Tuesday, April 14, 2015

Finding Your Blue Ocean and Filling It

"If I had asked people what they wanted, they would have said faster horses" - Henry Ford.

Nothing captures the essence of the renowned article, "Blue Ocean Strategy," more aptly than this quote. My big take-away from this writing is the multifaceted adaptability of “Blue Ocean Strategy.” I learned it does not demand that one be Edison or create the next Cola because innovation is more than patents and inventions. Based on this realization, I will assess the application of this strategy against real-life examples that followed two distinct models of “Blue Ocean Strategy.”

(1) Blue Ocean Strategy means building off the existing base of an industry. For instance, the market for portable electronic devices has been around for decades. However, Apple’s iPads created a whole new dimension for human-computer interaction and gave rise to a new market of mobile tablets such as Galaxy Tab and Google Nexus. Likewise, Costco is the undisputed leader in warehouse-based, wholesale retailer through differentiated strategies with pricing, marketing, supply chain management, branding, and customer experience. In addition, the entire industry of smartphone applications is full of Blue Ocean Strategy stories. Those firms operate around this motto: "find out what smartphone users want, or what they don't realize they need, and supply it at a finger-tip distance." Recently, Amazon created a commodity where you can install a button, “Amazon Dash Button”, in your house for an item that requires frequent purchases, like a toothpaste or laundry detergent, and have it delivered directly to your front door after pressing it (https://www.amazon.com/oc/dash-button). This idea is brought forth from the existing markets of online retail and package delivery but is seasoned with technical innovations of drone packaging and one-touch ordering services that transform customer experience.

(2) Blue Ocean Strategy can mean reinventing the wheel entirely. Kellogg introduced a new product to the world that had little relevance to the market trend of its time. As always, the beginning was small: they started with toasted corn from their house. Eventually, the company tactfully publicized it, aggressively advertised it, and eventually created a whole new demand that nobody thought of before: breakfast cereal. This item, combined with clever branding, led to a lasting demand that would dominate the breakfast and healthy-eating market for decades and decades.

(3) One big caveat with Blue Ocean Strategy that stood out to me was this: simply showing off how far you can go with a technological innovation doesn’t lead to success. Kim and Mauborgne are careful to warn us there must be a “link” between new technology and value creation. While “technology innovation” is the key point in so many industries, if it gets too ahead of the customers’ wants, it will only hurt your firm’s financial records, especially R&D. For instance, for a previous lecture, we read about the super sophisticated bike wheels invented by a Japanese engineering firm – it was too pricey, its fancy features not essential to a satisfactory bike-riding experience, and thus it has attracted very few actual customers.

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