Proof: Blue Ocean Strategy does indeed find blue oceans
It's not just a term; a new simulator we've created at VSTRAT does indeed show if VC or PE firms want better returns, use blue ocean strategy.
Most people know Anastassia and I spent well over a decade at Fontainebleau, France, at the INSEAD Blue Ocean Strategy Institute and INSEAD Research. We went there to build out an idea I’d had after watching executives struggle with strategy frameworks: that software could actually help apply them. It was a novel idea at the time.
We built software, wrote cases, wrote articles, including cases on Blue Ocean Strategy itself. Georges Doriot, the father of venture capital, had passed away long before either of us arrived, but we sat for years alongside people who’d worked directly with him and carried his thinking forward.
One thing I always wanted to do, though, was prove that Blue Ocean businesses were more likely to succeed. The book makes that case too, but the original research was limited by the technology available at the time, and the sample was relatively small.
Along the way, while researching the actual genesis of modern entrepreneurism, I got to speak with Arthur Rock, the man who coined the term venture capital, on a referral from Draper Sr., who’d taken Doriot’s class at Harvard Business School. Rock told me himself he regretted never taking it.
More recently, sparked by a piece of homework my wife was doing for Venture Lab, I built the idea out further inside VSTRAT itself. In v2, you build a strategy, talk it through with our stable of personas (or build your own), analyze it, and then run it against a Monte Carlo simulation to see how it actually performs over time, compared to competitive or marketing-led approaches. That simulation is what convinced me to finally write this.
The result: a portfolio loaded toward Blue Ocean businesses is typically 2-5x more likely to beat the S&P 500 than one built on competitive or marketing-led strategies. Somebody better at math than me could probably tighten that number. But the result repeats, run after run.
I’m finishing VSTRAT v2 now, but I’ll be opening the simulator itself to anyone who wants to try it.
If you’re looking for slow, steady, predictable returns, blue ocean businesses probably aren’t for you. Then again, neither is venture capital or private equity. But if you care about the entrepreneurial ecosystem broadly, this tool makes a strong case that blue ocean is where the real upside lives.
This whole thing traces back to Anastassia’s own homework for Venture Lab, and a genuinely great essay she wrote arguing that venture capital itself was founded and named by people the Blue Ocean community calls noncustomers, funding noncustomers.
- Michael
PS: if you’re managing a portfolio or building a strategy and want to run your numbers through the simulator, or build custom personas for your market, drop me a line or subscribe below.