Blue Ocean Strategy and the Art of War

I found myself recently referencing a post from many years ago on these two works. Here is an update.

The Blue Ocean Strategy has become a staple of business strategy and most MBA programs. At its core, the Blue Ocean strategy is about value innovation.

“Red” oceans are known industries and markets. The competition is constantly trying to outperform rivals and the waters bloody. It is an inevitable race to a pure commodity market. “Blue” oceans are industries and markets that are unknown today. Demand is created rather than fought over. There is ample opportunity for growth and profit. Blue oceans are often created from red oceans. A competitor finds an opening to create value and finds their blue ocean. Several examples are cited such as Henry Ford and the Model T and more recently Michael Dell and Dell Computer. I believe that Facebook would be another example since they have been able to execute on an idea that was not necessarily new (i.e. Friendster, MySpace, etc.).

The authors, Kim and Mauborgne, are too dismissive of red ocean companies. They state rather bluntly that corporate strategy is heavily influenced by its roots in military strategy. While this is in fact true, the authors insist that the goal of military strategy is to engage and combat the enemy. Competition, confronting the opponent and driving him from the battlefield are listed; however this is not military strategy. It is the goal of a direct attack. The direct attack is only one strategy that can be used and it is usually the one of last resort. This notion made me think how the blue ocean strategy would compare to Sun Tzu’s The Art of War, one of the oldest and most successful books on military strategy.

Here are some select passages from The Art of War that conflict with the red ocean view of corporate/military strategy:
1) All warfare is based on deception.
2) In all history, there is no instance of a country having benefited from prolonged warfare.
3) Supreme excellence consists in breaking the enemy’s resistance without fighting.

Sun Tzu would not advocate a red ocean. In contrast, The Art of War is blue ocean:

You can only be sure of succeeding in your attacks if you only attack places that are undefended.

Pretty clear talk of finding uncontested market space, capturing new demand and making the competition irrelevant. In contrast, red oceans are prolonged fights exploiting differentiation or cost. These are commodity markets, not drivers of innovation. Blue oceans are value innovators and have been known to mankind for since at least the 6th century BC. Red oceans work if and only if there are in fact commodity markets. Perhaps for agricultural products and metals, but what about technology? What about something as simple as an electric toaster? After all electric toaster was invented in 1893. These should be freely traded on the open market, the reddest of red oceans right? For more data and history on toasters and a fine article on commoditization read Schrage’s The Myth of Commoditization. Another compelling look at why red oceans aren’t so red.