28 Oct Blue Ocean Strategy
The authors of Blue Ocean Strategy argue one game-changing point. Stop competing in overcrowded markets.
Overcrowded markets are red oceans. They are found in nearly every industry. Companies try to out-rival each other.
Blue oceans, on the other hand, are where there is no competitor. Blue oceans are uncontested market spaces where the market is yet to be defined by anyone else.
Cirque de Soleil is a strong example. It combined high art theatricality with a circus theme and eliminated animal performers from the show. With no similar entertainment format, the shows have been incredibly successful around the world.
Blue oceans can be hybrids of existing technology, but rarely rely on technological innovation in themselves.
iPod, after all, was not the first portable mp3 playing device, but it is the most successful because it solved an associated problem – the music distribution industry was rife with pirating.
With the creation of iTunes, Apple was able to load songs onto their iPods at minimal but reasonable price, making the product simple and convenient for consumers. It won favour with consumers and favour with record labels. It therefore didn’t just invent iPods. It wrapped an entire business model around them.
Blue oceans like this create brand equity that can last for decades.
What defines blue oceans is differentiation and low cost simultaneously. And it’s first in, best dressed. You create brand buzz and a loyal following and this provides a significant barrier to entry.
The model T Ford is another early example. At the time, motor vehicles were a luxury outside the affordability of the everyday man. The other option was horse and carriage.
It was launched at an affordable price of $850.Then the price dropped to $609 and with operational efficiencies and streamlining, it later became $295. Customisation was limited. Henry Ford said, “Any colour you like, as long as it’s black.”
Three years after this book was published, Indian motor car maker, Tata Group, pulled the same trick as Henry Ford. In 2008, they launched a $2,500 ultra-cheap four-wheel car for the masses of Indians who were used to getting around on two.
Now Nissan, Renault and Suzuki are struggling to work out how to do the same.
Applying This Knowledge
The lesson for a small business or a service based business?
Find a blue ocean. They can be found by adding value to your existing service or packaging a unique offering.
Real estate agents offer a property service which provides a pest and building report with every home listed. This way the buyer can save on upfront cost unless they wish to obtain an independent report to confirm the findings.
It also benefits the vendor and the agent by clarifying any building issues from the outset in which better negotiating strategy can be decided rather than successive disappointments later on.
Tax Accountants – why not work for a percentage of the return you can secure for your client.
If you have created a blue ocean in your crowded industry, please share it. We would love to hear about your success.
Blue Ocean Strategy is the best-selling book (2005) by W. Chan Kim and Renée Mauborgne, Harvard Business School Press.