Wednesday, November 27, 2013

How Coin is walking the line between red and blue ocean

While the term "blue ocean" is not new, and talked about in a tone of awe and innovation, the CEO of Coin, Kanishk Parashar knows how easy it is to drown in the blue ocean.

In 2010 Parashar launched a smartphone app - SmartMarket - that he envisioned would revolutionize the payment methods used everywhere. His app used location information and broadcast the picture and account information of every person that walked into the store. All the store manager would have to do was to select the appropriate photo to charge the customer for their purchase. This is one of those ideas that would immediately strike you as a game-changing innovation. But did it work? No. Despite having thousands of downloads of the SmartMarket app, no one was willing to trust the new methods of payment. This experience of his caused him to remark that "The market is so large that if you have a product that completely tries to replace what everyone does, change everyone’s habits, the chance of adoption is essentially zero".[1]

So while creating a new market that doesn't exist, sounds like a revolutionary idea, it is by no means a simple thing to do. As with SmartMarket, if the new market being created is trying to replace an existing one, then the value innovation from blue ocean strategies may not even come into effect because of the low acceptance rate from consumers. In such cases being innovative within the realms of the existing markets might be more effective. And that is exactly what Parashar set out to do with the Coin. In this article it is mentioned how Parashar believes that, although people don’t want drastic changes, they do want small changes. Coin does not drastically remove the use of credit cards as a payment mechanism, but makes it more convenient. "I believe that response has now turned into just improving our lives, getting better at everything," he explains. "That’s why when we take an age-old thing like a card that we use every day and trust and improve it. It resonates."



It is easy to see how popular Coin has been - This article on Forbes reports that there are 5 tweets every second on Coin, and 410000 mentions of Coin on Facebook. This type of attention is a lot greater than what BitCoin recieved when it was launched. BitCoin can be seen as an example of creating its own market for a new method of payment called cyrptocurrency. It has failed to achieve the popularity that one would imagine comes with a blue-ocean-type revolutionary new market idea.
This pattern makes me agree with Parashar that while aiming for an innovation that would create a new market is good, the acceptance rate of the innovation is more important. And in this case where the existing markets are so widespread, innovating within the existing red-ocean market ends up being the more sensible option.

But then again, maybe these repeated innovations within the existing market would probably one day lead to the creation of a new market?

References:
[1]http://www.wired.com/business/2013/11/coin/
[2]http://www.forbes.com/sites/natalierobehmed/2013/11/20/coin-reaches-campaign-goal-extends-pre-order/
[3]http://en.wikipedia.org/wiki/Bitcoin

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