Chapter 1: Reach Beyond the Best
1. See NYOI 2009—Kickoff Year video, at 10:34, www.youtube.com/watch?v=5DCaqw0dasU (accessed March 30, 2017).
2. After six extraordinary years, in 2014 ISIS invaded Iraq. The rise of ISIS with its penetration in Iraq has endangered the country and forced the orchestra into hiatus. Yet, its message of hope, as documented here, can still be heard today, as even some of the greatest musicians around the world continue to celebrate the blue ocean it created.
3. Oprah Winfrey’s tweet on ActiFry was posted at 1:46 p.m. on February 15, 2013. The full tweet reads: “This machine T-Fal actifry has changed my life. And they are not paying me to say it.” https://twitter.com/oprah/status/302534477878554624?lang=en (accessed May 16, 2017). T-Fal refers to Groupe SEB’s brand under which ActiFry is sold in the United States. Depending on the country, Groupe SEB markets ActiFry under different brands including T-Fal, Tefal, and SEB. For this reason, we simply refer to ActiFry as Groupe SEB’s ActiFry in this book.
4. This is called environmental determinism, or the structuralist view. Its theoretical root stems from industrial organization economics, whose core argument can be summarized by its structure-conduct-performance paradigm. The paradigm says that industry structure determines organizations’ conduct or strategy, which in turn impacts performance. See, for example, Bain (1959) and Scherer (1970).
5. This view of strategy is well articulated in the seminal work of Michael Porter, Competitive Strategy (1980).
6. That organizations can consciously shape industry boundaries and create new market space by breaking the value-cost trade-off are central arguments of our research on market-creating strategies. Among our other publications, see, for example, Kim and Mauborgne (1997a, 1999a, 2005, 2009, 2015a).
7. In his influential work, “What Is Strategy?”, Porter (1996) formulated and used the concept of the productivity frontier to distinguish between operational effectiveness and strategy.
8. See Porter (1980).
9. The dashed curve will eventually form a new productivity frontier when its imitation and competition are in full swing.
10. See, for example, Kim and Mauborgne (1993, 1995, 1996, 1997a, 1998, 1999a, 2002b, 2004, 2005, 2009, 2015a), among others.
11. Since the launch of Groupe SEB’s ActiFry and its great success, Christian Grob, who headed the initiative, unfortunately passed away.
12. See Global Footprint Network, “World Footprint: Do We Fit on the Planet?” (accessed April 3, 2017).
Chapter 2: The Fundamentals of Market-Creating Strategy
1. See Schumpeter (1942) for his seminal discussion on creative destruction.
2. Ibid.
3. While the intellectual origin of the concept of disruption is unclear, Richard Foster (1986) discussed what he called “technological discontinuities” in his book Innovation: The Attacker’s Advantage and predicted that the phenomenon would only accelerate with coming tides of innovation. In his book, while the term disruption per se was not used, the phenomenon of “technological discontinuities” he described was about the disruption where upstart competitors abruptly overtook their well-run market leaders with new and discontinuous technologies. His research findings echo Schumpeter’s insight about creative destruction.
4. Clayton M. Christensen (1997) has spurred the recent popularity of the term disruption through his influential work on disruptive technology and innovation. See his seminal work, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.
5. Ibid.
6. In the context of new market creation, the term disruptive creation well captures the notion of displacement, whether it starts abruptly and destructively, with a superior technology, or slowly and gradually over time, with an inferior technology. Accordingly, we use the term disruptive creation to embrace both forms of displacement so that the process of new market creation through displacement can be fully, not partially, explained.
7. Our book Blue Ocean Strategy (2005, Expanded Edition 2015a) showed blue oceans of new market space were created both within and beyond the bounds of existing industries. We found that, compared with the blue oceans of new market space created within existing industry boundaries, those created beyond the bounds often generated entirely new demand and growth without disrupting existing players and markets.
8. In a similar vein, Bhidé (2004, 2008) and Hubbard (2007) pointed out that Schumpeter’s conception of creative destruction in economic growth missed a critical form of innovation and argued for the importance of what they called “nondestructive creation.” They explained that nondestructive creation and entrepreneurship matter to economic growth. While their conception of nondestructive creation was in direct contrast with that of creative destruction without explicit consideration of disruptive innovation and their focus was more on the role of entrepreneurs and technology in the process of innovation and growth, their conception of nondestructive creation as a key form of innovation is insightful and is consistent with our research findings on market-creating strategies.
9. Unlike the entrepreneurship school of thinking on innovation and growth, the act of nondisruptive creation as defined here does not rely on entrepreneurs as it can be performed by any person, regardless of their entrepreneurial talent, with a systematic process. Such difference aside, Bhidé (2008) offers penetrating insights on the importance of nondestructive creation in explaining growth and innovation in the US economy.
10. C. K. Prahalad (2006) formulated the notion of “the bottom of the pyramid.” There you can find more on why the “bottom of the pyramid” offers organizations ample brand-new opportunities as well as brand-new problems to solve.
11. For more on how technology innovation differs from value innovation, which is fundamental to an organization’s ability to unlock commercially compelling new markets, as well as why value innovation is a distinctive concept from value creation, see Kim and Mauborgne (1999b, 2005, 2015a).
12. See, for example, Tellis and Golder (2002).
13. See Kim and Mauborgne (1999b, 2005, 2015a, 2015b).
14. See Heilemann (2001).
15. To get a free downloadable copy of our quiz, “Are you true blue or bloody red?” go to www.blueoceanshift.com/truebluequiz
16. See, for example, Kim and Mauborgne (2005) and the work of Ries (2011).
Chapter 3: The Mind of a Blue Ocean Strategist
1. The theory of industrial organization economics proposes a structure-conduct-performance paradigm, which suggests a causal flow from market structure to conduct (strategy) and performance. See, for example, Bain (1959) and Scherer (1970). Under this structuralist view of strategy, executives typically begin with industry and competitive analyses and then set out to carve a distinctive strategic position in the existing industry space, whereby their organization can outperform rivals by building a competitive advantage. The underlying logic here is that a company’s strategic options are circumscribed by the market environment. In other words, structure shapes strategy. The seminal work on this is Porter (1980).
2. That industry boundaries are not fixed and that individual firms can create and re-create industries based on their conscious efforts is our central and long-standing argument. See, for example, Kim and Mauborgne (1997a, 1999a, 2005, 2009, 2015a).
3. Steve Jobs at NeXT Computer, Redwood City, California, 1995, https://www.youtube.com/watch?v=kYfNvmF0Bqw (accessed April 3, 2017).
4. Our 1997a Harvard Business Review article, “Value Innovation: The Strategic Logic of High Growth,” first introduced the concept of the trap of competing. Our long line of research has since consistently argued that a focus on beating the competition and aiming to build competitive advantages frequently leads to imitative, not innovative, approaches to the market. For a quick summary of this argument see Kim and Mauborgne (1997b, 2003b).
5. See, for example, Kim and Mauborgne (1997a, 1997b, 2005, 2015a).
6. The central importance of noncustomers as a way to not only gain keen insight on how to create and re-create markets but also generate new growth has been a consistent finding of our research. See, for example, Kim and Mauborgne (1997a, 2005, 2015a, 2015b).
7. See Kim and Mauborgne (2015b).
8. See Kim and Mauborgne (1997a, 2004, 2005, 2015a, 2015b). See also Hill (1988).
Chapter 4: Humanness, Confidence, and Creative Competence
1. The concept we call atomization was first introduced in our article “Tipping Point Leadership” (2003a). Our follow-up research on it since then showed that atomization has a significant positive effect on people’s motivation to take action, as it makes big challenges—like making a blue ocean shift—attainable to people. See, for example, Kim and Mauborgne (2005, 2015a).
2. Our research has consistently argued for the importance of firsthand discovery—not “outsourcing your eyes”—and conducting live market research via “visual exploration.” See, for example, Kim and Mauborgne (2002a, 2002b, 2005, 2015a).
3. Our research on fair process has demonstrated the critical role exercising fair process plays in strategy and management. We developed a model of fair process showing how it builds people’s trust, commitment, and voluntary cooperation. See, for example, Kim and Mauborgne (1991, 1993, 1995, 1996, 1997c, 1998).
4. For a managerial summary of our fair process research see Kim and Mauborgne (1997c).
5. In Kim and Mauborgne (1998), we developed intellectual and emotional recognition theory. Our research found that the respect for people’s intellectual and emotional worth that fair process engenders via engagement, explanation, and clear expectations triggers something at the core of the human spirit that builds our trust, commitment, and voluntary cooperation. It makes us want to “go the extra mile.” The theory posits that, through fair process, people feel intellectually and emotionally recognized and valued and, in response, they mirror that recognition back to the organization and their colleagues.