Joe: Lewis, what’s the first rule of winning a fight? Lewis: Uh... hit harder than the other guy? Or maybe don't get hit? Something along those lines. Joe: Exactly. It’s all about overpowering the opponent. But what if the secret to winning in business, and maybe even in life, is to never get in the fight at all? To make the other guy, the competition, completely and utterly irrelevant. Lewis: Okay, that sounds like a nice Zen proverb, but how does that actually work? Isn't business, by its very definition, competition? You're fighting for customers, for market share, for survival. Joe: That's the conventional wisdom, and it’s precisely the idea that two INSEAD professors, W. Chan Kim and Renée Mauborgne, decided to blow up in their book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. This isn't some obscure academic text; we're talking about a book that has sold over four million copies worldwide and has become a cornerstone of modern strategic thinking. Lewis: Four million copies? Wow. So they clearly struck a nerve. Making the competition irrelevant... it's a seductive idea. But what does that even look like in the real world? It sounds great on a book cover, but I can't picture it. Joe: It looks like a circus with no animals. Lewis: A circus with no... what? That's like a coffee shop with no coffee. What's the point? Joe: The point is to change the game entirely. And that’s our first big idea today: understanding the difference between a bloody, competitive "Red Ocean" and a wide-open, uncontested "Blue Ocean."

Joe: Let's talk about the circus industry in the 1980s. It was a classic Red Ocean. The water was red because it was full of the blood of competitors fighting over a shrinking market. Lewis: Sounds grim. What was happening? Joe: Everything was going wrong for them. The main audience, kids, were more interested in video games. Parents felt guilty about the use of animals, and animal rights groups were protesting constantly. The big players, like Ringling Bros. and Barnum & Bailey, were locked in a death match, trying to outdo each other by getting more famous clowns or more daring lion tamers. But all they were doing was driving up their costs while their audience was walking away. It was a race to the bottom. Lewis: Right, they were fighting harder and harder over a pie that was getting smaller and smaller. I can see that. So where does Cirque du Soleil fit in? Joe: They didn't. That's the whole point. In 1984, a group of Canadian street performers, led by Guy Laliberté, looked at this bloody red ocean and decided not to jump in. Instead of asking, "How can we build a better circus?" they asked, "How can we create something entirely new?" Lewis: Hold on, they got rid of the main attractions—the animals and the star performers? That sounds like business suicide. That’s what a circus is. Joe: That’s what a circus was. They looked at the industry and asked what they could eliminate. Animal acts? Gone. Super expensive, ethically questionable. Star performers, the famous ringmasters and clowns? Gone. They create bidding wars and high salaries. They even got rid of the three-ring arenas, which just diffused the audience's focus. Lewis: Okay, so they've just gutted the entire concept of a circus. What's left? A sad tent? Joe: They kept the tent, but they made it glamorous, more like a mystical pavilion. They kept the clowns, but their humor became more sophisticated, more Vaudevillian. They kept the acrobats, but they elevated the artistry. Then they started adding things no circus had ever offered. They introduced a theme, a storyline, like a piece of theater. They brought in artistic music and dance, complex choreography, and lighting you’d expect to see in a Broadway show. Lewis: Ah, so they weren't competing for kids and families anymore, were they? Joe: Exactly! They created a new market. Their audience wasn't families looking for cheap entertainment; it was adults and corporate clients who were used to paying premium prices for theater, opera, or ballet. They priced their tickets accordingly, not against other circuses, but against a night out at the theater. In less than twenty years, Cirque du Soleil was generating more revenue than Ringling Bros. and Barnum & Bailey had managed in over a century. Lewis: Wow. So they didn't win the fight. They just left the ring and built a whole new stadium next door, and everyone followed them. They made the competition irrelevant because they weren't even playing the same sport. Joe: That is the essence of a Blue Ocean. It's an uncontested market space. You're not fighting over existing demand; you're creating new demand. The book's data on this is pretty shocking. They studied 108 business launches and found that 86% were line extensions in red oceans. These accounted for 62% of revenues but only 39% of profits. Lewis: So, most companies are just fighting in the bloody water. Joe: Right. The other 14% of launches were aimed at creating blue oceans. And that tiny fraction generated 38% of total revenues and a staggering 61% of total profits. It’s a completely different world of growth. Lewis: Okay, the Cirque du Soleil example is brilliant, but it feels like a one-off stroke of artistic genius. It's inspiring, but I'm not an artist or a street performer. Can a regular company, say, in a less glamorous industry, do this systematically? Or do you just have to get lucky? Joe: That's the perfect question, and it leads us to the second core idea. It’s not about luck or genius. It's about a systematic process called "Value Innovation."

Lewis: Value Innovation. That sounds like corporate jargon. Break it down for me. What does it actually mean? Joe: It means you stop thinking about the trade-off between value and cost. Red ocean strategy is all about that trade-off. You can either create more value for customers at a higher cost, which is differentiation, or you can create reasonable value at a lower cost. You have to choose. Lewis: Be the premium brand or the budget option. Got it. Joe: Value innovation is about pursuing differentiation and low cost simultaneously. You do it by focusing on what you can eliminate, reduce, raise, and create. It’s a framework. Let's take a less "artsy" example: private jets. Lewis: Okay, definitely not artsy. What was the red ocean there? Joe: For decades, if a corporate executive needed to travel, they had two choices. The first was to fly commercial, even first class. It's relatively cheap, but it's a massive headache. You're tied to hub-and-spoke routes, you waste hours in airports, you have layovers, and your productivity plummets. The alternative? Buy a private jet. Lewis: Which costs millions of dollars. A pretty clear red ocean of two very different, very flawed options. Joe: Exactly. One is cheap and inconvenient. The other is hyper-convenient but astronomically expensive. So a company called NetJets came along and applied the value innovation framework. They didn't try to make commercial flights a little better or private jets a little cheaper. They created a new blue ocean. Lewis: How? What did they eliminate and create? Joe: First, they looked at what they could eliminate and reduce. The biggest pain point of owning a private jet is the insane upfront cost and all the associated hassles—maintenance, pilots, hangar fees. So NetJets eliminated the need for full ownership. Instead, they offered fractional ownership. You could buy a 1/16th share of a specific jet. Lewis: So it's like a timeshare for a private jet? Joe: That’s a great analogy. It dramatically reduced the cost. You got the private jet experience for a fraction of the price. But here’s the "raise and create" part. They raised the convenience factor to a whole new level. With fractional ownership, you weren't just buying one jet; you were buying access to their entire fleet. Your jet is in Paris but you're in New York? No problem, another one will be ready for you in a few hours. Lewis: Whoa. So they created the flexibility of an on-demand service. Joe: Precisely. And they created point-to-point travel. Commercial airlines fly to a few hundred airports. Private jets can fly to thousands of smaller, regional airports, getting you much closer to your actual destination. They eliminated the layovers, the security lines, the wasted time. They combined the low cost of commercial—well, relatively low cost—with the convenience and speed of a private jet. Lewis: And who were they targeting? Not the super-rich who already owned jets, right? Joe: No, they were targeting the noncustomers! They went after the massive market of executives who were flying first or business class. These people couldn't justify buying a whole jet, but they would happily pay a premium over a first-class ticket to get back a full day of their time. NetJets created a blue ocean so vast that it grew to be larger than many commercial airlines. Warren Buffett's Berkshire Hathaway eventually bought the company. Lewis: That's incredible. But I have to ask the skeptical question here. Critics of this book sometimes say it's just a fancy way of saying "do something new and innovative," and that these frameworks are just fitted to success stories after the fact. Is this really a repeatable system, or are we just cherry-picking great stories? Joe: It's a fair critique, and the authors acknowledge that execution is everything. But their point is that traditional strategic planning forces you to look at competitors. It asks, "How is our competitor priced? What are their features? How can we beat them?" All your energy is focused on the red ocean. This framework forces you to ask different questions. It makes you look at alternatives, not just competitors. Cirque du Soleil looked at theater. NetJets looked at commercial airlines. It also forces you to look at noncustomers—the people who aren't buying from your industry—and ask why. Lewis: So it’s a structured way to force yourself to think outside the box you're currently in. You're not just waiting for a lightning bolt of inspiration. Joe: Exactly. It's about systematically reconstructing market boundaries. It’s a disciplined process for creating, not just competing.

Joe: When you put the stories of Cirque du Soleil and NetJets side-by-side, you see the same pattern. Neither company started by analyzing their direct competitors. They didn't care what Ringling Bros. or American Airlines were doing. Lewis: They were looking at the world from the customer's perspective, or even the noncustomer's perspective. They were solving a bigger problem. For Cirque, it was "what is a captivating night out for adults?" For NetJets, it was "how can a busy executive travel with maximum efficiency?" Joe: And in doing so, they revealed the deep insight of this whole book: market boundaries are not fixed. They are not laws of nature. They are simply assumptions that an industry has collectively agreed to follow over time. The circus must have animals. Air travel must be either cheap and inconvenient or expensive and exclusive. Lewis: And blue oceans are created the moment someone has the courage to challenge those assumptions. That's powerful. So the big takeaway isn't just for CEOs of Fortune 500 companies. It's a mindset that anyone can apply. Joe: Absolutely. It's about asking, in our own work, in our own projects, what are the "industry rules" we are following without even thinking about it? What are the trade-offs we've accepted as inevitable? Lewis: Right. The trade-off between quality and speed, or creativity and budget. We accept these as given. But maybe they're not. Maybe there's a way to eliminate the friction, reduce the waste, and create a whole new kind of value. Joe: That's the challenge the book leaves us with. It reframes the entire goal. The goal isn't to be the best player in the game. It's to invent a new game that you're uniquely suited to win. So maybe the final question for everyone listening is this: What if the biggest barrier to your next breakthrough isn't your competition, but your own definition of the game you're playing? Lewis: A question worth sitting with. This has been fascinating, Joe. A whole new way to look at the world. Joe: It really is. It’s about creation, not just competition. Lewis: This is Aibrary, signing off.