Why Blue Ocean ?
I’ve gotten the question a lot lately, what is Blue Ocean Strategy?
It made me realize how few people knew about the International Bestseller*, by W. Chan Kim and Renee Mauborne, and reinforced how many business owners could benefit from consulting services based on their principles. Many years ago when I was in Business School we read the book and disintegrated not only how different successful companies like Cirque du Soleil, Southwest Airlines and NetJets had created blue oceans but also how it differentiated from the common business models of Six Sigma or ITIL. It just clicked with me; I loved it! By forcing businesses to think outside the box and create value through differentiation, they were able to solve common business or consumer problems simply by being creative.
I am not a fan of the all too common business practice of price wars. This to me is lowering your own value, and it’s a never ending cycle that decreases profit margins and blends all of the brands in a market space so closely together that it’s hard to distinguish one over another. This is how I came to starting my own consulting practice based on the framework of Blue Ocean Strategy. Now, I am not a devout or certified Blue Ocean Strategist, I do use some other more traditional business models and principles to help my clients. But the underlying theme of how to approach business, not worrying about what your competitors are doing and trying to price war with them; Instead, finding blue oceans that you can thrive in and identify an underserved market is how I approach all business problems. Also, I like to find ways to distinguish your business or offering so much that it appears to be a blue ocean just based on the innovation of the delivery.
So, you may be asking well what are blue and red oceans? Red oceans are existing market segments that are predefined and have existing boundaries. The rules are set and the demographic is defined, as is their need. Multiple solution providers are available to that client, and it gets to be a very crowded space. The businesses that live in this market segment must lower their prices to win the client, and thus the water becomes bloody, red. Blue oceans on the other hand are new, uncontested market segments that do not have any competition in them. You can price based on value and innovation. Many times, the key demographic that you will identify won’t even know that they had the need, but the offering is so good or different that it creates a new space. Of course, there will always be those that imitate the offering to catch the tail wind of your success. But by the time they have identified it and replicated, you have been the sole provider for usually years and have not only branded yourself as the leader/expert but obtained full market share.
To give you an example of a market segment that was red and then because of innovation, new market segments were defined and it is still changing with new businesses shining and veterans closing the doors: Movie Rental. In the 1980’s there were locally owned and franchise movie stores in every strip mall. Blockbuster came along and purchased them all up, they charged a pretty penny even for rewinding your VCR tapes if you forgot! Their only real competition was movie rentals through Cable once they became widely available (even years after Blockbuster had the monopoly on the space), but those rentals were generally 2-3x more expensive than heading down to the store. Fast forward to 1997 and the introduction of Netflix, then 2002 with RedBox, and of course now we have Amazon Prime and many other video streaming options. Blockbuster has closed its doors, filed bankruptcy and was auctioned off to Dish Network. They didn’t innovate or try to change with the growing number of Internet users and convenience that technology could offer. The competition still targeted the same demographic, but they created a blue ocean for the consumers by not opening yet another movie store on the corner. They brought the movie store to them, at a cheaper price and in a faster more convenient delivery.
For more information on how you can avoid price wars, being left in a red ocean, or how to strategically align your business for innovation and growth contact Blue Ocean Principles.
*Source: Kim, W. Chan and Mauborgne, Renee,
Blue Ocean Strategy. Harvard Business Press Review