Blue Ocean Strategy: Create Markets Instead of Fighting in Them

Most strategy is a slightly different version of the same thing

Open any market category. The leading 5-10 companies are competing on the same dimensions, with slightly different emphasis. Customer surveys ask the same questions; product roadmaps follow the same patterns; pricing tiers cluster within 30% of each other. This is the red ocean: well-defined, well-contested, low-margin at maturity.

Most founders enter red oceans because they think their product is “better.” Better at what, exactly? Usually a marginally improved version of the existing competitive dimensions. The market rewards this with marginally better outcomes: 3% market share at best, commodification at worst.

W. Chan Kim and Renée Mauborgne’s Blue Ocean Strategy (2005, updated 2015) is the framework for the alternative: instead of competing on existing dimensions, change which dimensions you compete on. The result is a market space where incumbents don’t fit, because their existing value curves were built for different rules.

Strategy canvas

The framework’s central tool. Two axes:

• X-axis: the competitive dimensions of your industry. Typically 8-15. For SaaS examples: ease of use, feature depth, integration breadth, pricing, customer support, security/compliance, target buyer size, deployment model.
• Y-axis: a 1-10 score on each dimension.

Plot each major competitor as a curve connecting their score across all dimensions. You’ll see incumbents cluster around similar shapes. High on some dimensions, low on others, with most variation being minor.

That cluster IS the industry’s strategic profile. Every competitor is a small variation on it. Your job is to draw a curve that visibly diverges.

The four-actions framework

Apply four moves to the existing dimensions:

Eliminate. Which dimensions does the industry compete on that you can remove entirely?

This is the hardest move. Founders are afraid to cut things buyers seem to value. But “seem to” is the operative phrase. Cirque du Soleil eliminated animals (most expensive line item in traditional circus) and star performers (second most expensive). Animal welfare wasn’t even on the radar in 1984 when Cirque started; cutting them was a cost decision. Cutting star performers seemed insane because every circus had headliners. Cirque succeeded anyway because the BUYER (urban adults seeking sophisticated entertainment) didn’t actually need either.

Reduce. Which dimensions can you de-emphasize well below the industry standard?

Notion reduced spreadsheet depth (its spreadsheet is much weaker than Excel) and reduced collaboration features at launch (it added them later, but V1 was less collaborative than Google Docs). The reductions made the product simpler, cheaper to build, and more focused on its actual differentiator (flexible blocks).

Raise. Which dimensions can you push well above the industry standard?

This is the most intuitive move and where most founders default. But raise alone isn’t blue ocean. It’s “we do X better than incumbents.” Raising must be paired with eliminate and reduce to keep cost structure viable. Otherwise you’re just a more expensive version of the same product.

Create. Which new dimensions can you introduce that the industry doesn’t compete on?

Cirque du Soleil created “theatrical narrative” as a circus dimension. Traditional circus didn’t have storylines. Cirque made every show a story arc. New dimension, no incumbent competition.

Notion created “flexible blocks” as a category dimension. Traditional docs/spreadsheets/databases didn’t have this. Notion’s blocks were a new way to think about productivity tools.

A worked example: a hypothetical SaaS

Suppose you’re building a customer-feedback platform. Red-ocean incumbents: Productboard, Canny, UserVoice, ProductPlan. The strategy canvas looks like this (simplified):

Most competitors cluster around: high feature depth, high setup complexity, enterprise pricing, weak AI.

Now apply the four actions:

• Eliminate: enterprise/compliance certification (SOC 2, HIPAA, ISO 27001). Your target buyer is SMB founders, not enterprise IT.
• Reduce: feature depth (you don’t need 80% of Productboard’s features), integration breadth (start with 3 integrations, not 25).
• Raise: AI summarization (real heavy use, not the surface-level tagging incumbents do), simplicity of setup (15-minute onboarding, not 2-hour).
• Create: “feedback-to-product-spec auto-generation” (a new dimension: AI converts customer feedback into draft PRDs that engineering can act on directly).

Your value curve: low on enterprise/compliance, low-to-medium on features and integrations, high on AI, very high on setup speed, and a new dimension nobody else has.

That’s a blue ocean if SMB founders actually value the new shape. (You validate this with real interviews and pre-orders, not analysis. See Lean Startup validation.)

When the blue ocean isn’t a blue ocean

Most claimed blue oceans aren’t. Three common failures:

1. Slightly different is still red. If your value curve mostly looks like the incumbent shape with a small dent, you’re not in a blue ocean. Differentiation isn’t strategy if it doesn’t change the dimensions.

2. The blue ocean has no buyers. Many uncontested spaces are uncontested because no buyer pool exists. Validate the demand before committing. A market gap and a market are different things.

3. The blue ocean is temporary. As soon as your strategy is validated and visible, competitors copy it. Cirque du Soleil’s positioning was blue for ~15 years before Le Rêve and KÀ caught up. The blue-ocean discipline is continuous reinvention, not permanent positioning.

Common mistakes

1. Cheaper isn’t blue. Lower price on the same dimensions is red-ocean price competition, not blue-ocean strategy.

2. Underestimating Eliminate. The hardest move and where the cost savings come from. Most founders skip it because it’s emotionally hard.

3. Skipping the canvas. Drawing the actual chart with actual scores is what makes the framework analytical. Vague differentiation claims are red-ocean thinking dressed as blue.

4. Confusing dimensions with features. Dimensions are categories of value (ease of use, integration breadth). Features are specific implementations within a dimension. The framework operates at the dimension level.

5. Treating it as a one-time exercise. Blue oceans red over time. Re-run the canvas every 18-24 months.

ShipFit and Blue Ocean

Stage 4 of ShipFit (How to Win?) applies Blue Ocean alongside 7 Powers. The two frameworks complement each other: Blue Ocean identifies WHERE the opening is (the divergent value curve). 7 Powers identifies WHAT defensible advantage will let you hold the opening once incumbents catch up.

ShipFit’s Blue Ocean module:

1. Asks you to list the competitive dimensions in your category (and surfaces ones you might miss based on category metadata).
2. Plots incumbent positions on the canvas.
3. Forces explicit Eliminate/Reduce/Raise/Create decisions and visualizes the resulting curve.
4. Flags when your curve doesn’t visibly diverge from incumbents (the “we’re slightly different” trap).
5. Validates the buyer-demand assumption via Mom Test prompts.

The output is either a defensible blue-ocean positioning or a verdict that the category is too crowded for your specific buyer + advantage combination, in which case ShipFit recommends pivoting buyer segment or technology.

Further reading

• W. Chan Kim & Renée Mauborgne, Blue Ocean Strategy (2005, updated 2015). The source. Use the updated edition; it includes 10 more years of case studies.
• W. Chan Kim & Renée Mauborgne, Blue Ocean Shift (2017). The implementation handbook for teams trying to apply the framework operationally.
• 7 Powers. Pairs with Blue Ocean for the “what advantage will I have at maturity?” question.
• Jobs-to-be-Done. Useful for identifying the buyer’s underserved job that your blue-ocean value curve will address.