What do Cirque du Soleil, Home Depot, e-Bay, Federal Express, Southwest Airlines, and CNN have in common? They all share Blue Ocean strategy as a main reason behind their success.
Blue Ocean strategy is most likely to be triggered when "competing in overcrowded industries is unlikely to sustain high performance. The real opportunity is then to create blue oceans of uncontested market space." The contrast of Blue Ocean strategy is what is recognized as the Red Ocean strategy (red as in bloody). Red oceans "represent all the industries in existence today—the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, prospects for profits and growth are reduced. Products turn into commodities, and increasing competition turns the water bloody."
In turn "Blue oceans denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as e-Bay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry".
A comparison between these two strategies is well described in the following diagram:
Blue Ocean strategist had little concern with hindsight, and all of them acted with the conviction of a 20/20 foresight. If I had a single wish at all in the world of business, it would be to appreciate and apply the "zeitgeist" (spirit of the time) the way these luminaries did, and which eventually led them to the clean blue oceans where they pioneered truly uncharted territories.
All excerpts and diagram are quoted from:
W. Chan Kim and Renée Mauborgne. "Blue Ocean Strategy." Harvard Business Review October 2004