The Blue Ocean Strategy is a business theory about discovering brand new markets without having to face the competition in a Red Ocean.

In the Red Ocean, you have to be bloodthirsty and defeat the competition. In Blue Oceans, you have to be a pioneer.

Excerpt from Blue Ocean Strategy:

In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets more and more 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. While blue oceans are occasionally created well beyond existing industry boundaries, most are created by expanding existing industry boundaries as Cirque du Soleil did. In blue oceans, competition is irrelevant as the rules of the game are waiting to be set.

This is is more of an historical description than practical business advice.

The Blue Ocean Strategy is like political heresthetic campaigns. There, politicians explore a new Blue Ocean, bypass their political opponents, and forge brand new governing coalitions.

Business strategies work the same way. Pioneers discover a previously untapped market and reap the rewards.

Blue Oceans don’t seem to last long in practice. Once a new market is discovered, rival businesses scramble to enter the Blue Ocean and turn it bloody Red in short order. This appears to have happened in the computer industry.

One example of the Blue Ocean Strategy is theNintendo Wii gaming console. It decided not to compete in the small hard-core gamer market against Microsoft’s X-Box and Sony’s Playstation 3. Nintendo did not try to create the “best” machine on the market. Instead, they produced a cheap console marketed for non-traditional gamers. Non-gamers first enter the gaming market with the Wii console, giving Nintendo a much larger market share than Microsoft or Sony.