Why 90% of startups fail fighting over scraps while value innovators feast on untapped demand
Picture this: You’re the CEO of a struggling British charity in 1985. The UK fundraising industry is drowning in a sea of 500+ charities, all using guilt-inducing images of suffering children to squeeze donations from an increasingly fatigued public. Competition is cutthroat. Costs are soaring. Donors are confused and exhausted.
What do you do?
If you’re Comic Relief, you throw out the playbook entirely. You eliminate guilt. You eliminate pity. You create Red Nose Day—a national celebration where people do ridiculous things for money while wearing plastic red noses. You turn charity into a party.
The result? Comic Relief raised over £950 million, achieved 96% brand awareness, and inspired everyone from six-year-olds with pocket change to wealthy philanthropists to donate. All while spending exactly zero on traditional marketing.
This isn’t luck. It’s Blue Ocean Strategy in action—and it’s the difference between companies that merely survive and those that redefine entire industries.
The 90% Failure Club: Why Your Competition-Obsessed Strategy Is Killing Your Business
Here’s a sobering statistic that should keep every entrepreneur awake at night: In the U.S., 90% of startups fail. Not because they lack passion or intelligence, but because they’re playing a rigged game.
They’re trapped in what INSEAD professors W. Chan Kim and Renée Mauborgne call “red oceans”—market spaces so crowded with competitors that the water has turned bloody from the feeding frenzy. These companies obsess over their rivals, benchmark religiously, and fight tooth and nail for incremental market share gains.
The result? A death spiral of:
- Commoditization (your “unique” product looks just like everyone else’s)
- Price wars (racing to the bottom)
- Shrinking profit margins (working harder for less)
- Customer acquisition costs that would make a loan shark blush
Meanwhile, the winners—the Cirque du Soleils, the Apples, the Southwest Airlines of the world—aren’t even playing the same game. They’ve discovered blue oceans: uncontested market spaces where competition is irrelevant because they’ve made it irrelevant.
Value Innovation: The One Concept That Changes Everything
At the heart of every blue ocean success story lies a counterintuitive insight that challenges everything you’ve been taught about strategy:
You don’t have to choose between differentiation and low cost. You can have both.
This is value innovation—the cornerstone of blue ocean strategy. While your competitors are stuck in the either/or trap (either we’re the premium player OR we’re the budget option), blue ocean strategists pursue the genius of AND.
Let me show you what this looks like in practice:
Cirque du Soleil didn’t create a better circus. They eliminated what made circuses expensive (animals, star performers, three-ring chaos) while adding what made theater sophisticated (storylines, artistic music, refined atmosphere). Result: They charged theater prices for a circus experience and had customers lining up around the block.
Southwest Airlines didn’t compete with other airlines. They competed with driving. Founded in 1967 as a low-cost carrier serving Texas, Southwest revolutionized air travel by eliminating assigned seating, meals, and hub connections while adding frequent departures and fun service. They offered the speed of a plane at the price of a car.
Casella Wines didn’t make better wine. They made wine fun and accessible. Yellow Tail was created by Australian winemaker Casella Wines in 2001, Yellow Tail eliminated the pretentious terminology, complex taste profiles, and intimidating selection process while adding a cute kangaroo and easy-drinking sweetness. They converted beer drinkers into wine buyers.
Notice the pattern? These companies didn’t benchmark their competitors. They reconstructed market boundaries by applying what W. Chan Kim and Renée Mauborgne call the Four Actions Framework.
The Four Actions Framework: Your Blueprint for Market Revolution
Stop what you’re doing and answer these four questions about your industry:
1. Which factors should be ELIMINATED that your industry takes for granted?
Every industry has sacred cows—expensive features that companies assume are essential but customers couldn’t care less about. For Cirque du Soleil, it was animal acts. For Southwest, it was meal service. What’s yours?
2. Which factors should be REDUCED well below the industry standard?
Some features matter, but not as much as your industry thinks. Casella Wines kept wine, but dramatically simplified it. They reduced variety from hundreds of options to just two.
3. Which factors should be RAISED well above the industry standard?
What do customers really value that your industry underdelivers? Southwest raised the frequency of departures. Cirque raised the artistic sophistication.
4. Which factors should be CREATED that the industry has never offered?
This is where the magic happens. NetJets created fractional jet ownership. iTunes created legal, single-song downloads. What unprecedented value could you create?
Here’s the key: You must pursue all four actions simultaneously. Eliminating and reducing drops your costs. Raising and creating increases buyer value. Together, they shatter the value-cost trade-off.
The Six Paths to Blue Ocean Paradise
But how do you know what to eliminate, reduce, raise, and create? This is where most companies get stuck, staring at their industry with the same tired eyes as everyone else.
Blue ocean strategists see differently because they look differently. Instead of accepting industry boundaries as fixed, they systematically explore six paths to reconstruct them:
Path 1: Look Across Alternative Industries
Don’t just study your competitors—study what customers use instead of your product.
Example: NetJets didn’t study other jet companies. They studied the alternatives business travelers faced: fly commercial (low cost, high hassle) or buy a whole jet (low hassle, astronomical cost). Their solution? Fractional ownership—selling shares of private jets starting at 1/16th ownership, giving customers private jet convenience at a fraction of the cost.
Your move: List every alternative way customers can achieve the same objective as your product. What are they really buying—and what pain points could you eliminate?
Path 2: Look Across Strategic Groups Within Industries
Most industries divide into strategic groups—luxury vs. budget, specialist vs. generalist. Blue oceans emerge when you cherry-pick the best of multiple groups.
Example: Curves fitness centers took the community support of traditional health clubs and combined it with the low cost and convenience of home exercise. Result: A 30-minute workout for $30/month that attracted millions of women who’d never set foot in a gym.
Your move: Map your industry’s strategic groups. What causes customers to trade up or down between them? Can you combine their best features?
Path 3: Look Across the Chain of Buyers
Industries often focus on one type of buyer—the purchaser, user, or influencer. Shift your focus, and new oceans appear.
Example: Novo Nordisk’s insulin industry focused on doctors (influencers). The Danish pharmaceutical company, founded in the 1920s and now the world’s largest insulin producer, shifted focus to patients (users) and discovered a huge unmet need: easy, discreet insulin delivery. The result? NovoPen, which transformed insulin from a medical procedure into a simple daily routine.
Your move: Map your buyer chain. Who’s been ignored? What do they value that current offerings miss?
Path 4: Look Across Complementary Products and Services
Your customers’ experience extends beyond your product. What happens before, during, and after they use it?
Example: UK teakettle sales were flat until Philips, the Dutch electronics giant founded in 1891, realized the problem wasn’t the kettle—it was the lime scale in the water that ruined British tea. Solution? A kettle with a built-in filter. Sales exploded.
Your move: Map your customers’ total solution experience. Where are the pain points outside your traditional boundaries?
Path 5: Look Across Functional or Emotional Appeal to Buyers
Industries tend to converge on either functional (rational) or emotional appeal. Flip the orientation, and watch what happens.
Example: Cemex cement was purely functional—until they created Patrimonio Hoy. This Mexican cement giant, one of the world’s largest building materials companies, transformed cement into “the gift of dreams” that helped Mexican families build rooms where “laughter and happiness could be shared.” Sales soared.
Your move: Does your industry compete on function or emotion? What would happen if you reversed it?
Path 6: Look Across Time
Major trends create blue ocean opportunities—but only if you look at how they’ll change customer value, not just technology.
Example: Apple didn’t invent digital music or MP3 players. But they saw the trend of illegal downloading and asked: How can we make this legal, easy, and profitable for everyone? iTunes was born.
Your move: What trends are reshaping your industry? How will they change what customers value?
The Strategy Canvas: Your X-Ray Vision for Industry Transformation
Here’s where blue ocean strategy gets practical. The strategy canvas is a diagnostic tool that reveals, in one picture, exactly where you and your competitors are investing—and where the opportunities lie.
Here’s how to build one:
- List your industry’s key competing factors (horizontal axis)
- Score each competitor’s offering level (vertical axis)
- Connect the dots to create value curves
What you’re looking for is convergence—when all the value curves look basically the same. That’s your signal that everyone’s competing on the same factors, turning the ocean red.
Your goal? Create a value curve that breaks away through:
- Focus: Don’t try to excel at everything
- Divergence: Look dramatically different from competitors
- Compelling tagline: Communicate your value in one memorable phrase
When Casella Wines plotted their strategy canvas against 1,600+ other wines, the divergence was striking. While others competed on complexity, aging, vineyard prestige, and variety, Casella Wines eliminated or reduced all of these and instead created fun, simplicity, and ease of selection.
Their tagline could have been: “Wine for people who don’t like wine.” And it worked.
From Strategy to Reality: The Four-Step Visualization Process
Numbers-driven strategic planning produces thick documents nobody reads. Visual strategy produces clarity that drives action. Here’s the proven process:
Step 1: Visual Awakening
Gather your team and draw your current strategy canvas. Warning: This will be painful. Most companies discover their strategy is muddled, unfocused, and indistinguishable from competitors.
Step 2: Visual Exploration
Send teams into the field to explore the six paths. No surveys allowed—only direct observation and conversation with customers, noncustomers, and users of alternatives.
Step 3: Visual Strategy Fair
Teams present new strategy canvases to a panel of customers and noncustomers. Let them vote with sticky notes. The brutal honesty of buyer feedback beats executive opinions every time.
Step 4: Visual Communication
Distribute the before-and-after strategy canvas to every employee. When people can see where you’re going in one picture, alignment happens naturally.
A European financial services company used this process to boost revenue 30% in one year. The key? They discovered customers hated relationship managers (who they saw as “relationship savers” for the company’s failures) but desperately wanted automatic transaction confirmations. One insight, properly visualized, transformed their business.
Beyond Customers: The Three Tiers of Noncustomers That Will Make You Rich
Here’s a counterintuitive truth that terrifies most executives: Your biggest growth opportunity isn’t your existing customers—it’s the people who refuse to buy from you.
Blue ocean strategists think in reverse. Instead of finer segmentation (let’s divide our customers into ever-smaller niches!), they practice desegmentation—finding commonalities across noncustomers to unlock massive new demand.
First-Tier: “Soon-to-be” Noncustomers
These people use your industry’s offering minimally and grudgingly. They’re waiting to jump ship the moment something better appears.
Example: Pret A Manger noticed professionals were increasingly skipping restaurant lunches—grabbing something quick, bringing brown bags, or going hungry. Why? Restaurants were too slow, too expensive, and too heavy.
Founded in London in 1986, Pret’s solution: Restaurant-quality sandwiches made fresh daily, served in 90 seconds, at fast-food prices. Today they serve 760,000 customers daily across 335 stores.
Second-Tier: “Refusing” Noncustomers
These people consciously choose against your industry because offerings are unacceptable or unaffordable.
Example: JCDecaux realized most companies refused outdoor advertising because billboards were on highways where people zoomed past. Founded in 1964 by Jean-Claude Decaux in France, the company pioneered a new innovation: “street furniture”—ad-supported bus stops in city centers where people actually had time to read. They now have 500,000 panels in 1,800 cities.
Third-Tier: “Unexplored” Noncustomers
These people are in distant markets that no one in your industry has ever considered customers.
Example: The Pentagon’s Joint Strike Fighter program looked across Army, Navy, and Air Force—three “customers” who’d never shared aircraft because each had “unique” needs. By focusing on the few factors that truly mattered to each branch, they designed one aircraft that served all three.
The rule: Focus on the tier representing the biggest catchment of demand you can capture. Often, you’ll find commonalities across all three tiers that unlock an ocean of demand.
The Strategic Sequence: Your Roadmap from Idea to Empire
Creating a blue ocean isn’t enough. You need a robust business model that ensures profitable growth. Follow this sequence religiously:
1. Buyer Utility: Is There Exceptional Value?
Use the Buyer Utility Map—a matrix of six utility levers (productivity, simplicity, convenience, risk reduction, fun/image, environmental friendliness) across six stages of the buyer experience cycle.
The Test: Does your offering remove the biggest blocks to utility? If not, you don’t have a blue ocean.
Example: Ford’s Model T removed the two biggest blocks to automobile adoption: cars broke down constantly (risk) and were impossible to use on muddy roads (convenience). By making cars reliable and road-worthy, Ford unlocked the mass market.
2. Strategic Pricing: Can the Mass Market Afford It?
Don’t price against competitors in your industry. Price against alternatives and substitutes across industries.
The Process:
- Step 1: Identify your target market’s price corridor by looking at alternatives
- Step 2: Set your price level based on your legal protection and imitability
Example: Southwest priced against the cost of driving, not flying. This opened up an entirely new market of people who would have driven instead of flying.
3. Target Costing: Can You Profit at the Strategic Price?
Work backward from your strategic price to arrive at target cost. Three levers help you hit it:
- Streamline operations and introduce cost innovations
- Partner instead of doing everything yourself
- Change the pricing model (think subscription vs. purchase)
Example: Swatch hit its $40 price point by using plastic instead of metal, reducing parts from 150 to 51, and revolutionizing assembly. Launched by Swiss watchmaker Nicolas Hayek in 1983 when Japanese digital watches were destroying the Swiss watch industry, Swatch created a fashion watch empire while Swiss labor costs remained high.
4. Adoption: What Could Block Your Success?
Address hurdles upfront with three stakeholder groups:
- Employees (who might feel threatened)
- Partners (who might lose revenue)
- General public (who might object to change)
Example: When Monsanto failed to educate the public about genetically modified foods’ benefits and didn’t offer clear labeling choices, they faced a backlash that continues today. Address concerns before they become roadblocks.
Making Blue Oceans Happen: The Four Organizational Hurdles (And How to Leap Them)
You’ve got your blue ocean strategy. Now comes the hard part: execution. Four hurdles stand in your way, but there’s a way over each one.
Hurdle 1: Cognitive—Waking People Up
Numbers and PowerPoints won’t convince anyone. People need to see and feel the need for change.
Tipping Point Solution: Make people experience reality firsthand.
When Bill Bratton became NYC Transit Police chief in 1990, crime statistics showed only 3% of major crimes happened on subways. His officers felt they were doing fine. So Bratton made them all—starting with himself—ride the subway day and night.
What they experienced: graffiti-covered cars, aggressive panhandlers, turnstile jumpers, and terrified citizens. The ugly reality was undeniable. Change happened fast.
Hurdle 2: Resources—Doing More with Less
“We need more resources” is the universal excuse for inaction. Blue ocean leaders multiply their existing resources’ value.
Tipping Point Solution: Focus on hot spots (high impact, low resource) and eliminate cold spots (high resource, low impact).
Bratton discovered that while crime happened throughout the subway system, the vast majority occurred at just a few stations. By redeploying officers from quiet stations to hot spots, crime plummeted without adding a single cop.
Hurdle 3: Motivation—Getting People to Move
Grand visions produce lip service. You need people to act.
Tipping Point Solution: Focus on kingpins (key influencers), put them in a fishbowl (public accountability), and atomize the challenge (break it into bite-sized pieces).
Bratton identified the 76 precinct commanders as kingpins—each controlled 200-400 officers. He created “Compstat” meetings where each commander publicly presented their crime statistics and strategies. Peer pressure and recognition drove rapid change throughout the 36,000-officer force.
Hurdle 4: Politics—Dealing with Resistance
There will always be devils (those who lose from change) and angels (those who benefit).
Tipping Point Solution: Identify both groups early. Build coalitions with angels before devils can organize. Have a consigliere (respected insider) on your team who knows where bodies are buried.
When NYC courts opposed Bratton’s focus on quality-of-life crimes, he built a coalition with the mayor and press. The courts couldn’t publicly oppose an initiative to make New York safer.
Fair Process: The Secret Weapon That Makes People Want to Execute Your Strategy
Here’s what kills most strategies: The executives who create them aren’t the ones who execute them. And the frontline people who must execute them feel like victims of decisions imposed from above.
The solution? Fair process—engaging people in the strategy’s creation so they own its execution.
The Three E Principles:
1. Engagement: Involve people in decisions that affect them. Ask for input. Allow debate.
2. Explanation: Ensure everyone understands why decisions were made, even if their ideas were rejected.
3. Expectation Clarity: Define clearly what will change, what’s expected, and how people will be judged.
An elevator manufacturer learned this the hard way. They implemented identical manufacturing changes at two plants to shift from batch manufacturing to cellular manufacturing—a more efficient production method using self-directed teams. At one plant, they violated all three E principles—brought in mysterious consultants, made changes without explanation, and left expectations unclear. Result: Rebellion, plummeting performance, and workers threatening to bring back the union.
At the other plant, they engaged workers in the change process, explained every decision, and clarified expectations. Result: Enthusiastic adoption and improved performance.
The difference? Fair process. When people feel their intelligence and experience are valued, they’ll execute even difficult strategies enthusiastically. Violate fair process, and they’ll sabotage even brilliant strategies.
Alignment: The Triple Crown of Sustainable Strategy
Most strategies fail because they’re lopsided. Companies nail the value proposition but bungle the profit model. Or they get both right but alienate the people needed for execution.
Sustainable blue ocean strategy requires aligning three propositions:
1. Value Proposition
What unprecedented utility do you offer buyers? Comic Relief eliminated guilt and made giving fun, easy, and meaningful—even £1 counted.
2. Profit Proposition
What’s your business model for making money? Comic Relief eliminated expensive galas and grant-writing, instead leveraging retail stores to sell red noses and volunteers to fundraise. Operating costs approached zero.
3. People Proposition
Why should employees, partners, and other stakeholders support you? Comic Relief gave volunteers starring roles in fundraising, corporations free publicity, and celebrities positive press. Everyone won.
When all three propositions pursue both differentiation and low cost, you get a strategy that’s not just successful but sustainable. Competitors can copy one element, but copying an entire aligned system? Nearly impossible.
Case Study: Apple iTunes vs. Napster
Napster had a killer value proposition—free music for everyone. Created by Shawn Fanning in 1999, this peer-to-peer file sharing service quickly amassed 80 million users. But they ignored the people proposition for a critical stakeholder: record labels. When labels approached them about revenue sharing, Napster said they’d succeed with or without them. The labels sued them into oblivion.
Apple aligned all three propositions. Buyers got legal, easy downloads at fair prices. Apple profited from both iTunes and increased iPod sales. Record labels got 70% of revenues and piracy protection. The result: 25 billion songs sold and counting.
When Blue Turns Red: The Art of Strategic Renewal
Every blue ocean eventually attracts sharks. The question isn’t if competitors will invade, but when—and what you’ll do about it.
Barriers to Imitation (Your Temporary Moat):
Cognitive Barrier: Competitors ridicule what they don’t understand. CNN was mocked as “Chicken Noodle News” for years.
Organizational Barrier: Imitation requires painful changes competitors resist. Airlines couldn’t copy Southwest without abandoning their hub systems.
Brand Barrier: First movers earn fierce loyalty. Microsoft spent years trying to beat Quicken and finally gave up. Intuit’s personal finance software, launched in 1983, had become so entrenched that even the software giant couldn’t dislodge it.
Economic Barrier: Scale advantages compound quickly. Walmart’s purchasing power makes imitation economic suicide. Founded by Sam Walton in 1962 as a discount retailer in rural Arkansas, Walmart’s massive scale now allows it to demand prices from suppliers that competitors simply cannot match.
These barriers can protect you for years, even decades. But eventually, they fall.
The Renewal Imperative
Monitor your strategy canvas religiously. When competitors’ value curves start converging with yours, the ocean is turning red. You have two choices:
Option 1: Swim Farther
Maximize your current blue ocean through operational improvements and geographic expansion. Milk it for all it’s worth.
Option 2: Create Another Blue Ocean
When convergence accelerates, it’s time for your next strategic move.
Master Class: Salesforce.com’s Serial Innovation
Founded by Marc Benioff in 1999 with the vision of delivering business software through the internet (the “cloud”), Salesforce.com hasn’t created just one blue ocean—they’ve created a series:
- 2001: Web-based CRM eliminated software installation, maintenance, and complexity
- Mid-2000s: Force.com platform let customers build custom applications
- 2010: Chatter added private social networking to solve CRM fragmentation
Each time competitors caught up, Salesforce was already swimming in the next blue ocean. That’s how you sustain leadership for 15+ years in tech.
The Ten Red Ocean Traps That Keep You Stuck in Bloody Waters
Even with the best intentions, companies fall into mental traps that keep them in red oceans. Avoid these at all costs:
Trap 1: “Blue ocean strategy means being customer-led”
Reality: It’s about non-customers. Your current customers will ask for more of the same.
Trap 2: “We must venture beyond our core business”
Reality: Most blue oceans are created within existing industries. Casella Wines didn’t leave wine—they redefined it.
Trap 3: “It’s all about technology innovation”
Reality: Value innovation matters, not tech. Comic Relief used zero new technology.
Trap 4: “First to market wins”
Reality: First to get it right wins. iPod wasn’t the first MP3 player—it was the first to nail the experience.
Trap 5: “Blue ocean strategy equals differentiation”
Reality: It’s differentiation AND low cost simultaneously.
Trap 6: “It’s about low prices”
Reality: Strategic pricing isn’t always low. Cirque du Soleil charges premium prices.
Trap 7: “Innovation equals blue ocean”
Reality: Only value innovation counts. Segway was innovative but created no blue ocean. The self-balancing personal transporter, launched in 2001 with massive hype as a device that would transform urban transportation, was a technological marvel that few people actually wanted or needed at its $5,000 price point.
Trap 8: “It’s just marketing theory”
Reality: It requires aligning value, profit, and people—far beyond marketing.
Trap 9: “Competition is bad”
Reality: Competition is fine until markets become oversupplied. Then you need blue oceans.
Trap 10: “Blue oceans require creative destruction”
Reality: Most create new demand without destroying existing markets. Cirque didn’t kill traditional circuses.
Your Blue Ocean Action Plan: From Bloodbath to Breakthrough
Ready to stop competing and start creating? Here’s your roadmap:
Week 1-2: Wake Up to Reality
- Draw your current strategy canvas
- Identify where all competitors’ value curves converge
- Calculate what percentage of your effort goes to matching competitors vs. creating new value
Week 3-4: See Differently
- Map all alternatives to your offering (not just competitors)
- Interview 10 noncustomers about why they don’t buy
- Visit analogous industries that solved similar problems differently
Week 5-8: Explore the Six Paths
- Assign teams to each path
- Require direct market observation (no surveys!)
- Generate at least 3 blue ocean ideas per path
Week 9-10: Test with Real Buyers
- Create strategy canvases for top ideas
- Present to panels of customers and noncustomers
- Let market feedback, not executive opinion, guide selection
Week 11-12: Align the Three Propositions
- Detail your value proposition (utility at strategic price)
- Design your profit proposition (target costing and partnerships)
- Craft your people proposition (why stakeholders should care)
Week 13-16: Prepare for Launch
- Identify organizational hurdles and tipping points
- Build coalitions with angels
- Create visual communication tools
- Establish fair process for rollout
The Choice That Changes Everything
Right now, you’re standing at a crossroads. Down one path lies the familiar red ocean—where you’ll continue benchmarking competitors, fighting for market share, and watching margins shrink.
Down the other path lies the blue ocean—uncontested market space where you make the competition irrelevant by offering buyers a leap in value they can’t get anywhere else.
The tools are proven. The frameworks are clear. The examples span every industry from airlines to charities, from technology to cement. The only question is: Will you have the courage to stop competing and start creating?
Remember: There are no permanently excellent companies. There are no permanently attractive industries. There are only companies that make the strategic moves to create blue oceans—and those that don’t.
The next blue ocean in your industry is waiting to be discovered. It might be hiding in the noncustomers you’ve ignored, the assumptions you’ve never questioned, or the complementary products you’ve overlooked.
But one thing is certain: It won’t be found by doing what you’ve always done, just a little better or a little cheaper.
It’s time to put down your competitive benchmarking reports. Time to stop obsessing over market share. Time to stop letting your competitors define your strategy.
It’s time to make the competition irrelevant.
Your blue ocean awaits. The only question is: Are you ready to set sail?
What’s your industry’s biggest “that’s just how it’s done” assumption? What would happen if you eliminated it entirely? Share your blue ocean insights in the comments below—I personally respond to every single one. And if you’re ready to transform your business with blue ocean thinking, subscribe to the BullishBooks newsletter for weekly strategic insights that challenge conventional wisdom.
