Notes

The Continuing Creation of Blue Oceans
Although the term blue oceans is new, their existence is not. They
are a feature of business life, past and present. Look back one hundred
years and ask yourself, How many of today’s industries were
then unknown? The answer: Many industries as basic as automobiles,
music recording, aviation, petrochemicals, health care, and
management consulting were unheard of or had just begun to
emerge at that time. Now turn the clock back only thirty years.
Again, a plethora of multibillion-dollar industries jumps out—mutual
funds, cell phones, gas-fired electricity plants, biotechnology,
discount retail, express package delivery, minivans, snowboards,
coffee bars, and home videos, to name a few. Just three decades ago,
none of these industries existed in a meaningful way.
Now put the clock forward twenty years—or perhaps fifty years—
and ask yourself how many now unknown industries will likely
exist then. If history is any predictor of the future, again the answer
is many of them.
The reality is that industries never stand still. They continuously
evolve. Operations improve, markets expand, and players
come and go. History teaches us that we have a hugely underestimated
capacity to create new industries and re-create existing
ones. In fact, the half-century-old Standard Industrial Classification
(SIC) system published by the U.S. Census was replaced in 1997
by the North America Industry Classification Standard (NAICS)
system. The new system expanded the ten SIC industry sectors into
twenty sectors to reflect the emerging realities of new industry territories.
The services sector under the old system, for example, is
now expanded into seven business sectors ranging from information
to health care and social assistance. Given that these systems
are designed for standardization and continuity, such a replacement
shows how significant the expansion of blue oceans has been.
Yet the overriding focus of strategic thinking has been on competition-based
red ocean strategies. Part of the explanation for this
is that corporate strategy is heavily influenced by its roots in military
strategy. The very language of strategy is deeply imbued with
military references—chief executive “officers” in “headquarters,”
“troops” on the “front lines.” Described this way, strategy is about
confronting an opponent and fighting over a given piece of land
that is both limited and constant. Unlike war, however, the history
of industry shows us that the market universe has never been
constant; rather, blue oceans have continuously been created over
time. To focus on the red ocean is therefore to accept the key
constraining factors of war—limited terrain and the need to beat
an enemy to succeed—and to deny the distinctive strength of the
business world: the capacity to create new market space that is uncontested.