Sunday, June 12, 2016

Startups & Blue Ocean Strategy

Blue Ocean Strategy suggests creating a market that is underserved or non-existent. It emphasizes nimbleness and adaptability as key success factors for survival. Startup companies are great examples of organizations adopting the Blue Ocean Strategy but in many ways constrained to go through with all the steps in implementation. Startups identify a niche area and develop products and services to serve that segment but are always in need of funding for both capital and resources. The business plan creation process tries to delve into the profitability and the sustainability of the idea. Here the companies try to predict percentages of target market and projected revenue. For a truly disruptive startup, the numbers are never been backed by solid research as the market for idea is unknowable.

Successful companies always exercise caution on gauging the market and invest heavily in R&D. To quote the current GE CEO “I personally believe is that I can’t sit around a company like GE and see us want to go out and pay a startup $100 million for technology that if we had just spent $2 million a year for 10 years, we could have done a better job at.” [1] The downside of using their own R&D teams is that the companies don’t take it to the next level with market facing teams or product sustainability – this is where the startups are different.

A slightly varied adaptation of this model is the startup incubator concept.  The incubator model is a great example of how organizations adopt blue ocean strategy without re-allocating their existing resource pool but are still engaged with the cutting edge innovations.[2] Many times the companies in the incubator evolve from an existing market with a new idea. The other variation is “Entrepreneurs in Residence Program”[3] like at Cisco which adopts startups after a certain threshold on products, services and markets.

Blue Ocean Strategy is the driving force making innovation and creativity key differentiators in a truly disruptive world. Ideas are the key, rest will follow.


[2] - “We provide financial support and the best of Google’s resources to startup communities that equip and nurture entrepreneurs.”
[3] - Cisco Adds Five New Silicon Valley Startups to Entrepreneurs in Residence Program, October 26,2015

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