The Transition to the Blue Ocean — Summary and Key Concepts (The 5 Steps)

The highlights of the book “The Transition to the Blue Ocean” are:

1. The focus of competitors can cause your company to miss out on great growth opportunities;
2. You need to expand your strategic thinking;
3. Every person in every type of organization is capable of making the transition from the red to the blue ocean, provided he takes the necessary actions;
4. The trust of people is essential to create and execute your development strategy;
5. Growth should not be based on the conditions and environment that already exist within your industry. It must be shaped in your favor to reach new heights;
6. The transition to the blue ocean is based on five systematic steps.

Summary: Step 1 — Start the process

The beginning of the transition to the blue ocean consists of analyzing your portfolio and categorizing your offers according to the value they offer.

Authors W. Chan Kim and Renée Mauborgne suggest including your offers as follows:

1. Settlers: are those products that are “repetitions” of what already exists in the market, offering only imitation of value;
2. Migrants: offers that are slightly better than those of the competition, some additional value to the customer;
3. Pioneers: they are innovative businesses that offer unprecedented value to the customer.

According to the book “The Transition to the Blue Ocean”, the key to renewing your portfolio is in your pioneering businesses, since the nature of these products breaks with the current competition.

From this classification, it is possible to assemble what the authors call the pioneer-migrant-settler matrix, which will help you visualize the current state of your portfolio.

It is valid to emphasize that the objective is not to build a portfolio only with pioneers, but a healthy balance between colonist products — which will provide some stability and income — and pioneers, which will be the engine of future growth and innovation in value, in addition to the transition with migrant products, which represent an improvement in value.

After defining the scope, you must assemble the Blue Ocean team. You must have representatives from all organizational areas and levels who play a fundamental role in change.

This allows all sectors to be aligned with the objective of carrying out a new offering and creating a new market.

Summary: Step 2 — Understand Where You Are Now

In sequence, you need to make an assessment of your own company and sector. You must assemble a table that expresses the current situation of your company, your products and services, and the way in which they differ from the competition.

To visualize this, authors W. Chan Kim and Renée Mauborgne propose the construction of what is called the “current strategy screen”, which will provide the necessary information for the blue ocean team.

The assembly of this screen is carried out through the following steps presented in the book “The Transition to the Blue Ocean”:

1. Name the sector you are in;
2. Identify the main factors in which your sector competes;
3. Decide which key competitors you want to compare with;
4. Evaluate your offer and that of the best competitor along the main competitive factors;
5. Draw your strategy screen.

With the strategy screen completed, the team becomes aware of the current situation of the sector, the competitive factors and the degree of convergence between your strategic profile and the profiles of your competitors (convergence that is responsible for the red ocean present in the sector).

Summary: Step 3 — Imagine Where You Could Be

In the next step, you must discover the “weak points” in the current industry that limit the demand for your offer and exclude potential buyers.

As explained in the book “The Transition to the Blue Ocean”, in the process of transition to the blue ocean, these limiting points should not be considered as restrictions, but as clear opportunities to change the strategic field.

To identify such points, authors W. Chan Kim and Renée Mauborgne teach that it is necessary to create a “buyer utility map.”

Initially, you should know the six levers:

1. Customer productivity: all efficiency-related features to meet buyers’ needs (less time, effort, and / or money);
2. Simplicity: features that minimize complexity;
3. Convenience: when and where the buyer wants something (example: 24 hours, every day of the year);
4. Risk reduction: they can be financial, physical or emotional risks;
5. Fun and image: aesthetic and sensory aspects that convey an offer;
6. Environmental conservation: is the offer environmentally sustainable?

The activity to be carried out now is to analyze the obstacles, limiting each lever, and discover the reasons why they are producing impediments. This evaluation must be carried out from the perspective of each stage of purchase (purchase, delivery, use, accessories, maintenance, disposal).

Summary: Step 4 — Find out how to get there

At this point, you already have an idea of ​​how your company and sector works, and you understand the potential of the new demand that can be released with a recreated offer.

So now you must rebuild the borders of the market and create a new space. With this in mind, authors W. Chan Kim and Renée Mauborgne listed six “paths”, which are systematic means of opening a new value-cost frontier.

The model is as follows, comparing the behaviors between the search for blue oceans and the focus on current competition:

1. Industry: In today’s competition, the focus is on industry rivals. Already when creating blue oceans, alternative sectors are sought;
2. Strategic group: the current competition focuses on the competitive position within a group, while, in the blue oceans, strategic groups are sought within the sector;
3. Buyer group: the focus of today’s competition is to serve the best buyer. In the creation of blue oceans, the buyer group of the sector is redefined;
4. Scope of the product or service offering: today’s competition seeks to maximize the value of the product and service offering within the limits of the sector, while, in the blue oceans, offers of complementary products and services are desired;
5. Functional-emotional orientation: the current competition is focused on improving price behavior within the functional-emotional orientation of the sector. In the blue oceans, the functional-emotional orientation of the sector is reconsidered;
6. Time: Today’s competition adapts to external trends when they occur, and the blue oceans participate in the formation of external trends over time.

With this exploration of the market, the team will gain new insights into how it is possible to deliver value in innovative ways. To make the best use of this information, authors W. Chan Kim and Renée Mauborgne suggest in the book “The Transition to the Blue Ocean” the “four actions model”.

This model is based on four fundamental questions that help challenge the business model of an industry. The actions and their respective questions are:

1. Eliminate: “What factors considered‘ definitive ’by the sector should be eliminated?”;
2. Reduce: “What factors should be reduced well below the industry standard?”;
3. Raise: “What factors should rise well above the industry standard?”
4. Create: “What factors that the sector never offered should be created?”

Summary: Step 5 — Make your move

In the final stage of your journey through the blue ocean, you must properly plan your movement, test it in the market, adjust it according to the feedback received and refine it, always seeking to maximize your potential.

According to the book “The Transition to the Blue Ocean”, tests are essential to confirm the market potential of your blue ocean, ensuring that it not only offers an innovation of value for customers, but will also guarantee the economic stability of your company.

Finally, you need to formalize your business model in order to maximize the return and minimize the risk of your big launch, conclude authors W. Chan Kim and Renée Mauborgne.