Scrutinizing Blue Ocean Strategy – II

[Part I is here.]

In their book, authors W. Chan Kim and Renée Mauborgne point out the differences between Blue Ocean Strategy and the ‘traditional’ Red Ocean Strategy.

(Click to enlarge.)

The idea and advantages of creating an uncontested market space is long known. It is not exactly a great discovery. Sony's founder Akio Morita once said, “We don’t serve market. We create market.” The difficult part is: can we identify the uncontested market? Or, if we can identify such a market, do we have the know-how, technology or resources to make it happen?

The Blue Ocean Strategy also dictates that a firm aligns its activities in pursuit of both differentiation and low cost. In the literature of management guru Michael Porter, ‘differentiation’ refers to product differentiation, and implies added value in the perspective of end users. Kim and Mauborgne use this term rather loosely. Even difference in production process or price is taken as differentiation.

For example, Kim and Mauborgne write in their book:

[Henry] Ford’s success was underpinned by a profitable business model. By keeping the cars highly standardized and offering limited options and interchangeable parts, Ford’s revolutionary assembly line replaced skilled craftsmen with ordinary unskilled laborers who worked one small task faster and more efficiently, cutting the time to make a Model T from twenty-one days to four days and cutting labor hours by 60 percent. With lower costs, Ford was able to charge a price that was accessible to the mass market.

The success of Henry Ford was due to his efficient assembly line, but that didn’t constitute product differentiation. Furthermore, rather than discussing Ford’s marketing strategy, wouldn’t it be more beneficial to study his assembly line innovation?