Wednesday, November 20, 2013

Preventing the blue ocean from turning red

The description of the blue and red ocean in the blue ocean strategy got me thinking of an analogy from the Matrix where there are two options presented to Neo: To take the blue pill or the red pill. Taking one of them means staying in the same world that we are used to, and the other would take us to an entirely new universe. In the HBR paper [1], the concept is similar. The red ocean is the industry and market that exists today, and the blue ocean is the creation of an entirely new market, an industry that did not exist before.
For companies that exist in the red ocean, they compete among themselves for the customers in that market. Most organizations that we know fall under this category; they apply tactics and marketing to capture the market share from their competitors. Companies that follow the blue ocean strategy create their own market, and as mentioned in the paper "demand is created, not fought over".

There are many examples available of companies that applied a blue ocean strategy to their advantage.
Cirque Du Soleil is mentioned as the organization that did not confine itself to the traditional theater experience but took entertainment to a new level.
Another example is that of Casella Wines [2] that applied the blue ocean strategy to its brand of wine called yellow tail. It too followed the four actions framework where it reduced the complexity on the part of the customer who buys these wines, created a fun and easy wine to drink, eliminated all the jargons and marketing acronyms that were used for other wines while raising the involvement of stores when compared to the other wines in the market.
In each of these examples, it is clearly seen how it is upto the companies to be innovative and to think of the new product outside the traditional boundaries defined in the market. Only by breaking out of these boundaries would the company be able to create demand where none exists currently.
It is only natural to think of Apple when thinking about innovation to create demand. The iPod made it seem like it was essential for every person who likes music to own one. It eliminated the tough user interface of currently existing music players, raised its features and functionality, created a cool experience of listening to music and reduced the need to pirate the music. These 4 actions fall into place for the blue ocean strategy used by apple in releasing the iPod and creating a new market for portable music players and creating the demand along with it.

But after each of these companies achieved success with creating the non-existant demand, other companies follow suit. The newly created market turns into a red ocean with multiple companies fighting over market share. While the first company that created the market might still be more profitable just because they were the first ones there, it is also important that they do not get engrossed in red ocean strategies in trying to fight for market share in the market that they created out of nothing. Innovative organizations like apple, realize when a market is "turning red" and move on to creating the next big thing. In understanding how to continuously keep innovating and prevent being a red ocean company, it is valuable to look at what these companies must do to be a blue ocean company in the first place.

In the book on blue ocean strategy by Kim and Mauborgne [3] talks about visualizing the strategy of the organization:
Visual Awakening - See where you are
Visual Exploration - See how others see you
Visual Strategy Fair - See where you could be
Visual Communication - Draw a Map for everyone involved. A map of this sort could be the pioneer settler migrator map which tracks the current and future growth of the company.
Along with this it is also important to look at the customer market as well [4]. For example asking questions such as:
In what direction is each of these key indicators headed and why?
Who are and who are not the core customers? Why?

While using these two ways of creating the winning blue ocean strategy, in parallel the company must think of how they would sustain the position they are in. Because the headstart that they have is what puts them ahead of their competitors who would be trying to enter the market (i.e. making it a red ocean).
So how do these innovative companies keep innovating in order to stay in the blue ocean?
In the article "Do you have the right leaders for your growth strategy" the authors Herrmann et. al. talk about tailoring the talent according to the growth strategies [5] of the company. But how much talent tailoring can be done to sustain innovation? And how does the organization (and its vision) sustain these ever changing circumstances but constant need to innovate?

Not only would the focus of the company change as and when the newest and biggest innovation is identified, but the bigger challenge would be to find the right set of people who are willing to constantly learn and experiment to sustain innovating into new markets.

references:
[1] HBR blue ocean
[2] http://www.thepersonalcoach.ca/userContent/documents/bookreport,blueoceanstrategy.pdf
[3] http://www.blueoceanstrategy.com/boo/book.html
[4] http://www.newmarketsadvisors.com/blog/bid/35618/Picking-a-niche-4-ways-to-create-new-market-space

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