Scaling Down Blue Ocean Strategy

What Blue Ocean Strategy Gets Right and What Most Founders Get Wrong

Aug 08, 2025

Most business books are about companies you don’t run. They’re written for executives in roles you may never hold.

But what if we scaled these big ideas down to operators, early-stage founders, 20-person teams, solopreneurs trying to grow from $500K to $5M?

That’s the point of this series: Scaling Down the Big Ideas. We translate strategic frameworks into tools you can use today, not to defend market share like Amazon, but to protect your margin next quarter.

"Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant."
— Kim & Mauborgne

Most strategy books are written for the enterprise. Blue Ocean Strategy is no exception.

Cirque du Soleil. Apple. Southwest Airlines. These are the companies most often used to illustrate the theory. They’re exceptional companies and polished examples. Their results were dramatic. They assume scale.

But scale isn't the real issue. The challenge is some balance of belief and market awareness. Many entrepreneurs convince themselves they have created something new when they have not. They overestimate the uniqueness of their offer, often pointing to service, care, or attention to detail as their edge. These attributes are hard to quantify and easy to copy. What feels differentiated internally may not register as such externally.

This isn't a criticism of ambition. It's a call for discipline.

Most businesses will never create a true blue ocean. That doesn’t mean the frameworks aren’t useful. It means they must be used wisely.

As a mindset at the outset.

As a shaping force during product development.

As a provocation for innovation.

And then when you’re in the market, with competition on your heels, shift gears. Move to operational execution. Use Porter. Use systems. Use cost structure, supply chain, and pricing discipline.

Writers of business books don’t want you to know this, but you need both. Given the complexities of operating, growing, scaling and optimizing a company, you’re going to need all the help and smart ideas you can get.

Blue Ocean Strategy helps you think. Porter’s Five Forces helps you operate. One is about shaping markets. The other is about surviving them.

This essay is written with that balance in mind.

The Core of Blue Ocean Thinking

Blue Ocean Strategy describes two worlds:

Red Oceans are known markets. Competition is fierce. Margins shrink. Products converge.
Blue Oceans are unexplored markets. Demand is unlocked, not fought over. Competition fades. Profit pools widen.

The book provides three tools:

Strategy Canvas — A graph that compares how industry players compete across key factors.
✅ Helps visualize how your company differs (or doesn’t) across customer-facing attributes.
✅ Highlights areas of feature parity and opportunity whitespace.
✅ Encourages non-price-based differentiation.
Four Actions Framework — A tool to reshape value propositions:
✅ Eliminate what adds cost but no value.
✅ Reduce what is over-delivered.
✅ Raise and create new value where customer needs are unmet.
Noncustomer Analysis — A lens for finding demand from people not currently buying in the category.
✅ Identifies first-tier (soon to leave), second-tier (refusing), and third-tier (unaware) noncustomers.
✅ Reveals hidden market expansion opportunities.
✅ Focuses innovation beyond current buyer assumptions.

These tools work. But they were built for the boardroom.

Let’s bring them to the shop floor.

Why Blue Ocean Fails to Translate

Five ways the strategy breaks down for operators:

The Examples Are Too Big — The companies profiled have time, capital, and talent. They can afford to experiment, while most founders can't.
"Create a New Market" Isn’t a Realistic Prompt — Small businesses need to create cash flow, not market categories.
The Tools Are Abstract — The Strategy Canvas is useful, but only once you've translated it into your own terms. Otherwise, it's a chart with no engine.
The Focus on Noncustomers Can Distract — The average operator needs to close deals with known buyers. BOS says to ignore them, which is hard to do when payroll is due.
The Time Horizon Is Too Long — Blue Ocean moves often take years, while most small businesses plan in weeks.

A Founder Story: Mistaking the Ocean You’re In

When I became CEO of my family’s industrial distribution company, Walter Isaacson’s biography of Steve Jobs had just come out. Every article I read mentioned disruption. Innovation. Strategy.
I was reading everything I could, arguing that our approach to client savings, our data mining, our service model, was all different. That we were innovative. That we were redefining how services were delivered in our niche.
Then time passed. We grew. I met more competitors. I saw what real data-centric firms were doing in more complex verticals. And I realized much of what I thought made us special was, in fact, standard. We were operating in a red ocean with razor-thin margins, cutthroat pricing, and very demanding corporate customers.
But the attempt to differentiate wasn’t wasted. That pursuit of uniqueness made us work harder. It drove us to deliver common services with uncommon consistency. That’s how we won contracts. That’s how we scaled. That’s how we succeeded far beyond what we originally thought was possible.
We didn’t create a blue ocean. But we still behaved as if one might be within reach and that disciplined aspiration made an immense difference in the quality of the team we attracted (and kept) and the outcome achieved.

A Practical Translation

Here’s how to make the core concepts usable for founders and operators.

1. Value Innovation, Rewritten

Don't chase novelty. Find ways to:

Improve customer outcomes
✅ Ask customers what frustrates them most about current options
✅ Streamline or automate steps that create friction
✅ Provide faster or more predictable outcomes
Cut delivery costs
✅ Identify low-value activities in fulfillment or onboarding
✅ Outsource or eliminate manual steps
✅ Build processes that scale with fewer people
Simplify your offer
✅ Reduce number of SKUs, packages, or steps to purchase
✅ Strip out nice-to-have features that don’t convert
✅ Communicate value clearly and quickly

2. Run a Local Strategy Canvas

In a spreadsheet:

List your top 3 competitors
✅ Use customer feedback, not your own assumptions
✅ Look at how they position and price their offers
Identify 5–6 features customers care about (e.g. speed, service, design, price)
✅ Pull these from actual customer language
✅ Prioritize based on how buying decisions are made
Score each player (including yourself)
✅ Use a 1–5 scale for each factor
✅ Be honest; score based on outcomes, not effort
Look for flat lines (everyone doing the same thing)
✅ These are opportunities to break the pattern
Create contrast
✅ Raise or reduce key features to shift perception

3. Use the Four Actions Framework

Ask these questions:

What can we eliminate that customers ignore?
✅ Look at product features no one mentions or uses
What can we reduce that adds cost but little value?
✅ Look at over-serviced elements that aren't driving retention
What can we raise that matters more than we realize?
✅ Ask which moments drive referrals, trust, or speed
What can we create that no one else offers?
✅ Think across service models, delivery, packaging, guarantees

Build these into your service or product. Then test the result.

4. Reframe Noncustomers

Instead of chasing distant segments, look close:

Past leads who didn’t convert
✅ Call or email asking what held them back
Customers who churned
✅ Survey with one open-ended question: "What would’ve kept you?"
People who want the outcome but not your category
✅ Identify adjacent solutions customers currently use (e.g., spreadsheets instead of software)

Blue Ocean Thinking and the Zero to One Instinct

Most entrepreneurs believe they are building something new. Few are. But the ones who are, the true zero to one companies, don’t start that way by accident. They begin with a different mental model.

Peter Thiel defines “Zero-to-One” as creating something from nothing, a company that is entirely unique in what it offers and how it serves the market. Companies like these change consumer behavior and expectation. A step change. Blue Ocean Strategy provides the scaffolding for that leap. It helps you map the existing terrain, then walk off it. It doesn’t ask, “How do we win?” It asks, “What if the game didn’t exist yet?”

That’s the most important phase of strategy for founders. Not just to differentiate, but to define. To design the product, the market, the language. To see what others aren’t looking for.

But building a zero-to-one company, or making a Blue Ocean move, is rare. And it doesn’t mean you escape competition forever. It means that if you succeed, you’ll attract copycats. Eventually, you’ll find yourself back in a red ocean.

That’s why these early-stage frameworks are powerful, but not sufficient. Once you’ve made the leap, you’ll need new lenses. That’s where Porter comes in. You need to understand power, pressure, and profitability.

Most companies will need both: the Blue Ocean instinct to create, and the Five Forces discipline to sustain.

Blue Ocean and Five Forces: Why You Need Both

Blue Ocean Strategy encourages you to ask, "What if the game were different?"
Porter's Five Forces that we discussed last week asks, "How well can you play the game as it is?"

These two frameworks serve different roles in the lifecycle of a business, but they are commonly compared against each other in the popular conversation:

The mistake is choosing one. The discipline is learning when to apply each.

You may start with Blue Ocean thinking to invent or reposition your offer, but you will always return to competitive terrain. In those moments, Five Forces shows you where margins leak, where power shifts, and where to shore up defenses.

Strategy isn’t one model. It’s a sequence of lenses.

You Don’t Need to Be Cirque du Soleil

You don’t need to invent a new category. You need to make your offer more useful, more efficient, and more different. You don’t need to conquer an ocean. You need to carve a channel.

Blue Ocean Strategy, scaled down, becomes a mindset:

Stop chasing competitors.
Stop imitating industry norms.
Start designing around your customers and your costs.

That’s operating strategy.

Operator Takeaways

1. Value Innovation, Simplified

✅ Cut what customers don't notice
✅ Raise what they care about
✅ Eliminate hidden delivery costs

2. Run a Strategy Canvas

✅ Map yourself and top competitors
✅ Score on customer-visible traits
✅ Identify where to diverge

3. Use the Four Actions Framework

✅ Eliminate unnecessary features
✅ Reduce complexity
✅ Raise utility
✅ Create new value elements

4. Revisit Your Noncustomers

✅ Call churned clients
✅ Survey leads that ghosted
✅ Ask what blocked the purchase

5. Use BOS as a Design Tool, Not a Theory

✅ Test ideas quickly
✅ Use customer feedback
✅ Build new value step by step

Next week in Scaling Down the Big Ideas: we explore Peter Thiel’s Zero to One, how it pairs with Blue Ocean thinking, when to apply it (and when not to), and what every founder should know about building something truly new. The book is also a philosophical centerpiece of my thinking about business economics. I was introduced to it not through the bestseller list but through a classmate's notes while they were taking Peter’s class at Stanford. We’ll tie the core concepts back to the competitive realities explored in Porter’s Five Forces and the operational discipline of Good to Great.

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