Imagine a market universe composed of two sorts of 'oceans': red oceans and blue oceans. Red oceans represent the industries currently in existence. This is the known market space. Blue oceans are all the industries not in existence today. This is the unknown market space.
In the red oceans, industry boundaries are well defined and generally accepted, and the competitive rules of the game are known. Here, companies Endeavour to compete with their rivals to grab a greater share of existing demand. As the market space gets more crowded, prospects for profits and growth are reduced. Products become commodities, and cut-throat competition turns the ocean bloody.
Blue oceans, in contrast, are defined by untapped market space, demand creation and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries. In blue oceans, competition is absent because the rules of the game are not yet set.
It will always be important to swim successfully in the red ocean by out-performing rivals. But with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, is not sufficient to sustain high performance.
Companies need to go beyond competing. To seize new profit and growth opportunities, they also need to create blue oceans.
Unfortunately, blue oceans are largely uncharted. The dominant focus of strategy work over the past 25 years has been on competition-based red ocean strategies. Some discussions of blue oceans exist. But until now there has been little practical guidance on how to create them. To Create Uncontested Market Space and Make the Competition Irrelevant, we provide practical frameworks and analytics for the systematic pursuit and capture of blue oceans.
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