Tuesday, April 12, 2011
Blue Ocean? Red Ocean?-Week 5, Yunyue WU
Reading the article Blue Ocean Strategy reminds me of a conversation that I had with one of my friends who is now working at P&G. We both agreed that modern life imposes a lot of commodities on customers that were not of any value and unnecessary setting the clock forward years. For instance, when we were little, we never used hair conditioner; we could totally do without Ipad. There are tons of examples like that.
The author of Blue Ocean Strategy basically contends that companies can generate higher profits and gain more growth potentials by creating demand in an uncontested market space, than competing with rivals in red oceans which are existing market space. He cites the case of Cirque du Soleil where the business gets reinvented instead of competing with existing entertainment businesses head to head.
Referring back to the hair conditioner case, it is the business leader’s role to first invent value of how hair conditioner will bring about benefits not provided by shampoo and educate the customers to get accustomed to adding one more step cleaning their hair. This is about creating a total new market place. However, what confuses me is that the definition of Blue Ocean seems vague in the sense that it is hard to differentiate competing for a spearhead position in a forming market space and creating a market place and excluding other new entrants. The latter seems quite infeasible though because not every company can follow the path of Cirque du Soleil due to the unreachable expertise level. The success stories are susceptible to unrealistic implications.
What I agree with Blue ocean strategy is that the theory breaks market boundaries and industry structure by stating that they are not set and can be totally reconstructed by industry players. However, I disagree with the author that tapping into blue ocean is not about technology innovation but about value innovation. Under a lot of circumstances, technology breakthrough still determines a company’s pre-dominance especially after the dot-com booms.
Pic source: http://www.drakeintl.com/au/bussolutions/blueoceanstrategy.aspx