The increasingly diffuse boundaries. Kim and Mauborgne describe this as venturing out in the blue oceans (in contrast to the red ocean that existed in a modern world of much clearer and tighter boundaries). Here is their description of both oceans (Kim and Mauborgne, 2005, pp. 4-5):
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 crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.
Blue oceans, by contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding industry boundaries . . . . In blue oceans competition is irrelevant because the rules of the game are waiting to be set.
It will always be important to swim successfully in the red ocean by outcompeting rivals. Red oceans will always matter and will always be a fact of business life. But with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance. Companies need to go beyond competing. To seize new profit and growth opportunities they also need to create blue oceans.
Living at the Intersection
Kenneth Boulding prophetically described, almost four decades ago, something that he called the intersect organization. This Noble-prize winning economist and social analyst suggested that these new kinds of organizations held great promise in terms of their ability to solve longstanding problems in our society. Yet, these intersect organizations are also subject to troubling ambiguity. According to Boulding (1973, p. 179):
In the twentieth century many societies have witnessed the development of “peculiar” organizations which did not fall into any of the well-recognized categories. They are not quite government, although they are usually the result of some kind of government action. They are not quite business, although they perform many business functions. They are not quite educational or charitable organizations either, though they may also perform some of these functions. They frequently occupy “cracks” or interstices in the organizational structure of society. They have been named “intersects” because they have some qualities of more than one conventional type of organization.
