In one of my earlier articles, I have talked about devising ‘Go to Market’ strategy for a business. The article briefly mentions Blue ocean strategy and how it can be used as Innovation Strategy to help the business claim high growth. In this article, we will discuss the Blue and Red Oceans in detail along with ways to create blue oceans.
With the push on creating entrepreneurs and new businesses, more and more people are entering the startup arena. While some of these startups are thoughtfully founded with a well conceived business plan, many are driven by what may be called the ‘bandwagon effect’. Most of the times, such startups are inspired by a certain technological breakthrough they had, a new technology they have fallen in love with or a copy of a business running in a different part of the world.
I recently met a Startup that had developed a device to mount the overhead projector on the wall/ceiling along with a mobile app to operate it. My first question to them was: What problem are solving and who would use the solution. Their answer showed that they had made a lot of assumptions about who all will need their solution. They were trying to enter a market where there is a lot of competition with the Projector OEMs themselves providing the same or better functionality, out of the box. After some more research later, I found out that there are some other companies that have a more less similar offering. In short, this startup was trying to enter a red ocean.
Red Ocean vs Blue Ocean
When there is a lot of competition, it makes it hard for the companies to achieve higher growth as many competitors are fighting for the same market space. This cut-throat competition makes it the red ocean. All the current marketplace is considered red ocean.
When a new and uncontested, unexploited market segment is created/discovered its called the blue ocean. Blue oceans generally give rise to new industry segments. But, every blue ocean eventually turns into a red ocean as the bandwagon effect creates competition in every new industry (if the entry barrier is not too high). A blue ocean is generally created by fulfilling a need that the users/consumers haven’t realized as something they need. An example: The social media platforms available today.
How to create Blue Ocean
Creating Blue ocean means creating a completely new market that didn’t exist before. This creation of new markets leads to the creation of new demand and leads to exponential growth for company that has got the uncontested access to this newly created market. Visionary leaders have used various Innovation Strategies to create blue oceans. Some of them we will discuss here.
Addressing the Unexpressed Needs of the User
Many a times, the users/consumers are not aware of what they want. Its because they generally focus on the very task they want to get done and don’t see the full picture. When somebody else looks at the full picture, they come out with a solution that the users focusing on individual tasks have never imagined. This also creates a whole new section of users/consumers and helps create a blue ocean. In the 1990s the Camera manufacturing companies never thought that in future they would be challenged by the companies that manufacture telephone devices.
Here is what Steve Jobs had to say on unexpressed needs of the user:
Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, “If I’d asked customers what they wanted, they would have told me, ‘A faster horse!'” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”
I do not agree with Jobs’ views on Market research. But, I do feel that innovators and business leaders need to go the extra mile to get better products to their users/consumers. It is worth noting that the smartphone has given rise to many new kind of consumers and therefore new market segments. While the internet driven social media was present before the advent of smartphones, nobody could imagine a social network like Snapchat or Instagram that is primarily driven by the camera provided with the smartphone. This lead to the creation of new markets.
Thinking Beyond the Current Competition
Most of the companies follow the strategy of tackling their competition and staying ahead of them. In so doing, these companies under-utilize their potential, handling only the present challenges. They thus open themselves to disruption by innovative companies. Such companies are always playing a ‘catch up’ game. To be able to create new products giving rise to new markets, the companies need to think beyond their current competition. They need to focus on the unexpressed needs of their consumers. They also need to look beyond their industry and sector and see if they can serve the customers in other domains, other sectors.
For example, surface transport and air travel are two different industries. But, Uber is trying to combine the two to create a new industry that provides the services of flying autonomous taxi. This service will help the commuters to be able to beat traffic.
Exaptation is imaginative reuse of a capability or function in one area, in a completely different and unrelated area. This imaginative reuse leads to the creation of new industries and new markets. I talked about Exaptation in one of my earlier post, Ideas: Where are they (Part 2), on Innovation. Imaginative reuse can create new and unexpected markets and industries.
The World Wide Web (WWW) is the best example of Exaptation. When Tim Berners Lee invented the WWW, it was meant for sharing information amongst the scientists working at CERN. But, as it developed further, it started serving different markets and users. That same platform is today being used for sharing information, Entertainment, Ecommerce and many more. It is needless to say that it has created a huge number of new markets, creating new industries.
For the businesses of today, breaking out of the red ocean is a must to achieve high growth. Creation of Blue Oceans needs some serious Business imagination powered by empathy for the user/consumer. Empathizing with the user/consumer may help understand their unexpressed needs. Innovation Strategy leading to cross pollination of ideas and solutions helps in finding new market segments and creating new industries.
Blue oceans are not about technology, but about creating an uncontested market space. Many a times people carry the misconception that using a ‘shiny new technology’ will help them achieve high market growth. But, the business is all about creating value for your customers and yourself.