Nearly fifty years ago Michael Porter of Harvard Business School devised the five forces of competitive position analysis. Many companies have fought their way through competitive red blood-stained shark infested waters since the concept was envisaged. Approaching the turn of the millennium some newly enlightened companies wondered was there a blue ocean available away from the congested red tides. Burke et al described the contrast so well in their paper ‘Blue Ocean Versus Competitive Strategy: Theory and Evidence’ in saying:
“Blue ocean strategy seeks to turn strategic management on its head by replacing ‘competitive advantage’ with ‘value innovation’ as the primary goal where firms must create consumer demand and exploit untapped markets”.
The following grid is an attempt to summarise the key differences between the Five Forces of competitive strategy and Blue Ocean’s new market-space creation approach and takes a lot of inspiration from a template created by Gary Fox in relation to Blue Ocean Strategy.
| Red Ocean Strategy – Focus on Customers | Blue Ocean Strategy – Focus Noncustomers, new proposition |
| Compete in existing markets | Create uncontested markets |
| Beat the competition – Zero sum game | What competition? Render irrelevant |
| Stick to the knitting – Exploit live demand | Create and Capture new demand |
| Compromise on the value-cost trade-off | Break the value-cost trade-off |
| Give the customer what they think they need – Strategic intent low cost or differentiate– | Delight the future imagined customer -Strategic intent is differentiation at low cost |
One caveat to note is whist blue ocean strategy might feel like a new panacea one would be foolish to dismiss the five forces tool. Having encountered several digital disruptors in a professional capacity the author is aware that firms such as Amazon, AWS and Alphabet also play close attention to Porters wisdom as well as more recently envisaged tools and techniques. Practice illustrates innovation profits are eventually eroded by competition albeit it can take a long time.
Key SentinelReward Lesson: In an ideal world a company should run a parallel approach by working to beat competition in its existing markets whilst also envisaging a longer term horizon two or three approach of completely reinventing itself and its potential future total addressable market.