You have a product that works. Your churn is low. And you're still losing — because the person next to you sells the same thing at 20% less and has been doing it longer. I've been there: a SaaS tool I built in 2021, copied feature-for-feature by a competitor within eight months, our pricing cut three times just to stay in the race. That's a red ocean. Blood in the water, everyone swimming in it.
The alternative has a name — blue ocean strategy — and it's one of the few business frameworks I still trust, partly because its authors did the boring work of building it from evidence rather than vibes. Chan Kim and Renée Mauborgne studied more than 150 strategic moves across 30-plus industries and roughly a century of business history. Their finding: the biggest jumps in value rarely came from beating competitors. They came from creating a market where competition barely existed yet.
Key Takeaways
- A blue ocean is created by a strategic move, not by a company size — which is exactly why it's available to entrepreneurs.
- The core mechanism is value innovation: raise buyer value and cut cost at the same time, not one at the expense of the other.
- Cirque du Soleil, Nintendo's Wii, Netflix's shift into streaming and Yellow Tail wine are real examples — each one redefined who the buyer was.
- The ERRC grid (Eliminate, Reduce, Raise, Create) is the practical tool. Fill it in honestly and it exposes weak ideas fast.
- Most failed attempts aren't failures of creativity. They're failures of execution: the idea was right, the cost structure or the delivery wasn't.
- You can test a blue ocean hypothesis before you build anything — a landing page and 40 conversations will tell you more than a business plan.
What real blue ocean strategy examples actually teach entrepreneurs
The examples get recycled everywhere: Cirque du Soleil, Netflix, Nintendo. What's less often said is that almost none of those companies were startups. They were established players who found a new space after years in a crowded one. That matters, because it means the pattern isn't about having resources. It's about having the discipline to look at what an entire industry takes for granted and ask why.
What is blue ocean strategy in entrepreneurship?
In a nutshell: it's a way of building a business that competes on a different map rather than a better position on the same map. The red ocean is the existing market, where industry boundaries are set and the rules are known. The blue ocean is the space you create by serving non-customers — people who currently don't buy from your industry at all — often by removing the features the industry assumes everyone wants.
For a founder, this reframes the first question you ask. Instead of "how do I beat the incumbents?", you ask "who is not being served by this industry, and what would have to be true for them to buy?" That's a different starting point, and it produces different products.
Why a "strategic move" matters more than your company
Kim and Mauborgne deliberately studied moves rather than companies. A strategic move is a set of managerial actions that produces a genuinely new offer — and crucially, the same company can make one blue ocean move and then spend years in a red ocean. Look at Netflix: it made a blue ocean move when it shifted from mailing DVDs to streaming and later to producing its own content, and then, the moment every studio launched a platform, it was competing in a red ocean again.
The practical takeaway: blue oceans are temporary. Assume yours will be contested and design your advantage around something that's hard to copy at speed — not around a feature list.
Five real examples, and what each one got right
Here's where I'd go beyond the usual list. For each of these, I've added the question that actually matters to a founder: what did they remove?
- Cirque du Soleil. Removed the animals and the star performers, cut the cost base of a traditional circus, and raised the theatrical ambition, set design and price point — pulling in adults who would never have gone to a circus. It looked at the audience the industry had abandoned.
- Nintendo Wii. Removed the assumption that consoles had to win on raw processing power. It targeted families and older players who found controllers intimidating, and sold on motion control instead. The hardware was cheaper to build than the competition's, which is value innovation in its purest form.
- Yellow Tail wine. Stripped out the traditional language of wine — varietals, vintages, tasting notes — and made an easy-drinking, sweet red aimed at beer and cocktail drinkers, not oenophiles. It created demand in a category (wine) that had been marketed exclusively to existing wine drinkers.
- Netflix (streaming phase). Removed late fees and rental deadlines, then removed the need to leave your house. It didn't beat Blockbuster at Blockbuster's game; it changed the game to one where Blockbuster's stores became a liability.
- Southwest Airlines. Cut in-flight meals, seat assignments and hub-and-spoke complexity, and priced against buses and cars rather than against other airlines. The buyer wasn't the business traveller. It was the person who had never flown.
Which companies use the blue ocean strategy?
Beyond the five above, the ones I'd point to for entrepreneurs: Uber (created a market by making an idle car fleet bookable in real time), Airbnb (monetised existing homes, not new hotel capacity), Dyson (dominant in vacuum cleaners after years of selling bagless models nobody asked for), and, in B2B, Canva (design tools for people who weren't designers — the same logic as the Wii, applied to software). Notice the pattern: each one identified a group the industry had quietly decided not to serve.
Is Netflix a blue ocean strategy?
Yes — but only at specific moments. Netflix's DVD-by-mail model was a blue ocean move: no late fees, no store trip, a subscription instead of a rental. Its pivot to streaming was another. Its pivot into original content (House of Cards, Orange Is the New Black) was a third, and a deliberate one: it removed the dependency on studios who could pull their catalogue and started competing on its own supply. Since roughly 2019, however, Netflix has been fighting a red ocean again — every major studio now has a platform, and the differentiator has become price and bundling. That's the honest lesson: the label describes a move, not a permanent identity.
The ERRC grid, filled in on a real case
This is where theory either becomes usable or doesn't. The ERRC grid asks you four questions about your current industry: what should you Eliminate that the industry takes for granted? What should you Reduce below industry standard? What should you Raise well above industry standard? And what should you Create that the industry has never offered?
I'll use a startup case I know well: an online course business targeting small accounting firms. The industry standard (at the time: heavily produced pre-recorded video courses sold per seat, priced around €1,200 a year) assumed buyers wanted comprehensiveness. In practice, most buyers wanted a handful of answers, fast.
| ERRC | Action taken | Effect on cost or value |
|---|---|---|
| Eliminate | Pre-recorded video production (the single largest cost line) | Cut production cost by roughly 70% |
| Reduce | Course length — from 40-hour curricula to 90-minute sessions | Lower delivery and support cost |
| Raise | Live access to a working practitioner, answered within 24 hours | Higher perceived value for the buyer |
| Create | A subscription covering the whole firm rather than per seat | New buyer: firms that had never bought training at all |
The result wasn't a better course. It was a different product sold to a different buyer at a fraction of the cost. That's value innovation, and it works precisely because it makes no sense to the incumbent — the incumbent can't cut production costs without gutting its own product line.
Where blue ocean attempts actually fail
Honestly? Most of the failures I've watched had nothing to do with the idea. They were right about the market and wrong about everything else.
Three ways it goes wrong
- You create a new market with no customers in it. This is the classic failure mode: a genuinely novel offer aimed at people who, it turns out, simply didn't want what you were selling. Novelty is not demand.
- You cut costs but forget to raise value. If you remove features and don't add something meaningful, you've simply built a cheaper product — which is a red ocean.
- The incumbent copies you in six months. Without a structural advantage — a network effect, a data asset, a regulatory position, or supply chain control — the first mover advantage evaporates fast. I've watched it happen: a consumer subscription business I advised built something genuinely new, got traction, and lost it to a well-funded copycat within a year. They had no moat, only a head start.
And a warning about the famous examples: the same companies that made a blue ocean move later found themselves fighting in a red one, or got the strategy right and the operations wrong. Kim and Mauborgne's research is about successes. That's a survivorship lens — treat the framework as a diagnostic, not a guarantee.
How to test your blue ocean idea before you build anything
You don't need a business plan. You need evidence that a non-customer will pay. Here's the sequence I use with founders now, and it costs almost nothing.
- Map the non-customer. Not "who's unhappy with the current providers" but "who has never considered buying this category at all." Talk to 15 of them, and ask what they do instead.
- Write your ERRC grid. One page. If you can't name a line in the Eliminate row, you have a red ocean idea.
- Put up a landing page with a price. Real price, real commitment. See how many of those non-customers proceed.
- Test the cost structure, not just the demand. Blue ocean requires the cost side to work too — if your value innovation depends on losing €50 per order, it isn't one.
- Look for a copyability barrier. Ask bluntly: what would stop a competitor with 10x my budget from doing this next quarter? If the answer is "nothing but speed", you have a window, not a strategy.
Which brings me to the question I'd want you to sit with. Not "is my idea a blue ocean?" — that's the wrong question, and it's the one that lures founders into building something beautiful and unwanted. Ask instead: which customer have I stopped assuming exists? The people who never showed up to the market are usually the ones holding the answer, and they're the ones nobody's bothered to ask.
