laurenstrick's review against another edition
Didn’t find it to be the type of strategic educational content I was looking for.
peteroneilljr's review against another edition
Probably would be more interesting if you were in the middle of trying to create a new market for a product.
dfwsusie's review against another edition
2.0
This whole book could have been summed up in a 1000-word column. Also, there are a lot of moments I literally said “Well duh” out loud. Yes, you should try to work in an uncontested market space if you can. There, I summed up the whole thing for you.
architr's review against another edition
4.0
An antithesis of books such as "Good to great" and Built to last. A refreshing read
### Help! My Ocean Is Turning Red
The aim of blue ocean strategy was straightforward: to allow any organization—large or small, new or incumbent—to step up to the challenge of creating blue oceans in an opportunity-maximizing, risk-minimizing way.
Competition should not occupy the center of strategic thinking. Too many companies let competition drive their strategies. What blue ocean strategy brings to life, however, is that this focus on the competition all too often keeps companies anchored in the red ocean. It puts the competition, not the customer, at the core of strategy. As a result, companies’ time and attention get focused on benchmarking rivals and responding to their strategic moves, rather than on understanding how to deliver a leap in value to buyers—which is not the same thing.
Industry structure is not given; it can be shaped. The field of strategy has long assumed that industry structure is given. With industry structure seen as fixed, firms are driven to build their strategies based on it. And so strategy, as is commonly practiced, tees off with industry analysis—think five forces or its distant precursor SWOT analysis—where strategy is about matching a company’s strengths and weaknesses to the opportunities and threats present in the existing industry. Here strategy perforce becomes a zero-sum game where one company’s gain is another company’s loss, as firms are bound by existing market space.
Why Is Blue Ocean Strategy of Rising Importance?
A rising call for creative new solutions. Just look at a broad swath of industries that matter fundamentally to who we are: health care, K-12 education, universities, financial services, energy, the environment, and the government, where demands are high yet money and budgets are low. In the last ten years, every one of these industries has been seriously called to task.
The rising influence and use of public megaphones. It’s hard to believe, but only ten years back, organizations still controlled the majority of information disseminated to the public on their products, services, and offerings. Today that’s history. The surge in social network sites, blogs, micro-blogs, video-sharing services, user-driven content, and internet ratings that have become close to ubiquitous around the globe have shifted the power and credibility of voice from organizations to individuals. To not be a victim but a victor in this new reality, your offering needs to stand out as never before. That’s what gets people tweeting your praises not your faults; giving five-star ratings; clicking the thumbs up, not the thumbs down; listing your offering as a favorite on social media sites; and even being inspired to positively blog about your offering. You can’t hide or overmarket your me-too offering when virtually everyone has a global megaphone.
A locational shift in future demand and growth. When people around the world talk about the growth markets of the future, Europe and Japan hardly get a mention these days. Even the United States, though still the largest economy in the world, has increasingly taken a backseat in terms of future growth prospects. Instead, today China and India, not to mention countries like Brazil, top the list. In the space of the last ten years, all three have joined the ranks of the top-ten largest economies. However, this new breed of big economies is not like the large economies the world has historically looked to and counted on to consume the goods and services produced by the world. Unlike the relatively high per capita incomes enjoyed in the world’s developed economies, these big emerging markets are the product of very low, though rising, per capita income for very large populations of citizens. This makes the importance of affordable low cost in organizations’ offerings more critical than before. But do not be fooled. Low cost alone is not enough. For these same large populations also have increasing access to the internet, mobile phones, and TVs with global channels that raise their sophistication, demands, and desires. To capture these increasingly savvy customers’ imaginations and wallets, both differentiation and low cost are needed.
But it’s not just companies from these big emerging markets that are on the rise. That is just a tip of the iceberg of what the future portends. In the last decade, there has been a fundamental shift in the cost and ease of becoming a global player from virtually any corner of the globe. This is a trend no organization can afford to downplay. Consider just a handful of facts. With the ease and low cost of setting up a website, any business can have a global storefront; today people from anywhere can raise money via crowdfunding; with services like Gmail and Skype, communication costs have dropped significantly; trust in transactions can now be rapidly and economically achieved by using services like PayPal, while companies like Alibaba.com make searching for and vetting suppliers across the world relatively quick and easy. And there are search engines—the equivalent of global business directories—that are free. As for global advertising, there is Twitter and YouTube where you can market your offerings for free. With the low entry cost to become a global player, new players from virtually all corners of the world can increasingly participate in global markets and offer their wares or services. While, of course, these trends don’t mitigate all barriers to becoming a global player, they certainly intensify global competition. To stand apart in these overcrowded markets, you need to be creative through value innovation.
### Preface to the Original Edition
Our research confirms that there are no permanently excellent companies, just as there are no permanently excellent industries. As we have found on our own tumbling road, we all, like corporations, do smart things and less-than-smart things. To improve the quality of our success we need to study what we did that made a positive difference and understand how to replicate it systematically. That is what we call making smart strategic moves, and we have found that the strategic move that matters centrally is to create blue oceans.
### Part One: Blue Ocean Strategy
What makes this growth all the more remarkable is that it was not achieved in an attractive industry but rather in a declining industry in which traditional strategic analysis pointed to limited potential for growth. Supplier power on the part of star performers was strong. So was buyer power. Alternative forms of entertainment—ranging from various kinds of urban live entertainment to sporting events to home entertainment—cast an increasingly long shadow. Children cried out for video games rather than a visit to the traveling circus. Partially as a result, the industry was suffering from steadily decreasing audiences and, in turn, declining revenue and profits. There was also increasing sentiment against the use of animals in circuses by animal rights groups. Ringling Bros. and Barnum & Bailey had long set the standard, and competing smaller circuses essentially followed with scaled-down versions. From the perspective of competition-based strategy, then, the circus industry appeared unattractive.
Another compelling aspect of Cirque du Soleil’s success is that it did not win by taking customers from the already shrinking circus industry, which historically catered to children. Cirque du Soleil did not compete with Ringling Bros. and Barnum & Bailey. Instead it created uncontested new market space that made the competition irrelevant. It appealed to a whole new group of customers: adults and corporate clients prepared to pay a price several times as great as traditional circuses for an unprecedented entertainment experience
o understand what Cirque du Soleil achieved, imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all the industries not in existence today. This is the unknown market space.
In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.1 Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.
Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries, as Cirque du Soleil did. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.
It will always be important to swim successfully in the red ocean by outcompeting rivals. Red oceans will always matter and will always be a fact of business life. But with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance.2 Companies need to go beyond competing. To seize new profit and growth opportunities, they also need to create blue oceans.
Unfortunately, blue oceans are largely uncharted. The dominant focus of strategy work over the past thirty years has been on competition-based red ocean strategies.3 The result has been a fairly good understanding of how to compete skillfully in red waters, from analyzing the underlying economic structure of an existing industry, to choosing a strategic position of low cost or differentiation or focus, to benchmarking the competition. Some discussions around blue oceans exist.4 However, there is little practical guidance on how to create them. Without analytic frameworks to create blue oceans and principles to effectively manage risk, creating blue oceans has remained wishful thinking that is seen as too risky for managers to pursue as strategy. This book provides practical frameworks and analytics for the systematic pursuit and capture 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 120 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 forty years. Again, a plethora of multibillion-and trillion-dollar industries jumps out—e-commerce; cell phones; laptops, routers, switches, and networking devices; gas-fired electricity plants; biotechnology; discount retail; express package delivery; minivans; snowboards; and coffee bars to name a few. Just four decades ago, none of these industries existed in a meaningful way.
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.7 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.
The Impact of Creating Blue Oceans
We set out to quantify the impact of creating blue oceans on a company’s growth in both revenues and profits in a study of the business launches of 108 companies (see figure 1-1). We found that 86 percent of the launches were line extensions, that is, incremental improvements within the red ocean of existing market space. Yet they accounted for only 62 percent of total revenues and a mere 39 percent of total profits. The remaining 14 percent of the launches were aimed at creating blue oceans. They generated 38 percent of total revenues and 61 percent of total profits. Given that business launches included the total investments made for creating red and blue oceans (regardless of their subsequent revenue and profit consequences, including failures), the performance benefits of creating blue waters are evident. Although we don’t have data on the hit rate of success of red and blue ocean initiatives, the global performance differences between them are marked
The Rising Imperative of Creating Blue Oceans
There are several driving forces behind a rising imperative to create blue oceans. Accelerated technological advances have substantially improved industrial productivity and have allowed suppliers to produce an unprecedented array of products and services. The result is that in increasing numbers of industries, supply exceeds demand.8 The trend toward globalization compounds the situation. As trade barriers between nations and regions are dismantled and as information on products and prices becomes instantly and globally available, niche markets and havens for monopoly continue to disappear.9 While supply is on the rise as global competition intensifies, there is no clear evidence of an increase in demand relative to supply, and statistics even point to declining populations in many developed markets.10
The result has been accelerated commoditization of products and services, increasing price wars, and shrinking profit margins. Industrywide studies on major American brands confirm this trend.11 They reveal that for major product and service categories, brands are generally becoming more similar, and as they are becoming more similar, people increasingly select based on price.12 People no longer insist, as in the past, that their laundry detergent be Tide. Nor will they necessarily stick to Colgate when Crest is on sale, and vice versa. In overcrowded industries, differentiating brands becomes harder in both economic upturns and downturns.
All this suggests that the business environment in which most strategy and management approaches of the twentieth century evolved is increasingly disappearing. As red oceans become increasingly bloody, management will need to be more concerned with blue oceans than the current cohort of managers is accustomed to
In search of an answer, our initial step was to define the basic unit of analysis for our research. To understand the roots of high performance, the business literature typically uses the company as the basic unit of analysis. People have marveled at how companies attain strong, profitable growth with a distinguished set of strategic, operational, and organizational characteristics. Our question, however, was this: Are there lasting “excellent” or “visionary” companies that continuously outperform the market and repeatedly create blue oceans?
Consider, for example, In Search of Excellence and Built to Last.13 The bestselling book In Search of Excellence was published some thirty years ago. Yet within two years of its publication, a number of the companies surveyed began to slip into oblivion: Atari, Chesebrough-Pond’s, Data General, Fluor, National Semiconductor. As documented in Managing on the Edge, two-thirds of the identified model firms in the book had fallen from their perches as industry leaders within five years of its publication.14
The book Built to Last continued in the same footsteps. It sought out the “successful habits of visionary companies” that had a long-running track record of superior performance. To avoid the pitfalls of In Search of Excellence, however, the survey period of Built to Last was expanded to the entire life span of the companies, while its analysis was limited to firms more than forty years old. Built to Last also became a bestseller.
But again, upon closer examination, deficiencies in some of the visionary companies spotlighted in Built to Last have come to light. As illustrated in the book Creative Destruction, much of the success attributed to some of the model companies in Built to Last was the result of industry-sector performance rather than the companies themselves.15 For example, Hewlett-Packard (HP) met the criteria of Built to Last by outperforming the market over the long term. In reality, while HP outperformed the market, so did the entire computer-hardware industry. What’s more, HP did not even outperform the competition within the industry. Through this and other examples, Creative Destruction questioned whether “visionary” companies that continuously outperform the market have ever existed
Consistent with this observation, our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering. Compaq, for example, was acquired by Hewlett-Packard in 2001 and ceased to be an independent company. As a result, many people might judge the company as unsuccessful. This does not, however, invalidate the blue ocean strategic moves that Compaq made in creating the server industry. These strategic moves not only were a part of the company’s powerful comeback in the mid-1990s but also unlocked a new multibillion-dollar market space in computing.
### Help! My Ocean Is Turning Red
The aim of blue ocean strategy was straightforward: to allow any organization—large or small, new or incumbent—to step up to the challenge of creating blue oceans in an opportunity-maximizing, risk-minimizing way.
Competition should not occupy the center of strategic thinking. Too many companies let competition drive their strategies. What blue ocean strategy brings to life, however, is that this focus on the competition all too often keeps companies anchored in the red ocean. It puts the competition, not the customer, at the core of strategy. As a result, companies’ time and attention get focused on benchmarking rivals and responding to their strategic moves, rather than on understanding how to deliver a leap in value to buyers—which is not the same thing.
Industry structure is not given; it can be shaped. The field of strategy has long assumed that industry structure is given. With industry structure seen as fixed, firms are driven to build their strategies based on it. And so strategy, as is commonly practiced, tees off with industry analysis—think five forces or its distant precursor SWOT analysis—where strategy is about matching a company’s strengths and weaknesses to the opportunities and threats present in the existing industry. Here strategy perforce becomes a zero-sum game where one company’s gain is another company’s loss, as firms are bound by existing market space.
Why Is Blue Ocean Strategy of Rising Importance?
A rising call for creative new solutions. Just look at a broad swath of industries that matter fundamentally to who we are: health care, K-12 education, universities, financial services, energy, the environment, and the government, where demands are high yet money and budgets are low. In the last ten years, every one of these industries has been seriously called to task.
The rising influence and use of public megaphones. It’s hard to believe, but only ten years back, organizations still controlled the majority of information disseminated to the public on their products, services, and offerings. Today that’s history. The surge in social network sites, blogs, micro-blogs, video-sharing services, user-driven content, and internet ratings that have become close to ubiquitous around the globe have shifted the power and credibility of voice from organizations to individuals. To not be a victim but a victor in this new reality, your offering needs to stand out as never before. That’s what gets people tweeting your praises not your faults; giving five-star ratings; clicking the thumbs up, not the thumbs down; listing your offering as a favorite on social media sites; and even being inspired to positively blog about your offering. You can’t hide or overmarket your me-too offering when virtually everyone has a global megaphone.
A locational shift in future demand and growth. When people around the world talk about the growth markets of the future, Europe and Japan hardly get a mention these days. Even the United States, though still the largest economy in the world, has increasingly taken a backseat in terms of future growth prospects. Instead, today China and India, not to mention countries like Brazil, top the list. In the space of the last ten years, all three have joined the ranks of the top-ten largest economies. However, this new breed of big economies is not like the large economies the world has historically looked to and counted on to consume the goods and services produced by the world. Unlike the relatively high per capita incomes enjoyed in the world’s developed economies, these big emerging markets are the product of very low, though rising, per capita income for very large populations of citizens. This makes the importance of affordable low cost in organizations’ offerings more critical than before. But do not be fooled. Low cost alone is not enough. For these same large populations also have increasing access to the internet, mobile phones, and TVs with global channels that raise their sophistication, demands, and desires. To capture these increasingly savvy customers’ imaginations and wallets, both differentiation and low cost are needed.
But it’s not just companies from these big emerging markets that are on the rise. That is just a tip of the iceberg of what the future portends. In the last decade, there has been a fundamental shift in the cost and ease of becoming a global player from virtually any corner of the globe. This is a trend no organization can afford to downplay. Consider just a handful of facts. With the ease and low cost of setting up a website, any business can have a global storefront; today people from anywhere can raise money via crowdfunding; with services like Gmail and Skype, communication costs have dropped significantly; trust in transactions can now be rapidly and economically achieved by using services like PayPal, while companies like Alibaba.com make searching for and vetting suppliers across the world relatively quick and easy. And there are search engines—the equivalent of global business directories—that are free. As for global advertising, there is Twitter and YouTube where you can market your offerings for free. With the low entry cost to become a global player, new players from virtually all corners of the world can increasingly participate in global markets and offer their wares or services. While, of course, these trends don’t mitigate all barriers to becoming a global player, they certainly intensify global competition. To stand apart in these overcrowded markets, you need to be creative through value innovation.
### Preface to the Original Edition
Our research confirms that there are no permanently excellent companies, just as there are no permanently excellent industries. As we have found on our own tumbling road, we all, like corporations, do smart things and less-than-smart things. To improve the quality of our success we need to study what we did that made a positive difference and understand how to replicate it systematically. That is what we call making smart strategic moves, and we have found that the strategic move that matters centrally is to create blue oceans.
### Part One: Blue Ocean Strategy
What makes this growth all the more remarkable is that it was not achieved in an attractive industry but rather in a declining industry in which traditional strategic analysis pointed to limited potential for growth. Supplier power on the part of star performers was strong. So was buyer power. Alternative forms of entertainment—ranging from various kinds of urban live entertainment to sporting events to home entertainment—cast an increasingly long shadow. Children cried out for video games rather than a visit to the traveling circus. Partially as a result, the industry was suffering from steadily decreasing audiences and, in turn, declining revenue and profits. There was also increasing sentiment against the use of animals in circuses by animal rights groups. Ringling Bros. and Barnum & Bailey had long set the standard, and competing smaller circuses essentially followed with scaled-down versions. From the perspective of competition-based strategy, then, the circus industry appeared unattractive.
Another compelling aspect of Cirque du Soleil’s success is that it did not win by taking customers from the already shrinking circus industry, which historically catered to children. Cirque du Soleil did not compete with Ringling Bros. and Barnum & Bailey. Instead it created uncontested new market space that made the competition irrelevant. It appealed to a whole new group of customers: adults and corporate clients prepared to pay a price several times as great as traditional circuses for an unprecedented entertainment experience
o understand what Cirque du Soleil achieved, imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all the industries not in existence today. This is the unknown market space.
In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.1 Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.
Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries, as Cirque du Soleil did. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.
It will always be important to swim successfully in the red ocean by outcompeting rivals. Red oceans will always matter and will always be a fact of business life. But with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance.2 Companies need to go beyond competing. To seize new profit and growth opportunities, they also need to create blue oceans.
Unfortunately, blue oceans are largely uncharted. The dominant focus of strategy work over the past thirty years has been on competition-based red ocean strategies.3 The result has been a fairly good understanding of how to compete skillfully in red waters, from analyzing the underlying economic structure of an existing industry, to choosing a strategic position of low cost or differentiation or focus, to benchmarking the competition. Some discussions around blue oceans exist.4 However, there is little practical guidance on how to create them. Without analytic frameworks to create blue oceans and principles to effectively manage risk, creating blue oceans has remained wishful thinking that is seen as too risky for managers to pursue as strategy. This book provides practical frameworks and analytics for the systematic pursuit and capture 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 120 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 forty years. Again, a plethora of multibillion-and trillion-dollar industries jumps out—e-commerce; cell phones; laptops, routers, switches, and networking devices; gas-fired electricity plants; biotechnology; discount retail; express package delivery; minivans; snowboards; and coffee bars to name a few. Just four decades ago, none of these industries existed in a meaningful way.
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.7 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.
The Impact of Creating Blue Oceans
We set out to quantify the impact of creating blue oceans on a company’s growth in both revenues and profits in a study of the business launches of 108 companies (see figure 1-1). We found that 86 percent of the launches were line extensions, that is, incremental improvements within the red ocean of existing market space. Yet they accounted for only 62 percent of total revenues and a mere 39 percent of total profits. The remaining 14 percent of the launches were aimed at creating blue oceans. They generated 38 percent of total revenues and 61 percent of total profits. Given that business launches included the total investments made for creating red and blue oceans (regardless of their subsequent revenue and profit consequences, including failures), the performance benefits of creating blue waters are evident. Although we don’t have data on the hit rate of success of red and blue ocean initiatives, the global performance differences between them are marked
The Rising Imperative of Creating Blue Oceans
There are several driving forces behind a rising imperative to create blue oceans. Accelerated technological advances have substantially improved industrial productivity and have allowed suppliers to produce an unprecedented array of products and services. The result is that in increasing numbers of industries, supply exceeds demand.8 The trend toward globalization compounds the situation. As trade barriers between nations and regions are dismantled and as information on products and prices becomes instantly and globally available, niche markets and havens for monopoly continue to disappear.9 While supply is on the rise as global competition intensifies, there is no clear evidence of an increase in demand relative to supply, and statistics even point to declining populations in many developed markets.10
The result has been accelerated commoditization of products and services, increasing price wars, and shrinking profit margins. Industrywide studies on major American brands confirm this trend.11 They reveal that for major product and service categories, brands are generally becoming more similar, and as they are becoming more similar, people increasingly select based on price.12 People no longer insist, as in the past, that their laundry detergent be Tide. Nor will they necessarily stick to Colgate when Crest is on sale, and vice versa. In overcrowded industries, differentiating brands becomes harder in both economic upturns and downturns.
All this suggests that the business environment in which most strategy and management approaches of the twentieth century evolved is increasingly disappearing. As red oceans become increasingly bloody, management will need to be more concerned with blue oceans than the current cohort of managers is accustomed to
In search of an answer, our initial step was to define the basic unit of analysis for our research. To understand the roots of high performance, the business literature typically uses the company as the basic unit of analysis. People have marveled at how companies attain strong, profitable growth with a distinguished set of strategic, operational, and organizational characteristics. Our question, however, was this: Are there lasting “excellent” or “visionary” companies that continuously outperform the market and repeatedly create blue oceans?
Consider, for example, In Search of Excellence and Built to Last.13 The bestselling book In Search of Excellence was published some thirty years ago. Yet within two years of its publication, a number of the companies surveyed began to slip into oblivion: Atari, Chesebrough-Pond’s, Data General, Fluor, National Semiconductor. As documented in Managing on the Edge, two-thirds of the identified model firms in the book had fallen from their perches as industry leaders within five years of its publication.14
The book Built to Last continued in the same footsteps. It sought out the “successful habits of visionary companies” that had a long-running track record of superior performance. To avoid the pitfalls of In Search of Excellence, however, the survey period of Built to Last was expanded to the entire life span of the companies, while its analysis was limited to firms more than forty years old. Built to Last also became a bestseller.
But again, upon closer examination, deficiencies in some of the visionary companies spotlighted in Built to Last have come to light. As illustrated in the book Creative Destruction, much of the success attributed to some of the model companies in Built to Last was the result of industry-sector performance rather than the companies themselves.15 For example, Hewlett-Packard (HP) met the criteria of Built to Last by outperforming the market over the long term. In reality, while HP outperformed the market, so did the entire computer-hardware industry. What’s more, HP did not even outperform the competition within the industry. Through this and other examples, Creative Destruction questioned whether “visionary” companies that continuously outperform the market have ever existed
Consistent with this observation, our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering. Compaq, for example, was acquired by Hewlett-Packard in 2001 and ceased to be an independent company. As a result, many people might judge the company as unsuccessful. This does not, however, invalidate the blue ocean strategic moves that Compaq made in creating the server industry. These strategic moves not only were a part of the company’s powerful comeback in the mid-1990s but also unlocked a new multibillion-dollar market space in computing.