Wednesday, November 25, 2015

How crowded is your ocean?

            The article Blue Ocean Strategy introduces the concept of blue oceans and red oceans in a marketplace. Red oceans are industries in today’s marketplace, attempting to outperform other firms for a larger share of existing demand of a market. Gradually more and more entrants enter a market, driving down the portion of the pie others can expect to receive until they eventually bloody the water competing for dwindling resources. Blue oceans on the other hand represent new open industries that are lacking in competitors often due to sheer novelty. These new industries can be completely new, but are often tangentially related to another field and often swim out of incumbents in another field that use existing technologies from other unrelated fields to change the process and overall product experience to differentiate themselves from would-be competitors. One example of this would be Henry Ford borrowing practices from the meat-packing industry to expedite vehicle production by way of standardization and assembly-line production to drive the costs low enough that automobiles could be redefined as something other than a toy for the extremely wealthy. Blue oceans often focus on the crucial components of a product or experience, remove the unnecessary parts and drive down costs while simultaneously improving value. This differentiation from an established market also provides at least a temporary advantage over competitors by giving them a brand that attracts customers in droves and in turn helps to promote customer loyalty in the long-run.
            The concept of disruptive innovation is continued with the readings from The Innovator’s Dilemma where the concept of sustaining technologies, which foster improvements in existing technologies and fields, as well as disruptive technologies, which help to redefine an industry according to new guidelines, were introduced. Disruptive technologies often underperform in the short term but later help to shift the market paradigm to a new product or set of features. Historically this is extremely difficult to predict and in Discovering New and Emerging Markets we see numerous cases of both good strategy, such as Honda’s re-evaluation of a failure with motorcycles leading to them creating a new field of smaller off-road motorbikes and the distribution network to get them to consumers, and bad strategy as shown through HP thinking they knew what the market wanted and their putting all their eggs in the PDA basket where they guessed wrong and invested far too much money in one area and lacked the resources to correct course, which Intel was able to do and save themselves. These instances would suggest that a measured attitude assuming one doesn’t know all about a market leads to success since it allows one to invest in what the market actually wants.

            Arrogance and thinking that one can dictate the market to the consumer often leads to a company’s downfall, while listening to what the consumer wants or doesn’t like can lead to success. An example of this would be in video streaming services vs cable or traditional video stores. Netflix started as a competitor to Blockbuster, but used their larger selection of non-main releases to provide a larger swath of options and differentiate themselves from other renters. They then differentiated themselves by investing resources in a streaming service that was largely untested and in a way that catered to customers who were torrenting or using streaming sites to get media they might not be able to physically obtain. By pursuing this strategy, Netflix was able to not only create a blue ocean, but also bring in would-be customers who found it easier (and less risky than other streaming options) to use their service.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.