Harvard Business Review
Issue Date:   October 2004

Pages76-85
Reprint Number:  R0410D

 

Blue Ocean Strategy

W. Chan Kim and Renee Mauborgne

Despite a long-term decline in the circus industry, Cirque du Soleil profitably increased revenue twenty-two-fold over the last 10 years by reinventing the circus. Rather than competing within the confines of the existing industry or trying to steal customers from rivals, Cirque developed uncontested market space that made the competition irrelevant. Cirque created what the authors call a blue ocean--a previously unknown market space. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In red oceans--that is, in all the industries already existing--companies compete by grabbing for a greater share of limited demand. As the market space gets more crowded, prospects for profits and growth decline. Products turn into commodities, and increasing competition turns the water bloody. There are two ways to create blue oceans. One is to launch completely new industries, as eBay did with online auctions. But it's much more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry. In studying more than 150 blue ocean creations in over 30 industries, the authors observed that the traditional units of strategic analysis--company and industry--are of limited use in explaining how and why blue oceans are created. The most appropriate unit of analysis is the strategic move, the set of managerial actions and decisions involved in making a major market-creating business offering. Creating blue oceans builds brands. So powerful is blue ocean strategy, in fact, that a blue ocean strategic move can create brand equity that lasts for decades.

Harvard Business Review
Issue Date:   April 2003

Pages 60-69
Product Number:  3533

Tipping Point Leadership

W. Chan Kim and Renée Mauborgne

How can you lead with your hands tied? How can you generate a leap in performance when everything seems to be, and in effect is, set up against you? Think limited resources, a demoralized staff, politics, and an organization wedded to the status quo. The answer rests in applying what we call Tipping Point Leadership. The theory of tipping points, which has its roots in epidemiology, hinges on the insight that in any organization, fundamental changes can happen quickly when the beliefs and energies of a critical mass of people create an epidemic movement toward an idea. Key to unlocking an epidemic movement is concentration, not diffusion. Tipping point leadership builds on the reality that in any organization there are factors that exercise a disproportionate influence on performance. Hence, contrary to conventional wisdom, meeting a massive challenge is not about putting forth an equally massive response where gains in performance are achieved by proportional investments in time and resources. Rather it is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate influence in an organization. The key questions Tipping Point Leaders should answer are: What factors or acts exercise a disproportionately positive influence on breaking the status quo, on getting the maximum bang out of each buck of resources, on motivating employees to aggressively move forward with change, and on knocking down political roadblocks that often trip up even the best strategies? By focusing on points of disproportionate influence, tipping point leaders are able to break the performance/cost tradeoff and topple the four hurdles that block a leap in performance fast and at low cost. The four hurdles are: the cognitive hurdle that blinds employees from seeing the that radical change is necessary; the resource hurdle that is endemic in firms today; the motivational hurdle that discourages and demoralizes staff; and the political hurdle of internal and external resistance to change.

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Harvard Business Review
Issue Date:   June 2002

Pages76-83
Reprint Number:  R0206D
 

Charting Your Company's Future

W. Chan Kim and Renée Mauborgne
 


 

     Few companies have a clear strategic vision. The problem, say the authors, stems from the strategic-planning process itself, which usually involves preparing a large document, culled from a mishmash of data provided by people with conflicting agendas. That kind of process almost guarantees an unfocused strategy. Instead, companies should design the strategic-planning process by drawing a picture: a strategy canvas.
     A strategy canvas shows the strategic profile of your industry by depicting the various factors that affect competition. And it shows the strategic profiles of your current and potential competitors as well as your own company's strategic profile - how it invests in the factors of competition and how it might in the future. The basic component of a strategy canvas - the value curve - is a tool the authors created in their consulting work and have written about in previous HBR articles. This article introduces a four-step process for actually drawing and discussing a strategy canvas. Readers will learn how one European financial services company used this process to create a distinct and easily communicable strategy.
     The process begins with a visual awakening. Managers compare their business's value curve with competitors' to discover where their strategy needs to change. In the next step - visual exploration - mangers do field research on customers and alternative products. At the visual strategy fair, the third step, managers draw new strategic profiles based on field observations and get feedback from customers and peers about these new proposals. Once the best strategy is created from that feedback, it's time for the last step - visual communication. Executives distribute "before" and "after" strategic profiles to the whole company, and only projects that will help move the company closer to the "after" profile are supported.

 
 



 
 

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Harvard Business Review. 
Issue DateSeptember-October 2000
 
 
 

Knowing a Winning Business Idea When You See One

W. Chan Kim and Renée Mauborgne
 


 

     Over a decade ago, we researched the roots of profitable growth and found that innovation was the key driver.  This finding is consistent with the New Growth Theory of economics, spearheaded by Paul Romer, which established that innovation is the central determinant of the wealth creation and economic growth potential of nations.  Since then, our research has focused on how companies actually make innovations happen.  We have built up a database on over a hundred companies that have innovated successfully and repeatedly.  We've also collected data on the companies whose products and services our innovators have displaced.  We've drawn on all this information to understand what underpins the commercial success of a new idea, whatever the market space it occupies or creates.  The result is three analytic tools, based on the underlying economics of utility, price, and cost, that help managers know a winner - a commercially successful new business with a strong future - when they see it.   The first tool, "The Buyer Utility Map," indicates how likely it is that customers will be attracted to a new business idea.  The second tool, the 'The Price Corridor of the Mass", helps identify what price will unlock the mass of customers. The third tool, "The Business Model Scorecard" offers a framework to help figure out whether and how a company can profitably deliver on the new idea at the targeted price.  The article concludes with a discussion of adoption hurdles such as employee, partner, or societal resistance to innovation.  While often overlooked in the planning process, adoption hurdles can make or break the commercial viability of even the most powerful innovative ideas.   The paper explores how managers can head off those reactions. 
  


 
 
 

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Harvard Business Review
Issue Date:  January-February 1999
Pages:   83-93
Reprint Number:99105
 
 

Creating New Market Space

W. Chan Kim and Renée Mauborgne
 

     Most companies focus on matching and beating their rivals. As a result, their strategies tend to take on similar dimensions.  What ensues is head-to-head competition based largely on incremental improvements in cost, quality, or both. The authors have studied how innovative companies break free from the competitive pack by staking out fundamentally new market space--that is, by creating products or services for which there are no direct competitors.  This path to value innovation requires a different competitive mind-set and a systematic way of looking for opportunities. Instead of looking within the conventional boundaries that define how an industry competes, managers can look methodically across them.  By so doing, they can find unoccupied territory that represents real value innovation.  Rather than looking at competitors within their own industry, for example, managers can ask why customers make trade-off between substitute products or services.  Home Depot, for example, looked across the substitutes serving home improvement needs.  Intuit looked across the substitutes available to individuals managing their personal finances.  In both cases, powerful insights were derived from looking at familiar data from a new perspective.  Similar insights can be gleaned by looking across strategic groups within an industry;  across buyer groups; across complementary product and service offerings;  across the functional-emotional orientation of an industry;  and even across time.  To help readers explore new market space systematically, the authors developed a tool, the value curve, that can be used to represent visually a range of value propositions.
 



 
 

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L'Expansion Management Review
Issue Date:  December 1999 
Pages:   17-26
 
 

Briser les frontières de la concurrence

W. Chan Kim and Renée Mauborgne
 

La concurrence peut être acharnée, surtout lorsque les marchés manquent de dynamisme.  Les dirigeants sont unanimes:  ils n'aiment pas ce type de situation et souhaitent en sortir au plus vite.  Leur instinct leur dicte alors que l'innovation est le moyen de s'échapper du peloton.  Mais par où commencer?  Les belles formules (« Adoptez des stratégies plus créatives, » « Sortez des sentiers battus, » etc.) s'accompagnent trop rarement de conseils pratiques.

Depuis bientôt une dizaine d'années que nous étudions des entreprises ayant effectivement produit de la valeur de façon significative, nous avons recherché par quels schémas elles ont su créer de nouveaux marchés ou en régénérer d'existants.  Nous avons ainsi repéré six approches de base.  Toutes découlent d'un regard nouveau porté sur des données pourtant familières, aucune ne part d'un don exceptionnel de voyance ou de prévoyance.

La plupart des entreprises se font un devoir de "coller" à leurs concurrents pour mieux les doubler.  Ce qui fait que leurs stratégies tendent à converger vers un même axe, les mêmes préjugés implicites sur les pratiques concurrentielles dans tel secteur ou dans tel groupement stratégique - une conception conventionnelle de la nature des clients et de leurs critères de valeur, ainsi que de l'étendue des produits et services qui peuvent être fournis.  Plus les entreprises s'enferrent dans ces lieux communs, plus forte est cette convergence.  Les concurrents tentant néanmoins de se doubler les uns les autres, ils en viennent à surenchérir sur des miettes dans la qualité ou les coûts.

Créer un nouveau marché suppose un état d'esprit très différent.  Loin de rester fasciné par le centre de l'arène, il faut porter le regard vers la périphérie:  les industries de substitution, les groupements stratégiques, les groupes d'acheteurs, les offres de produits et de services complémentaires, les orientations fonctionnelles et émotionnelles, ainsi que sur le facteur temps.  Alors, on aura une chance de découvrir un créneau inoccupé, permettant une réelle rupture.
 



 
 

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Harvard Business Manager 
Issue Date:  4/ 1999
Pages:   49-60
 
 

Branchengrenzen sprengen und das Geschäft neu erfindin

W. Chan Kim and Renée Mauborgne
 

Viele Unternehmen sehen sich in erbitterten Kopf-an-Kopf-Rennen mit ihren Branchenrivalen.  Alle suchen Vorteile mit denselben Strategien zu erreichen:  Kosten eindämmen, die Performance steigern und die Werbetrommel kräftig rühren.  Unterm Strich, so die Autoren, bringt das bestenfalls ein grö?eres Stück vom vorhandenen Kuchen.

Erst wenn Manager ihr Verständnis von Wettbewerb ändern, kommen ihre Unternehmen aus diesen eingefahrenen Gleisen heraus.  Es gilt, innovative Wertangebote zu erzeugen, die die Kunden begeistern und neuen Marktraum (Market Space) schaffen.  Um das Geschäft völlig neu aufzuziehen, müssen traditionelle Branchengrenzen durchbrochen, Marktchancen systematisch erforscht und daraus neue Kuchen gebacken werden. 



 

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Harvard Business Review
Issue Date:  January-February 1997
Pages:   103-112
Reprint Number:97108
 
 

Value Innovation: The Strategic Logic of High Growth

W. Chan Kim and Renée Mauborgne
 

     Why are some companies able to sustain high growth in revenues and profits--and others are not? To answer that question, the authors, both of INSEAD, spent five years studying more than 30 companies around the world. They found that the difference between the high-growth companies and their less successful competitors was in each group's assumptions about strategy. Managers of the less successful companies followed conventional strategic logic. Managers of the high-growth companies followed what the authors call the logic of value innovation. The authors tell the story of the French hotelier Accor, which discarded the notion of what a hotel is supposed to look like in order to offer what most customers want: a good night's sleep at a low price. And Virgin Atlantic challenged industry conventions by eliminating first-class service and channeling savings into innovations for business-class passengers. Those companies didn't set out to build advantages over the competition, but they ended up achieving the greatest competitive advantage.
 



 

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L'Expansion Management Review
Issue Date:  June 1997
Pages:   75-84
 
 

La Logique des Stratégies de Croissance

W. Chan Kim and Renée Mauborgne
 

     Pourquoi certaines entreprises jouissent-elles d'une croissance soutenue de leur chiffre d'affaires et de leurs bénéfices?  L'étude réalisée pendant cinq ans sur ce genre de sociétés, tout comme sur leurs concurrentes qui connaissent moins de réussite, montre que c'est la stratégie qui fait la différence.  Les entreprises les moins florissantes ont une approche conventionnelle:  leur pensée stratégique est dominée par l'obsession de rester dans le peloton de tête.  Les sociétés à forte croissance ne sont pas le moins du monde obnubilées par leur rivalité avec leur concurrentes.  Elles cherchent à mettre ces dernières hors d'état de nuire, en se fondant sur une logique stratégique que les auteurs appellent "l'innovation de valeur."
 


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Harvard Business Review
Issue Date:  September-October 1997
Pages: 4-15
 
 

Value Innovation, Per Una Crescita Sostenuta

W. Chan Kim and Renée Mauborgne
 

     Perché alcune aziende riescono a ottenera risultati prolungati in termini di ricavi e di utili e altre no?  Uno studio condotto di W. Chan Kim e Renée Mauborgne dimostra che le imprese vincenti sono quelle che non danno per scontate le condizioni del loro settore e non si fanno condizionare dalle risorse e dalle capacità esistenti.
 



 

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Harvard Business Review 
Issue Date:  July-August 1997
Pages:   65-75
Reprint Number:97405
 
 

Fair Process:  Managing in the Knowledge Economy

W. Chan Kim and Renée Mauborgne
 

     Unlike the traditional factors of production--land, labor, and capital--knowledge is a resource that can't be forced out of people.  But creating and sharing knowledge is essential to fostering innovation, the key challenge of the knowledge-based economy.  To create a climate in which employees volunteer their creativity and expertise, managers need to look beyond the traditional tools at their disposal. They need to build trust. The authors have studied the links between trust, idea sharing, and corporate performance for more than a decade. They offer an explanation for why people resist change even when it would benefit them directly. In every case, the decisive factor was what the authors call fair process--fairness in the way a company makes and executes decisions. Fair process may sound like a soft issue, but it is crucial to building trust and unlocking ideas.
 



 

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Harvard Business Manager 
Issue Date:  January 1998
Pages:   60-70
 
 

Mit Fairness führen:  Warum rücksichtsvolle Chefs erfolgreicher sind

W. Chan Kim and Renée Mauborgne
 

     Nach herrschender Lehrmeinung streben Menschen stets danach, die Ergebnisse ihres Handeln zu maximieren.  Die Erfahrung hingegen lehrt, so die Autoren, dass Menschen, oder beruflich oder privat, auch einen suboptimalen Ausgang akzeptieren, falls er fair zustandegekommen ist.  Manager sollten deshalb daran denken.  Nur wenn sie bei ihren Entscheidungen die Grundprinzipien eines "Fair Process" beachten, werden sie das Vertrauen ihrer Kollegen und Mitarbeiter gewinnen.  Sie müssen Fairness und Rücksicht walten lassen in der Art und Weise, mit der sie Massnahmen beschliessen und umsetzen.  Das gilt insbesondere für harte Entscheidungen.  Erst ein faires Vorgehen macht Beteiligte und Betroffene willens, uneingeschränkt mitzuwirken - auf allen Ebenen einer Organisation, von den Arbeitern bis zu den Managern der Chefetage.
 


 

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L'Expansion Management Review
Issue Date:  December 1997
Pages:   25-32
 
 

Le Pouvoir Méconnu de la Concertation

W. Chan Kim and Renée Mauborgne
 

     Les théories économiques présument que les gens sont utilitaristes, essentiellement motivés par les stratégies favorables à leur intérêt personnel.  Elles prennent pour axiome qu'ils ne se préoccupent que des résultats.  La théorie et la pratique du management sont désormais fortement imprégnées de cette affirmation.  Elle a une influence très forte sur les outils auxquels les managers ont traditionnellement recours pour contrôler et motiver leurs employés.  Le concept de la concertation n'a jamais été aussi crucial pour les dirigeants.  Il représente en effet un puissant outil de management pour les entreprises confrontées à la transition d'une économie fondée sur la production vers une économie fondée sur le savoir, dans laquelle la création de valeur dépend de plus en plus des idées et de l'innovation.  La concertation influence profondément les attitudes et les comportements quand on recherche des performances élevées.  Elle crée un climat de confiance et libère les idées.  Elle permet aux dirigeants d'atteindre les objectifs les plus difficiles tout en s'assurant la coopération volontaire des employés. 
 


 

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Harvard Business Review 
Issue Date:  July-August 1992
Pages:   123-128
Reprint Number:92405
 
 

Parables of Leadership

W. Chan Kim and Renée Mauborgne
 

     Why do the same activities lead to renewal in one company and to more-of-the same performance in another?  Almost always, the explanation comes down to "leadership."  But while it is easy to recognize leadership in action, defining the essence of leadership is hard because it cannot be reduced to a set of personal attributes nor confined to particular activities and roles.

Intent on capturing the essence of leadership, W. Chan Kim and Renée Mauborgne articulate five parables that capture the essence of leadership.  These parables deal with the qualities that define true leaders, and allow their points to be made through stories, not through statistics or research.

A young prince sent into a forest to learn to hear the unheard.  A discouraged disciple whose journey down a mountain teaches him perspective.  A tale of fire and water.  In these and their other parables, the authors illuminate the qualities and actions that define a leader.  In so doing, they give every reader an occasion to reflect on his or her own life and work.


 

W. Chan Kim is The Boston Consulting Group Bruce D. Henderson Chair Professor of International Management at INSEAD, France.

Renée Mauborgne is The INSEAD Distinguished Fellow and a professor of strategy and management at INSEAD and a Fellow of the World Economic Forum. 

  

Harvard Business Review