and market categories requires education costs to promote customer recognition and understanding. Market creation burden difficult to address with conventional marketing methods.

Alert File 4: Post-success imitation and following pressure Successful Blue Ocean creation risks re-Red Ocean-ization through competitor imitation and entry. Need to maintain continuous value innovation and market creation capabilities.

Alert File 5: Practical utility loss through excessive industry convention denial Over-application of Four Actions, especially "eliminate" and "reduce," risks reducing even essential customer values. Important to properly balance value innovation with practicality.

Blue Ocean Strategy Applications and Related Methods - Related Case Files

Related Evidence 1: Integration with 3C Analysis

Market analysis × Blue Ocean:
Customer → Perspective expansion from existing to non-customers
Competitor → Transformation from competitive analysis to industry convention analysis
Company → Development from own strengths to value innovation capabilities

Blue Ocean opportunity discovery through 3C perspective:
・Customer unmet needs/latent demand
・Value areas competitors overlook
・Own unique value creation possibilities

Related Evidence 2: Evolution of SWOT Analysis

Traditional SWOT: Competitive advantage analysis in existing environment
Blue Ocean SWOT: New market creation possibility analysis

Strength → Unique capabilities applicable to value innovation
Weakness → Meaningless through liberation from industry conventions
Opportunity → Unexplored market creation opportunities
Threat → Avoidance through escape from existing competitive rules

Strategic redefinition of SWOT elements

Related Evidence 3: Enhanced collaboration with Jobs Theory

Customer Jobs × Blue Ocean:
・Discovery of customer jobs overlooked by traditional industry
・Redefinition of competitive relationships beyond industry boundaries
・Creation of new approaches to job achievement
・New market creation from unmet jobs

Precision of value innovation through Jobs Theory

Related Evidence 4: Value Chain reconstruction

Value chain × Blue Ocean:
・Fundamental review of existing value chains
・Efficiency through elimination/integration of unnecessary activities
・Addition/enhancement of new value creation activities
・Value chain innovation beyond industry standards

Value chain optimization through Four Actions

Related Evidence 5: Fusion with Design Thinking

Human-centered design × Blue Ocean:
Empathize → Deep understanding of existing customers and non-customers
Define → Problem definition questioning industry conventions
Ideate → Value innovation ideation through Four Actions
Prototype → Concretization/visualization of new value curves
Test → Hypothesis verification/improvement through market reaction

Integrated approach of human understanding and value innovation

Industry-specific Blue Ocean Success Cases - Special Evidence

Related Evidence 6: Nintendo Wii's Revolutionary Market Creation

Blue Ocean in gaming industry:

Eliminate:
・High-performance graphics/processing power competition
・Complex controller/operation methods
・Core gamer-targeted high-difficulty games

Reduce:
・Development costs/sales prices
・Game learning time requirements

Raise:
・Operation intuitiveness/physicality
・Whole family shared experience
・Exercise/health elements

Create:
・Motion control experience
・Consideration for game inexperienced users
・Cross-generational common entertainment

Result: New "motion gaming" market creation

Related Evidence 7: Kyokusui no Utage (High-end Japanese Restaurant)

Blue Ocean in Japanese cuisine industry:

Eliminate:
・Stiff formality/etiquette requirements
・Season-limited/reservation-difficult exclusivity
・Chef's intimidating/craftsman-like service

Reduce:
・Number of dishes/course duration
・Price/barrier height

Raise:
・Explanation/storytelling
・Seasonal feeling/presentation beauty
・Hospitality/approachability

Create:
・Japanese culture experience/learning elements
・Foreign tourist consideration
・Social media-worthy/experience sharing value

Result: "Casual high-end Japanese cuisine" market creation

Related Evidence 8: Zoom (Video Conferencing)

Blue Ocean in video conferencing industry:

Eliminate:
・Complex setup/IT knowledge requirements
・Expensive dedicated equipment/facility investment
・Enterprise-focused complex management functions

Reduce:
・Time/procedures until usage start
・Fees/implementation costs

Raise:
・Audio/video quality stability
・Usability/intuitiveness
・Various device compatibility

Create:
・Personal use/small team-focused design
・One-click participation/easy sharing
・Essential positioning during COVID pandemic

Result: "Anyone can use video conferencing" market creation

Blue Ocean Strategy Implementation Success Factors - Special Investigation

Related Evidence 9: Organizational change necessary conditions

Organizational requirements for Blue Ocean realization:

Leadership requirements:
・Thinking ability unconstrained by industry conventions
・Tolerance for uncertainty/experimental spirit
・Long-term value innovation investment judgment
・Transformation driving force against organizational resistance

Organizational capability requirements:
・Customer latent needs discovery ability
・Learning/application ability beyond industry boundaries
・Rapid hypothesis verification/improvement cycles
・Culture/mechanisms for continuous value innovation

Strategic execution requirements:
・Phased market creation approach
・Appropriate risk management/investment allocation
・Customer education/market development strategy
・Imitation countermeasures/continuous innovation planning

Success probability improvement factors:
・Phased expansion from small-scale experiments
・External perspective/cross-industry knowledge utilization
・Continuous dialogue/co-creation with customers
・Failure-tolerant/learning-focused organizational culture

Digital Age Blue Ocean Strategy - Additional Investigation

Related Evidence 10: New market creation through technology utilization

Digital technology × Blue Ocean:

AI/Machine Learning utilization:
・Latent needs discovery from customer behavior data
・Previously impossible service realization through automation
・Personalization value creation

Platform strategy:
・Ecosystem building beyond traditional industry boundaries
・Market dominance through network effects
・Value creation expansion through API integration

IoT/Sensor technology:
・New value delivery through real-time data
・Visualization of previously invisible customer behavior
・Predictive/preventive service realization

Blockchain/Distributed technology:
・New value axis creation of trust/transparency
・New market structure through intermediary elimination
・Global/borderless market entry

Example: Uber's market creation
・Eliminate: Taxi licenses, dedicated vehicles, cash payments
・Reduce: Wait times, price opacity
・Raise: Convenience, transparency, rating system
・Create: Personal vehicle utilization, app experience, real-time tracking

Result: "Ride-sharing" market creation, urban transportation revolution

Blue Ocean Strategy and Japanese Companies - Special Investigation

Related Evidence 11: Japanese company-specific issues and countermeasures

Japanese corporate cultural characteristics and Blue Ocean:

Issue 1: Industry custom/precedent-focused culture
Countermeasures:
・Active recruitment of external perspectives/cross-industry experienced personnel
・Organizational climate cultivation questioning industry conventions
・Phased transformation through small-scale experiments

Issue 2: Perfectionism/risk avoidance tendencies
Countermeasures:
・Prototype thinking/experimental culture introduction
・Failure-tolerant/learning-focused evaluation systems
・"Rapid verification" over "perfect planning" emphasis

Issue 3: Consensus-focused/slow decision-making
Countermeasures:
・Understanding promotion through visualization (Strategy Canvas utilization)
・Phased consensus-building process design
・Management leadership/clear direction setting

Issue 4: Technology-focused/insufficient customer perspective
Countermeasures:
・Increased direct customer dialogue opportunities
・Design thinking combination utilization
・Market-in thinking organizational penetration

Success factors:
・Value innovation from global perspective
・Utilization of unique Japanese strengths (omotenashi, quality, technology)
・Phased organizational transformation/culture cultivation
・Continuous learning/improvement system building

Blue Ocean Strategy Measurement and Evaluation System - Evaluation Indicators

Related Evidence 12: Success measurement framework

Blue Ocean success indicators:

Market creation indicators:
・New customer segment acquisition rate
・Traditional non-customer customerization rate
・Market overall expansion scale/growth rate
・Differentiation recognition vs competitors

Value innovation indicators:
・Customer evaluation of differentiation value
・Cost efficiency/profit margin improvement
・Four Actions realization level
・New value curve achievement level

Competitive advantage indicators:
・Competitor imitation difficulty/time
・Market share/position establishment
・Degree of escape from price competition
・Brand value/recognition improvement

Sustainability indicators:
・Continuous value innovation frequency
・Organizational learning/adaptation capability improvement
・Next-generation Blue Ocean creation capability
・Long-term growth/profitability maintenance

Qualitative evaluation:
・Customer satisfaction/loyalty improvement
・Employee engagement/pride
・Industry influence/leadership
・Social value/contribution recognition

Blue Ocean Strategy Evolution and Future - Future Predictions

Related Evidence 13: Next-generation Blue Ocean Strategy

Future Blue Ocean Strategy:

Sustainability × Blue Ocean:
・Simultaneous realization of environmental/social and economic value
・New market creation through circular economy models
・Competitive axis change through ESG focus

Data-driven × Blue Ocean:
・Latent needs discovery through big data/AI
・Real-time value innovation/market adaptation
・Personalization/mass customization markets

Virtual × Blue Ocean:
・New experience creation through metaverse/VR/AR
・Value delivery beyond physical constraints
・Digital-physical fusion markets

Global × Local:
・Fusion of regional characteristics and global standards
・Value creation utilizing cultural diversity
・Borderless/multicultural markets

Collaboration × Ecosystem:
・Cross-industry collaboration/co-creation models
・Platform/ecosystem strategies
・Integrated optimization of stakeholder value

Predicted new Blue Ocean areas:
・Well-being/mental health markets
・Aging/senior-targeted technology
・Smart city/urban solutions
・Space/ocean/polar frontier markets
・Biotechnology/life sciences

Conclusion - Investigation Summary

Final Investigation Report:

Blue Ocean Strategy is a "revolutionary business strategy system for competition avoidance through value innovation and new market creation." This theory, systematized by INSEAD professors W. Chan Kim and Renée Mauborgne, fundamentally overturns traditional competitive strategy paradigms, functioning as a powerful framework that makes the impossible possible: simultaneous achievement of differentiation and low cost.

The most impressive discovery in this investigation was the revolutionary nature of "shifting from competition to value creation thinking." The idea of escaping bloody competition in Red Oceans and creating unexplored market spaces to make competition itself irrelevant represents a fundamental paradigm shift in strategic thinking. Just as Cirque du Soleil succeeded by completely redefining the existing circus industry, true innovation emerges from questioning industry assumptions and conventions.

The systematicity of the Strategy Canvas and Four Actions Framework was also an important discovery. The simple questioning of "eliminate, reduce, raise, and create" becomes a powerful tool for organizing complex industry structures and creating new value curves. This represents excellent design that transforms abstract strategic theory into concrete execution methodology.

The mechanism for simultaneous achievement of differentiation and low cost was also a remarkable insight. The mechanism that enables both through value innovation breaks the traditional strategic choice between "differentiation or low cost," opening new dimensions of strategic thinking by achieving cost efficiency through elimination/reduction of unnecessary elements and differentiation through enhancement/addition of value elements.

Integration possibilities with other business frameworks were confirmed. Blue Ocean Strategy functions as an integrated foundation that significantly improves the effectiveness of other methods from a value innovation perspective, including deepened customer understanding through Jobs Theory, human-centered design through Design Thinking, and market analysis through 3C Analysis.

Evolution in the digital age was also an important discovery. Technological advances in AI, IoT, and platform strategies have dramatically expanded the application scope and effectiveness of Blue Ocean Strategy, making previously impossible value creation and market creation possible. Uber's ride-sharing market creation exemplifies successful cases of technology and Blue Ocean thinking fusion in the new era.

However, cultural challenges for implementation in Japanese companies were also highlighted. Cultural mismatches such as industry custom emphasis, risk avoidance tendencies, and consensus-building focus create barriers to the experimental spirit and transformation orientation that are prerequisites for Blue Ocean Strategy. Parallel organizational culture transformation alongside systematic initiatives becomes key to success.

Market creation uncertainty risk was recognized as an important limitation. Compared to existing market attacks, new market creation inherently carries high uncertainty, constantly risking that assumed demand doesn't exist or can't be created. Careful hypothesis verification, phased investment, and rapid course correction capabilities are necessary.

Post-success imitation and following leading to market Red Ocean-ization was confirmed as an unavoidable challenge. Blue Ocean creation success inevitably invites competitor entry, and new markets eventually transform into competitive markets. Maintaining continuous value innovation and market creation capabilities becomes the source of sustainable competitive advantage.

The most important discovery was that Blue Ocean Strategy functions as a "value creation philosophy" beyond mere "competition avoidance methodology." The thinking process of discovering customer latent needs, fundamentally reviewing industry conventions, and creating new markets through value innovation fundamentally improves organizational innovation and adaptation capabilities.

In today's rapid environmental change and intensifying global competition, differentiation competition in existing markets has limitations. Blue Ocean Strategy provides companies exhausted by competition with new growth pathways and a revolutionary approach to securing sustainable competitive advantage.

Value Innovation Maxim: "Making competition irrelevant is far more valuable than winning in competition"

【ROI Detective Agency Classified File Series X034 Complete】

Case Closed