In an October 2004 Harvard Business Review article, W. Chan Kim and Renée Mauborgne introduced the concept of “blue ocean” markets. Unlike “red ocean” markets where rivals tear each other to pieces in fierce competition, blue ocean markets are pristine, untainted by competition. Some blue ocean markets are created from scratch. “But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.” The obvious message is that, instead of continuing to fight it out in the red oceans, companies should seek to create blue oceans. We certainly wouldn’t disagree (although many organizations don’t have the luxury of stepping away completely from red ocean markets.)

The next year, the two expanded the concept to a full book, called Blue Ocean Strategy. In that book, they introduced the Strategy Canvas. “The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It serves two purposes. First, it captures the current state of play in the known market space. This allows you to understand where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from the existing competitive offerings on the market.” Most of the book talks about the second use of the Strategy Canvas, which is identifying changes that can be made to reconstruct the industry value curve and create a blue ocean.

Along the bottom of the canvas you can see five factors that the commercial construction industry has invested in and on which they compete. The vertical axis represents the position perceived by customers on each of these factors. Note that sometimes a Low rating (e.g., Total Cost) represents high value to customers, and sometimes a High rating (e.g., Quality) represents high value to customers. The lines on the chart are called value curves and plot how each player (Us), or class of players (Competitor Groups A & B), or alternative solution (none included here) performs on each of the factors.

Note that most companies operating in most industries feel that they must strive to be competitive on all of the key factors and hopefully stand out somewhat (differentiate) on one or more. However, disruptors creating "blue ocean" markets may choose not to be competitive on all factors and instead to introduce new competitive factors.

Tools for creating a Strategy Canvas coming soon!

Watch a tutorial here on using the Strategy Canvas in performing a Situation Assessment.