What is Blue Ocean Strategy: An Introduction Guide for 2025

What is the Blue Ocean Strategy?

Blue Ocean Strategy is a business approach that aims to create new market space to avoid saturated markets (аka red oceans). W. Chan Kim and Renée Mauborgne developed this theory in their book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.”

By creating a new market, companies avoid the need to compete by making competitors irrelevant. This allows companies to focus entirely on addressing customers' needs and building unfair advantages.

To make this work, product teams identify a customer segment outside the scope of the other market players, and the product can address unmet needs.

Key Benefits and Risks of BOS

Benefits of the Blue Ocean Strategy

1. Less competition
One of the main advantages of the Blue Ocean strategy is avoiding the competition, at least initially. By definition, you are creating a new market that is non-existent, which means that no other players are focusing on it. That will rapidly change once you start getting traction, and competitors will inevitably follow up, but you already have a significant advantage ahead of them.

2. Addressing a new audience
Part of creating the new market is identifying a new customer segment that has been approached with your product category. Addressing the needs of a new group of people opens up new opportunities for your product or service to grow.

3. Growth potential
Blue ocean markets offer immense growth opportunities. As the first to enter a new market, you are in an excellent position to reach most of the market. Even if the market is insignificant, having a major part of it may account for significant business.

Risks of the Blue Ocean Strategy

Looking retrospectively at businesses that successfully implemented their blue ocean strategy, it all may seem like a no-brainer. Creating a new market and owning it may seem like the obvious and inevitable thing to do, but that’s just survivorship bias, and things are not that clear. Here are some of the risks related to the blue ocean strategy.

1. Customer demand validation
The blue ocean strategy involves addressing a new group of people who haven’t used your product or a similar product to solve their customer problems. At first glance, there might be no obvious relationship between the product and the problem. Even though the product might be successful and there is validated demand for it with its traditional audience, this might not translate well to the new audience that will be targeted.

When approaching a new customer segment, all previous findings and learnings are invalidated, and customer problem fit and solution problem fit should be researched separately. This could be a time-consuming exercise, but skipping it might result in approaching the audience with a product that they don’t need.

2. Market size uncertainties
Estimating a market that doesn’t exist comes with an order of magnitude more uncertainty than estimating existing markets.

First, such a market might not exist at all. As we discussed in the previous point, customer demand needs to be evaluated.

Then, the size of the customer segment will be mainly in the realm of the guestimates, and you might be off by far. Focusing on a market that is too small may result in unable to build a sustainable business model.

Finally, the severity and urgency of the customer problem might be significantly different from what is observed in established markets. Even though the problem might exist for many customers, its importance might be low enough that it doesn’t justify the switching cost.

Blue Ocean vs. Red Ocean Strategies: Key Differences

Below, we have gathered valuable insights into how the red and blue oceans' strategies compare to one another:

4 Blue Ocean Strategy Examples

1. Starbucks

Starbucks became today's world-known brand thanks to creating an entirely new market in the coffee industry. Howard Schultz is the person who bought the small chain of coffee houses and transformed it into the company we know today. He saw the potential of creating a space and experience that celebrates the coffee culture and turns coffee shops where people can socialize, spend quality time with themselves, or spend hours learning or working. Almost 40 years later, Starbucks is still the undisputed leader in the US market, shaping the taste and scent of the coffee experience. If you want to learn more about the story of Starbucks, check out the Acquired episode: Starbucks (with Howard Schultz).

2. Slack

Slack created one of the most significant shifts in office communication since the email. It successfully applied instant messaging technology to provide asynchronous, near real-time business communication that emails couldn’t facilitate well.

Before Slack, chats were sporadically used in companies for work-related communication, and email was the primary communication channel. However, email is often inefficient and creates unneeded noise and communication overhead.

Slack took the instant messaging user experience familiar from mIRC back in the 90s and 2000s and applied it for work-related purposes, allowing team members to follow information streams that they are interested in and skip everything else. Since then, Microsoft introduced a Slack competitor, and Teams is still trying to catch up.

3. Canva

For quite some time, people who had to create trivial visuals for different purposes had to improvise to get the job done. Few people will buy imaging editing software and spend the time learning it to make a photo collage for a friend’s birthday. Also, employees had to rely on the designers in their teams or external design services for trivial tasks.

Canva is a visual design software that targets non-designers and empowers them to create professional-quality visual content easily using templates and simple-to-use software.

4. Tetris

Tetris is considered one of the best-selling games in the world, even though its peak was decades ago. The key to building that successful game? Create a game that appeals to a different audience.

The traditional gaming personas are either kids or hardcore gamers. Tetris went way beyond that by creating a game that was simple and yet highly addictive to play. It was played not just by kids and gamers but also by their siblings, parents, grandparents, bosses, teachers, and everyone else.

From these examples you can see the pattern of identifying a customer segment that is considered outside of the industry and create the right user experience and product value for them to become loyal customers. Let's see what are the steps to get there.

Key Steps and Tools to Make a Blue Ocean Shift

Step 1: Prepare the Team

Whether you are part of a big company or running your own startup, to execute a successful Blue Ocean Strategy, you need the right people around you with an appropriate mindset for what’s next.

Targeting new customer segments requires challenging the status quo and pushing the established boundaries, which differs significantly from operating in a Red Ocean.

Step 2: Assess the Current Market Conditions

Innovation and expansion into new markets come from a deep understanding of the current landscape. The SWOT analysis and strategy canvas are great tools to systematically and visually capture your market assessment.

Step 3: Identify Pain Points and Non-customers

Narrow down hidden pain points that limit market growth. Customer interviews can be an incredible source of insights into what doesn’t work well and where the potential hotspots are.

Also, identify which non-customers are good candidates to target with your product. The “Three tiers of non-customers” tool categorizes non-customers into different categories to provide insights into how to convert them to customers.

The Three Tiers of Non-customers Framework

Tier 1: “Soon-to-be” Non-customers
These customers are the border of your industry and use its products out of necessity. They would easily switch to a solution better suited to their needs.

Tier 2: “Refusing” Non-customers
This group consciously decides not to use your industry’s product due to some beliefs, limitations, or values that they have. Such factors could be cost, lock of tablestake features, or risk-related.

Tier 3: “Unexplored” Non-customers
This segment is the furthest away from your industry and might never have considered your product a viable option.

The natural course of action would be to start from Tier 1 to Tier 3, which allows you to start with the customers who are most likely to convert to your product if their unmet needs are addressed.

Step 4: Reconstruct Market Boundaries

Use knowledge from non-customers and unaddressed pain points to guide you in reframing your industry to address the new customer segment well.

Step 5: Build & Test Your Hypothesis

To validate your thinking up to now, you need to build a hypothesis and validate it using actual people from your customer segment. Depending on your readiness, you can approach them with a prototype or a concierge MVP to reproduce the customer value that they would get from the actual product and evaluate their readiness to pay after that.

Conclusion

The Blue Ocean approach is a great strategy to avoid cut-throat competitions and oversatured market. Building and executing successful blue ocean strategy is based on deep understanding of your market and industry and identifying the underserved customer segments and their pain points. While it could be a challenging initiative, the blue ocean strategy can transform your company into a market leader.