Strategy & Leadership: Two of the most counter-intuitive elements in the blue ocean approach to strategy development involve the approach to customers and segmentation. You advise strategists to focus more on non-customers and also less on finer and finer segmentation. Can you elaborate?

Kim and Mauborgne: The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater the resulting customization of offerings. Although this might be a good way to gain a focused competitive advantage and increase share of the existing market space, it is not likely to produce a blue ocean that expands the market and creates new demand.

To create and capture blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. This allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.

Although the universe of noncustomers typically offers substantial blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them. To convert this huge latent demand into real demand in the form of thriving new customers, companies need to deepen their understanding of the universe of noncustomers. The book identifies three tiers of noncustomers to further guide this process. Once identified, companies should look to the commonalities across noncustomers. If you focus on these, and not on the differences between them, you will glean insight into how to desegment buyers and unleash enormous latent untapped demand.

Strategy & Leadership: You also say that in the shift to blue ocean strategy development, managers need to build effective execution in from the start. Can you elaborate on what you mean and explain how managers can best go about doing this?

Kim and Mauborgne: It is only when all the members of an organization are aligned around a strategy and support it that a company stands apart as a great and consistent executor. Overcoming the organizational hurdles to strategy execution is an important step toward that end.

From day one execution effectiveness is built into blue ocean strategy development using the principle of fair process. Fair process builds trust and commitment, trust and commitment produce voluntary cooperation, and voluntary cooperation drives performance, leading people to go beyond the call of duty in executing strategy and in sharing their knowledge and applying their creativity.

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