Create uncontested market space using value innovation instead of competing head-to-head. Use when the user mentions "blue ocean", "red ocean", "strategy canvas", "ERRC framework", "value innovation", "non-customers", "buyer utility map", "eliminate-reduce-raise-create", or "uncontested market". Also trigger when comparing pricing strategies, exploring new market categories, finding underserved customer segments, or asking how to stop competing on price. Covers the Four Actions Framework, buyer utility map, and value-cost trade-offs. For tech adoption strategy, see crossing-the-chasm. For product positioning, see obviously-awesome.
Strategic framework for creating uncontested market space that makes the competition irrelevant, based on simultaneous pursuit of differentiation and low cost.
Don't compete in bloody red oceans. Create blue oceans of uncontested market space.
Most companies fight for market share in existing industries (red oceans). Winners create new market space where competition is irrelevant (blue oceans) by delivering a leap in value for both buyers and themselves.
The foundation: Competition-based strategy is zero-sum. Value innovation creates new demand and breaks the value-cost trade-off.
Goal: 10/10. When evaluating business strategy or value proposition, rate 0-10 based on blue ocean principles. A 10/10 means clear value innovation, elimination of unnecessary factors, and creation of new demand; lower scores indicate competing in red oceans. Always provide current score and improvements to reach 10/10.
| Red Ocean Strategy | Blue Ocean Strategy |
|---|
| Compete in existing market space | Create uncontested market space |
| Beat the competition | Make competition irrelevant |
| Exploit existing demand | Create and capture new demand |
| Make value-cost trade-off | Break value-cost trade-off |
| Align whole system with strategic choice of differentiation OR low cost | Align whole system in pursuit of differentiation AND low cost |
Examples:
Red Ocean:
Blue Ocean:
See: references/blue-ocean-examples.md for detailed case studies.
Value innovation = the cornerstone of blue ocean strategy.
Definition: Simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and company.
Value Innovation = Utility × Price × Cost
The value innovation logic:
| Traditional View | Value Innovation View |
|---|---|
| High value = High cost | High value CAN = Low cost |
| Differentiate OR cut costs | Differentiate AND cut costs |
| Better performance on established factors | New factors, eliminate old factors |
How it works:
Result: Lower cost structure AND superior value proposition.
Example: Cirque du Soleil
See: references/value-innovation.md for value innovation frameworks.
The diagnostic tool for understanding current strategic position and discovering blue oceans.
How to create a Strategy Canvas:
List all the factors the industry competes on.
Example: Wine industry
Plot how you and competitors score on each factor (low to high).
Typical result: Everyone's curves look similar (red ocean).
Questions:
Example: Yellow Tail Wine
| Factor | Industry Average | Yellow Tail |
|---|---|---|
| Price | Medium-High | LOW |
| Prestige | High | LOW |
| Aging quality | High | LOW |
| Vineyard legacy | High | LOW |
| Complexity | High | LOW |
| Range | High | LOW |
| Easy drinking | Low | HIGH |
| Fun/adventure | Low | HIGH |
| Accessibility | Low | HIGH |
Result: Different curve = blue ocean.
See: references/strategy-canvas.md for templates and examples.
The tool for creating value innovation.
The framework:
ELIMINATE RAISE
- Which factors the - Which factors should be
industry takes for raised well above the
granted should be industry standard?
eliminated?
REDUCE CREATE
- Which factors should - Which factors should be
be reduced well below created that the
the industry standard? industry has never
offered?
How to use:
Question: What can we eliminate that the industry competes on but adds no value for customers?
Examples:
Benefits:
Warning: Don't eliminate factors buyers truly value. Test assumptions.
Question: What can we offer well below industry standard?
Examples:
Benefits:
Question: What should we raise well above industry standard?
Examples:
Benefits:
Question: What new factors should we create that the industry has never offered?
Examples:
Benefits:
Putting it together:
| Action | Effect on Cost | Effect on Value |
|---|---|---|
| Eliminate | ⬇ Reduces | — (no loss if done right) |
| Reduce | ⬇ Reduces | — (over-served area) |
| Raise | ⬆ May increase | ⬆ Increases significantly |
| Create | ⬆ May increase | ⬆ Increases significantly |
Net result: Value increases more than cost (value innovation).
See: references/errc-grid.md for ERRC templates and exercises.
Six ways to identify blue ocean opportunities by looking beyond existing boundaries.
Principle: Customers choose between alternatives in different forms.
Question: What are the alternative industries to yours?
Example:
How to apply: Map alternatives → identify unmet needs across them → create solution
Principle: Industries have clusters of companies pursuing similar strategies.
Question: What are the strategic groups, and can you create a new one?
Example:
How to apply: Map strategic groups → identify over/under-served needs → position between groups
Principle: Who influences the purchase may not be the end user.
Question: Can we target a different buyer in the chain?
Chain: Purchasers → Users → Influencers
Example:
How to apply: Identify all buyers in chain → explore unmet needs of overlooked groups
Principle: Value is often affected by complementary products.
Question: What happens before, during, and after using your product?
Example:
How to apply: Map customer's total experience → identify pain points → bundle solutions
Principle: Industries compete on either functional or emotional appeal, rarely both.
Question: Can we add emotional appeal to functional industries (or vice versa)?
Examples:
How to apply: Identify current appeal → explore opposite dimension → create hybrid
Principle: Trends shape industries over time.
Question: What trends are shaping your industry, and how can you act on them now?
Example:
How to apply: Identify irreversible trends → project future state → build for it today
See: references/six-paths.md for detailed path exercises.
Blue oceans are created by converting non-customers, not stealing competitors' customers.
Opportunity: Small shifts could win them over
Example: Pret A Manger won busy professionals who were "soon-to-be" non-customers of fast food (wanted healthy, fast)
Opportunity: Understand why they refuse, eliminate barriers
Example: JCDecaux bus-shelter advertising—cities refused outdoor ads until JCDecaux offered free bus shelters in exchange
Opportunity: Reframe offering to serve distant needs
Example: Callaway Big Bertha golf clubs—expanded market to beginners and occasional golfers (unexplored)
Process:
See: references/non-customers.md for non-customer analysis frameworks.
The right strategic sequence:
1. Buyer Utility → 2. Strategic Price → 3. Target Cost → 4. Adoption
Question: Is there exceptional utility?
Test: Does your offering unlock a leap in buyer utility for each of the six utilities?
Six utility levers:
Buyer Experience Cycle: Purchase → Delivery → Use → Supplements → Maintenance → Disposal
Goal: Identify where the biggest blocks to utility are, and solve them.
Question: Is pricing accessible to mass of buyers?
Approach: Price against alternatives (not costs or competitors in same industry)
Steps:
Example: Cirque du Soleil priced higher than circus, lower than theater
Question: Can we achieve target cost while preserving utility?
Formula: Strategic Price - Target Profit Margin = Target Cost
Approach:
Anti-pattern: "We'll achieve cost target later" (usually doesn't happen)
Question: What are the adoption hurdles?
Common hurdles:
Solutions:
Goal: Clear path to scalable adoption.
See: references/sequence.md for detailed sequence templates.
| Mistake | Why It Fails | Fix |
|---|---|---|
| Competing on same factors | Stuck in red ocean | Use ERRC to eliminate/create factors |
| Differentiation without cost focus | Not value innovation | Eliminate/reduce while raising/creating |
| Incrementalism | No leap in value | Aim for 10x improvement on key factors |
| Imitating competitors | Red ocean thinking | Look across six paths for alternatives |
| Ignoring adoption | Great idea, no execution | Plan for adoption hurdles upfront |
Audit any strategy:
| Question | If No | Action |
|---|---|---|
| Does Strategy Canvas show different curve? | Still in red ocean | Apply ERRC framework |
| Are we eliminating AND creating? | Not value innovation | Use all four actions |
| Are we breaking value-cost trade-off? | Traditional competition | Identify over-served factors to cut |
| Are we converting non-customers? | Fighting for share | Map three tiers of non-customers |
| Is there a leap in buyer utility? | Incremental improvement | Aim for 10x on key utility factors |
This skill is based on Blue Ocean Strategy developed by W. Chan Kim and Renée Mauborgne. For complete methodology:
W. Chan Kim and Renée Mauborgne are professors of strategy at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute. Their research on value innovation and blue ocean strategy has been published in top academic journals. Blue Ocean Strategy has sold over 4 million copies, been translated into 46 languages, and is one of the best-selling business books of all time. They work with companies and governments worldwide on strategic renewal and growth.