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PREFACE
Blue Ocean Shift — released in early-October 2017 — is the continuation of the award-winning
Blue Ocean Strategy, a bestselling strategy book based on a study of 150 strategic moves
spanning more than a hundred years and thirty industries. In this series, a “red ocean” is defined
as a saturated market in which companies must compete to survive, and “blue ocean” as a market
in which there is little or no competition.
Blue Ocean Shift focuses on how can corporations, bureaucratic organizations, non-profits,
among other organizations – shift their mindset and products towards a blue ocean. Specifically,
this book addresses the human barriers associated with innovation and change that can exist in
large organizations.
SYNOPSIS
Any company can move out of a “red ocean” of intense competition and into a new value-cost market
space – a wide-open “blue ocean.” Doing so requires completing five steps, each of which yields valuable
insights into the structure of the industry and the company’s particular vulnerabilities. The shift of a
company’s culture, product portfolio, and strategy from a red ocean to a blue ocean is the transformation
process introduced in “Blue Ocean Shift.”
A shift starts with a Pioneer-Migrator-Settler map, to get a good view of your current offerings, followed
by creating a picture of the state-of-play in the industry with a Strategy Map. Next, delve into the actual
experience of your customers and what they really want with a Buyer Utility Map, and identify how the
total demand landscape for your offering could be expanded. With this information, the team can dive
into systematic field research, using six paths that will enable them to decide what to eliminate, reduce,
raise or create and so reconstruct the boundaries of the industry. Finally, after holding a Blue Ocean Fair
and drawing up a new business model, the company will be ready to roll out its Blue Ocean Shift.
Established bureaucratic companies, companies in regulated industries, or even government agencies
surrounded in red-tape, can open up and create new blue oceans.
Blue Ocean Shift not only provides a recipe to identify and transition companies into blue oceans, but also
focuses on the human-side (or “humanness”) of a transition. It does this by introducing many strategies
and tactics that help shift the culture of an organization from its current state to one will allow any
organization to welcome a shift.
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SUMMARY
What is a Blue Ocean Shift?
In 2005, the book Blue Ocean Strategy described how some organizations across many industries have
successfully made the leap from a “red ocean,” where competitors are trapped in a blood-red fight for
customers, into a wide-open “blue ocean” of uncontested market space. Building on that work, a Blue
Ocean Shift is a five-step process that allows any organization to make the transition from an existing,
crowded market into a clear new market space. In other words, Blue Ocean Shift is the recipe book to help
organizations shift from red oceans to blue oceans.
Whether the head of a large bureaucratic corporation, a small non-profit, or a government department,
organization leaders tend to assume that the conditions of their industry are a given, a set of constraints
that form the boundaries of the red ocean in which they must compete. Focused on competing over
customers, leaders assume that there is always a trade-off between value and differentiation. But that
assumption is wrong. Organizations can break out of red oceans and move into a blue ocean with a Blue
Ocean Shift. Breaking out of the red ocean starts by swapping market-competing moves in favor of
market-creating moves. There are three overall components to a successful Blue Ocean Shift.
1. Adopting a blue ocean perspective: looking to the far horizon, recognizing that different questions
have to be asked, and pondering what could be;
2. Having practical tools that guide the process: these will translate a blue ocean perspective into a
whole new offering;
3. Embracing the concept of humanness: inspire people and build their confidence, so that they
drive the process forward and can successfully implement the shift to a blue ocean.
Based on the three components above, we will look at three key notions that underpin a successful Blue
Ocean Shift: (1) understanding the concept of market creation, (2) developing a Blue Ocean mindset, and
(3) developing “humanness.”
Setting the Stage
1. UNDE RSTAN DI NG MAR KET C RE ATION
Many people assume that market creation must involve some form of destruction or disruption. It is true
that in some cases a new technology can destroy a market and create others – think Uber vs. taxis, or e-
mail vs. snail-mail. However, focusing only on disruption gives a misleadingly incomplete picture of
market creation.
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For example, the children’s show Sesame Street created a new market for preschool edutainment, without
destroying or disrupting any other aspect of early childhood education. This is an example of non-
disruptive creation. In reality, market-creating strategies take one of three forms:
A breakthrough answer to an existing problem, which usually takes the form of disruptive
creation. For example, boats and airplanes allowed for a new marketplace of transportation that
did not exist beforehand.
Identifying an entirely new opportunity or solving a new problem, a wholly non-disruptive form
of growth and creation. For example, Cirque Du Soleil created a new form of circus for both
adults and children; they extended the market for circus goers.
Redefining the problem and offering a new solution, which has elements of both disruptive and
non-disruptive market creation. For example the smartphone disrupted less sophisticated cellular
phones, but also expanded the market by enabling new mobile experiences.
Many also assume that the key to unlocking a new market is innovation, or that entrepreneurship
automatically leads to market creation. The creators of new technologies do create extraordinary things,
but they are rarely the ones who convert the new technology into something that creates new value. And,
a business rarely succeeds or fails purely on the quality of its technology. It is important to understand
that a Blue Ocean Shift does not merely mean “innovation.” A blue ocean is created when a new value-
cost frontier is opened, and a Blue Ocean Shift occurs when an organization successfully “shifts” into the
newly created frontier.
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2. THE BL UE OC E AN MIND SET
Seeing new opportunities instead of nothing but competitive red oceans requires adopting a
different mindset, one based on four fundamental principles.
Do not take the conditions and boundaries in your industry as a given: instead, think in
terms of changing those boundaries to work in your favor. Unleash your imagination.
Make the competition irrelevant: do not focus on gaining an advantage over the
competition; that is backward looking and keeps you focused on what the organization
has achieved to date. Instead, unleash your forward-looking creativity.
Rather than fighting over existing customers, focus on how to create and capture new
ones: in most industries, existing customers are just a tiny sliver of the world of non-
customers waiting out there. Create new demand by finding these non-customers.
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Go beyond the value-cost trade-off: instead of choosing between differentiation and low
cost, actively pursue both at the same time.
3. HUMA NNESS
Adopting a blue ocean mindset also includes embracing the concept of “humanness.” Building
this concept into the process of a blue ocean shift inspires your people, gives them confidence,
and allows them to drive the process of change. Humanness brings out people’s emotional
engagement so that they have the confidence to act. Once they have that confidence, they can
then start to use the tools and processes that will unleash a blue ocean shift. There are three
elements to the blue ocean process that build the attitude of humanness.
ATOMI ZATION
The whole process of a blue ocean shift is daunting to contemplate. Instead, break the challenge
into small, concrete steps that can be easily grasped, acted on, and ‘won.’
FIRSTHAND DISCOVERY
When people are told that change must happen, they do not commit to the process and will be
resistant and even resentful. Instead, create the conditions that allow people to make discoveries
for themselves. Not only will this prevent people from feeling manipulated, the very act of
discovery helps people to develop a more open and forward-looking mindset. They will see
things they had never thought of before.
FAIR PROCESS
This requires three fundamentals: engagement, so that people are actively involved in driving the
process; explanation, so that people are reassured that they understand the thinking behind each
stage; and clear expectations, so that no-one is surprised. This contributes to an atmosphere of
trust, helping to ensure everyone’s voluntary cooperation.
Taken together, these three elements make it possible for people not only to buy into the whole
process of a Blue Ocean Shift, but also to be willing to actually implement the changes required
to make it happen. For example, in many industries innovation creates added risk, which might
not be welcomed by some individuals if their objectives or Key Performance Indicators are
aligned only with lowering risks. This is typical of regulated industries. During the Fair Process
implementation, objectives and KPIs might need to be re-written such that the organizational
culture can shift.
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The Five Steps of a Blue Ocean Shift
Not all organizations are willing or able to execute a complete Blue Ocean Shift right now; but
this is not an all-or-nothing process. Each of the five steps and its related tools has value in and
of itself. Perhaps the organization just needs a wake-up call in the form of a systematic review of
the industry as it stands (Step Two), or perhaps it could benefit from some insights into where to
find new customers (Step Three). The only mistake is to do nothing and hope that things will
change.
STEP ON E: GET TI NG ST A RTED
The first step is to map out exactly what industry or product offering you are going to tackle. The
best way to do this is to start with the Pioneer-Migrator-Settler Map. Traditional organizational
assessments focus on market share and industry attractiveness; but, market share is a lagging
indicator that shows where the industry has been, and attractiveness only gives a snapshot of
where the industry stands right now. Instead, the first step should be based around the concepts
of value and innovation. This lets you look beyond today’s performance data and gives you an
aerial view of the landscape.
To see how vulnerable or healthy your portfolio really is, use the concepts of Pioneer, Settler,
and Migrator to assess how much value the product or service offers.
Pioneers: products that break away from the competition. Pioneers are value innovations,
the key to renewing the portfolio and opening up new frontiers.
Settlers: the other end of the spectrum, Settlers offer only value imitation, converging
with the rest of the industry and offering little prospect of growth. Think of Microsoft’s
two main products, Office and Windows; they are the source of most of the company’s
profits, but they are decades-old Settlers. This fact is reflected in the company’s stalled
stock price.
Migrators: somewhere between the two, migrators offer some improvement over the
competition, but they do not represent innovative value.
To plot the Pioneer-Settler-Migrator map, first identify your key businesses, products or services.
Choose the heads of each of your organization’s main units to participate and have each manager
identify where the products fall on the map. It is important to have individuals complete this first,
to ensure they feel invested in the whole process – see “Humanness.” Then, bring the whole
group together to plot their collective assessment. Working as a group both ensures a sense of
fair process and gives everyone a perspective on what others in the company are thinking. The
“whole group” includes all decision makers. For example, in a regulated industry not only invite
the product owners, but the legal team, finance team, and compliance officers – among others –
responsible for the portfolio of products.
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With the map completed everyone can see where the organization is vulnerable. If there is a
healthy balance between Settlers, Migrators, and Pioneers -- congratulations! The organization is
on a great path and can hold off on launching a full Blue Ocean Shift. If, however, there are a lot
of Settlers, a few Migrators, and at best one or two Pioneers, then everyone can now see that a
shift is needed.
To define the scope of your Blue Ocean Shift, look for a business, product or offering that has
most or all of the following characteristics:
a Settler or low Migrator;
is headed by a manager who is eager to break into a blue ocean;
has no other major initiatives underway;
clearly has very limited options for growth.
The final part of Step One is constructing the right team to drive the Blue Ocean Shift. With a
total of 10-15 people, the team should include the functions and organizational levels that will
bring forth a new offering. This probably means senior representatives of human resources, IT,
marketing, finances, manufacturing, research and development, sales, and the front line. Job title
is less important that character; look for people who are well respected, with a reputation for
listening, asking questions, and getting things done. They should also know their areas intimately
and be willing to spend about 10% of their time on the project.
STEP T WO: THE STATE O F PLA Y
The next step is to build a clear, shared picture of the current strategic landscape by creating a
Strategy Canvas. This not only helps to build your strategy, it also makes sure that everyone is
working from the same overall picture.
The Strategy Canvas is a one-page visual that tells a story in the form of a graph. The horizontal
axis shows the key factors that the industry competes on, while the vertical shows the offering
level that buyers receive or experience for each of these factors. The blue ocean team first
identifies between five and twelve key competing factors for the “as-is” Strategy Canvas. Factors
can relate to an offering’s product, service, or delivery platforms, but all should describe a key
aspect of the offering from the buyer’s point of view. For example, a charity’s list of factors for
the fund-raising industry might include pity pleas, soliciting grants, year-round events,
recognition of donors, and so on.
Once again, start with the individual team members drawing up their own lists, then reconvene
as a group and decide together on the key factors list.
Once the team has decided on the key factors list, pick a best player against which to plot the
offering as a reference; either the industry leader or your strongest competitor. Then, using a
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five-point scale from very low to average to very high, have the team rate the offering level of
each factor for your product and then for the reference company.
This step will yield a visual map of the current state of play, showing where the shape of your
current offering diverges with the industry leader, if at all; the assumptions that the industry
tends to act upon; and the extent to which competition in the industry is converging.
STEP TH REE: WH AT COU L D BE
Now that the team has a strategic overview of the current state of play, the next step is to help
them envisage how they might shift from the current red ocean into a new blue ocean. This
means charting the hidden constraints in the industry and identifying the new demand that could
be unlocked.
1. DRAW UP A BUYER UTILITY MAP
Develop an overview of all the underlying assumptions and boundaries that make up the ‘pain
points’ that limit the industry. These are not just constraints, they are opportunities to change the
picture. The Buyer Utility Map will help the team members to see not only that every industry
has pain points, but also that these are problems that can be solved. The Map lists the six stages
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of the buyer experience, and the six utility levers that the organization can ‘pull’ to affect that
experience.
Starting with the buyer experience cycle, the team members should put themselves in the place
of a buyer and imagine the total experience offering, from purchase through to disposal,
identifying the specific activities that fall within each stage of the cycle. Next, add the six utility
levers: productivity, simplicity, convenience, risk reduction, fun and image, and environmental
friendliness. The team now has a chart with 36 spaces.
To fill in these spaces, the team works its way methodically through each of the stages of the
buyer cycle, and for each level asks, “what is the biggest block to this lever at this stage” and
“what are the reasons for this block?” Each time a pain point is revealed, put an X in that space
in the chart. And, for each point that the industry tends to focus upon, put an O. A retail furniture
seller, for example, may think only in terms of delivering to a buyer’s apartment building. After
working through the Buyer Utility Map, however, the company may discover that a key pain
point for buyers is figuring out how to get a bulky furniture delivery from the building lobby up
to their actual apartment.
To really garner good insights into the buyer experience, it may be necessary at this stage to send
the team into the field to really experience first hand what an ordinary buyer or user of the
service encounters across the full product cycle, not just at the point of sale.
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2. IDENTIFY THE TOTA L DEMAND LANDSCAPE
A Blue Ocean Shift means creating new demand and growing the industry. To do that, the team
has to understand who the non-customers are and why they are not buying your product or
service.
There are three tiers of non-customers. In the First Tier are those who patronize the industry
because they have to, not because they want to; if they find a better alternative they will quickly
move to it. The Second Tier are the refusing non-customers, people who have consciously
rejected the industry offering perhaps in favor of an alternative or because it is too expensive.
The Third Tier are all those who could benefit from your offering, but have never considered
themselves as potential customers. For example, in 2009 Square Inc. realized that there was an
ocean of non-customers of the credit and debit card industry, small businesses like food trucks
and farmers’ market vendors, and people who could not use a credit card to pay the plumber or
the ice cream vendor at the beach. By shrinking the credit card reader and using a smart phone’s
compute power and networking capabilities, Square created a blue ocean of point of sale devices.
To identify the various tiers of non-customers, the team should start by considering who
typically buys or uses the industry’s offering, thinking in big picture terms. Then, have each team
member think about who might be in the three tiers of non-customers, and share their thoughts
with the group. As these ideas are debated, the team will develop an understanding of the
untapped demand that is out there. Next, break the team into subgroups to do some quick
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research on the parameters of each of these non-customer segments, to get a rough idea of the
potential that each represents. By the end of this step, the team will have a strong sense of the
possibilities that could result from a Blue Ocean Shift, and will have developed the confidence to
tackle the final two steps.
STEP FO UR: A ST RUCTU R E FOR B LUE OCE AN CR E ATION
The next step in a Blue Ocean Shift involves systematically reconstructing market boundaries.
This requires team members to really delve into on-the-ground research, so that they can
generate insights that can be acted upon. In order to identify new opportunities where others see
only red oceans, the team will systematically work through the Six Paths Framework, with each
Path revealing key insights into the existing constraints and hidden opportunities in the industry.
This is the most time-consuming step in the Blue Ocean Shift, but ultimately is the most
rewarding.
Start by dividing the team into two sub-teams, each of which will work on three of the Paths.
Make sure the sub-teams thoroughly understand the process they will work through and the
questions they will ask, with clear work plans for each stage. For each Path, the individual team
members will interview 10-12 people, a mix of both customers and non-customers, seeking
answers to a set of questions. They will get out into the field, ask questions, and take pictures and
video. Members will record all of the key insights they gained for each Path. The individual
members will then re-group as a team to share their insights and schedule any follow-up
interviews.
PATH ONE: THE INDUSTRY
A red ocean lens focuses on rivals within the industry. A blue ocean lens looks across alternative
industries.
What major problem or need does your industry’s offering solve or address? What alternative
industries solve the same need, or a similar one? Among these alternatives, which captures the
greatest proportion of customers?
In the field, ask buyers why they traded across your industry, what they saw as the negatives in
the industry they rejected, and what they saw as the positives in the alternative industry that they
chose. For example, why did they choose to take a train instead of an airplane to get to their
destination, what were the negatives that caused them to reject the airline industry, and what
were the positives that attracted them to the rail industry.
PATH TWO: THE STRATEGIC GROUP
A red ocean lens focuses on competitive position with a strategic group. A blue ocean lens looks
across strategic groups within the industry.
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A “strategic group” is a set of companies with similar business models or service offerings
across an industry. For example, in the restaurant services industry: fast food, fine dining, to-go
meal replacements, among others, all fit in the same strategic group. The members of these sub-
groups have different competitive qualities in: preparation time, price, freshness, presentation,
flavor, etc. These differing qualities cause the industry to have more rapid innovation and
competition.
Choose the two largest strategic groups within your industry, preferably the one that captures the
largest share of customers and the one that has the greatest profitable growth.
In the field, ask buyers from each group why they traded up (or down) for one group over the
other. Ask them to focus on the major factors that led to their choice. A company in the health
management industry, for example, may ask customers why they decided to use a telephone
counseling service to make non-urgent health decisions, rather than a web-based service.
PATH THREE: THE BUYER GROUP
A red ocean lens focuses on providing better service to an existing buyer group within the
industry. A blue ocean lens looks across the chain of buyers and redefines the group.
A purchasing decision usually involves a chain of buyers, not just one target customer. There are
the users of the product; the purchasers who pay for it; and sometimes the influencers whose
opinions can make a difference. Looking beyond the traditional target customer to this longer
chain of buyers can open up new market space.
Identify the chain of buyers for the product or service, then focus on those parts of the chain that
the industry usually ignores. For example, a maker of fluorescent light bulbs may look beyond
the usual target customer, a corporate purchaser, and instead target the financial officers who are
aware that there are additional (disposal) costs associated with fluorescent lighting. In the field,
ask these untargeted groups about their definition of value, the blocks they face, and the burdens
the current industry focus places on them.
PATH FOUR: THE SCOPE OF THE OFFERING
A red ocean lens focuses on maximizing the value of the product as defined by the industry. A
blue ocean lens looks across complementary offerings to understand the full picture that
enhances or detracts from the offering.
Look at the total context in which your product or service is offered, paying attention to what
happens before, during, and after its use.
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In the field, watch buyers as they actually use your offering, noting where there are blocks. In
this way, a manufacturer of teakettles may discover that a key problem for kettle users is having
to clean out the lime scale that builds up after extended use.
PATH FIVE: THE OFFERING’S APPEAL
A red ocean lens focuses on improving performance within the industry’s orientation along the
emotional-functional axis. A blue ocean lens rethinks the industry’s orientation.
Some industries compete largely on functional factors such as price and usage. Others are based
more on an appeal to emotion. Shifting the offering from one basis to the other can open up a
new ocean of value.
In the field, listen to your customers and non-customers, and determine whether they
characterize your industry more by function or by emotion. Explore what the offering might look
like if you flipped that orientation. For example, legal services are usually seen in functional
terms; what could happen if a legal service focused instead on providing a positive emotional
experience?
PATH SIX: TRENDS OVE R TIME
The red ocean lens focuses on adapting to outside trends as they happen. The blue ocean lens
actively shapes the trends that impact the industry.
Projecting trends rarely gives any insight into opening up new frontiers. More important is
looking across time to see how a developing trend might change what customers value and how
this might impact the business model.
Start by identifying three to five trends that are believed will have a decisive impact on the
industry over a three- to five-year horizon. These should be trends that are irreversible and that
have a clear trajectory. Then consider what would happen if each trend were taken to its logical
conclusion; list what the implications would be for buyers, for the industry, and for the
organization. Netflix is a great example of a company anticipating a new trend – the rise of
broadband internet – and creating the new blue ocean of on-demand viewing.
FOUR ACTIONS FRAMEWORK
With all of this field work in hand, the team now has an abundance of new insights into the
offering and how it could be unlocked in innovative ways. To complete Step Four of the Blue
Ocean Shift, these field insights must be turned into opportunities that achieve both
differentiation and low cost. The tool to do this is the Four Actions Framework.
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The Framework considers the factors that the industry currently takes for granted, and asks:
which can be Eliminated?
which should be significantly Reduced?
which should be Raised up?
which should be Created?
The first two questions will give insights into ways to reduce your cost structure compared with
competitors; the second two give insights into new offerings. Taken together, the four factors
will allow the team to consider how to open up a new value-cost frontier.
For each of the six Paths investigated earlier, the team now identifies the common factors that
were revealed. These need to be precise and concrete factors, not vague concepts; something
specific that can be acted upon. Each factor is then listed under one of the four actions:
Eliminate, Reduce, Raise, or Create.
The team now uses the Four Actions Framework to fill in a “to-be” Strategy Canvas, based on
the Strategy Canvas created in Step Two. As in the earlier Canvas, each of the factors will be
scored, with a 0 for anything that should be eliminated, and a one-to-five point score for the
remaining factors. Overlay the result on the earlier state-of-play canvas, and you have a visual
strategy profile.
At this point it is likely that two or three of the six Paths have yielded compelling cases for a new
value-cost frontier. The other Paths may not have yielded enough for a new offering, but likely
will still have provided some key insights. Develop a tagline that succinctly describes how each
proposed offering creates a leap in value for customers. Finally, the team should outline the
preliminary economics of each proposed blue ocean offering, preparatory to moving onto Step
Five.
STEP FI VE: MA KI NG TH E MOVE
The final step in launching the Blue Ocean Shift involves holding a Blue Ocean Fair and creating
the Business Model.
THE BLUE OCEAN FAIR
To decide which strategic offering to pursue, hold a Blue Ocean Fair that brings all of the team
members together with the organization’s key decision makers, along with some customers and
non-customers, over the course of a few hours.
The Fair should be structured as follows:
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Give an overview of the current red ocean reality in the industry and make the case for a
Blue Ocean Shift.
The team presents each of the strategic options they created, summarizing the benefits for
buyers or users and outlining the economic benefits to the organization.
Attendees move around the room, visiting a display station for each option with poster-
sized versions of the to-be Canvas from Step Four and the Eliminate-Reduce-Raise-
Create grid.
The attendees vote for the options they consider most compelling. One this is complete,
ask attendees for the rationale behind their votes.
The executive team decides which Blue Ocean option to pursue.
FORMALI ZE THE BUS INE SS MODEL
Once the decision has been made, the team should quickly market-test a prototype of the new
offering, in order to capitalize on the momentum that has built up with the Blue Ocean Fair. With
any last-minute problems ironed out in the wake of the testing, the team can now move on to
formalizing the Business Model. This is a big picture that shows how the value and the cost sides
of the business can join together to generate profitable growth at the set strategic price.
At this stage, the team will need to be expanded to bring in people with expertise in operations
and team members will shift to working full time on executing the launch. Most of the legwork
for the Business Model has already been done. The key focus now is determining the target
profit margin for the offering. The more aggressive the target profit margin is, the more
aggressive the target costing will be. Setting aggressive targets challenges people to think in
innovate ways across the whole operation.
One way to meet an aggressive cost target is to figure out who the organization can partner with.
Another is to consider ways to streamline and innovate operations. Boosting people’s positive
energy and contributions is another important possibility; empowering and trusting customer-
facing staff boosts productivity.
Finally, it is time to roll out your Blue Ocean Shift. For the smartest Rollout Strategy, start small
– to iron out any last-minute bugs and hiccups – then go fast and wide.
Case Studies
GROUPE SEB
A French multinational founded in 1857, Group SEB was a large and well-established company
facing increasing competitive pressure. Its electronic french fry makers were particularly
vulnerable, struggling to stand out in a shrinking market – a classic red ocean dilemma.
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After delving into the details of a Buyer Utility Map and considering the total demand landscape,
the company team realized that two facts that the industry considered a given were actually
significant pain points for customers: that the best tasting fries had to be fried, and that this had
to entail lots of oil. Field work with customers revealed significant concerns: the process of
frying is inherently risky; lots of oil is expensive to buy and store; cleaning the machines is
aggravating; and disposing of the used oil is a problem.
This led the team to create ActiFry. First launched in 2006, it requires no frying and has no
safety issues, uses only a tablespoon of oil, is easy to clean, and has no oil disposal problem. By
creating a tasty, healthier french fry Groupe E captured a new segment of customers, people who
had never before considered using a home french fry maker because of all the pain points. The
company redefined the problem from how to make the best electric french fry maker, to how to
make tasty and healthy fries without traditional frying. This opened up a new value-cost frontier
for the company, creating a new market space in what had been a vulnerable commodity
industry.
CITIZEN M HOTE LS
The hotel industry is also a quintessentially red ocean with everyone competing on providing
more or less of the same factors. In 2007 a new company, citizenM, set out to create a new hotel
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chain for frequent travelers. They focused on the two strategic groups of three star and luxury
hotels, and asked travelers why they traded up (or down) for one offering over the other. They
discovered that travelers valued location, a luxurious feeling room, and free Wi-Fi in choosing a
luxury hotel; and they favored price and a more casual atmosphere in choosing a three-star.
The team realized that frequent travelers don’t need a formal lobby with a front desk and
concierge, so they could eliminate these and replace them with self-check-in kiosks and a
communal living space. Room size is not as important as details such as high-quality sheets and
strong water pressure in the shower. Room service was also not a high priority, allowing the
team to replace the high overhead of a full kitchen with partnerships with boutique caterers
located near the hotels. The team came up with an Eliminate-Reduce-Raise-Create grid that laid
out these choices.
By reducing or eliminating costly factors that travelers do not really value, and raising or
creating other factors, CitizenM significantly lowered its cost structure and enhanced buyer
value, creating a new market space of affordable luxury hotels in prime locations. The company
also recognized the importance of empowering their staff, giving all customer-facing positions
the title of ambassador. The company hires people based on their attitudes and values, and trains
for competence.
The first hotel was rolled out in 2008 at Amsterdam’s Schiphol Airport, before expanding across
the country and the globe. CitizenM now enjoys one of the highest customer satisfaction ratings
in the hospitality industry along with the lowest costs.
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