DeepSeek: Can It Create and Capture a Blue Ocean in the AI Industry?

DeepSeek is an emergent force transforming the AI industry, upending traditional large language model (LLM) development by delivering top-tier AI performance at a fraction of the industry's cost while operating under resource constraints. While industry giants like OpenAI, Anthropic, and Google have been engaged in an arms race of scale and capabilities, DeepSeek is charting a different course—one that challenges fundamental assumptions about the computational resources required for advanced AI. DeepSeek has captured the industry's attention and many see it as identifying and opening a blue ocean opportunity space. But its real challenge lies in transforming the blue ocean opportunity space it has opened into a successful blue ocean market under its leadership and capturing the economic benefits of the new market it has identified. This case explores DeepSeek's attempt to break the value–cost trade-off by simultaneously pursuing low-cost and high-performance AI. It discusses how DeepSeek challenged generally accepted assumptions of the LLM industry in an attempt to expand the AI market, while major rivals stayed locked in fierce competition. It asks participants to analyse what triggered DeepSeek to take off and make a big impact in the market fast and to think about what DeepSeek needs to do to create and capture a blue ocean in the AI industry. What is its strategic endgame? Where and how should DeepSeek go from here?

1.Demonstrate how DeepSeek challenged generally accepted assumptions of the LLM industry in an attempt to expand the AI market, while major rivals like OpenAI, Meta, Google, and Anthropic stayed locked in fierce competition and missed seeing the opportunity. 2.Illustrate how DeepSeek attempted to break the common value–cost trade-off by simultaneously pursuing low costs and high-performance AI and opening a new value–cost frontier beyond that of the LLM industry. 3.Discuss the strategic importance of a well-planned launch to capture attention and create momentum from day one. Analyse the steps DeepSeek took to take off and make a big impact in the market fast. 4.Discuss whether DeepSeek merely inspired everybody's imagination with its creativity or can successfully create and capture a blue ocean by aligning its value, profit, and people (stakeholders) propositions. Otherwise, despite being recognized in the AI industry for redefining the rules of the AI game, it may not succeed in capturing the economic benefits of the new market it identified.