Set Sail on a Blue Ocean
Do you want to operate in an industry that is characterized by strong competition, exploitation of existing demand, and a value/cost trade off? If you’re thinking no, then you’ve probably read Blue Ocean Strategy: How to Create Uncontested Marketspace and Make the Competition Irrelevant by W. Chan Kim and Renée Mauborgne, Harvard Business Review Press, 2005, 2015. If you’re wondering what that first sentence was all about, then visit www.BlueOceanStrategy.com and read the book. Go ahead; I'll wait.
The big takeaway from Blue Ocean Strategy is this: make your own industry. True, that’s easier to write than to do. It’s even easier to plan than to execute. But the world is full of examples of companies that looked at a traditional industry and said, “No thank you.” Kim and Mauborgne use two modern companies to illustrate their point: Cirque du Solei and Yellowtail Wine. The authors also frequently reference Henry Ford and the Model T. What do non-luxury cars, fancy clowns, and cheap wine have in common? Each company stripped offerings, or product features, that weren’t relevant or made the product too expensive and brought something entirely new to the marketplace. Cirque Du Solei rightly dropped the costly dancing elephants and horses in favor of theatrical performances set to intense light and music. Yellowtail Wine positioned itself as wine for people who didn’t like wine, offering semisweet, drinkable wine. Its marketing message dropped terms such as vintage and terroir in favor of scenes of happy adults enjoying a beverage outdoors. Henry Ford famously said, “The customer can have any color he wants so long as it’s black.”
Why are these companies worth learning from? Founded in 1984 by Montreal street performers, Cirque du Solei is now the largest show producer in the world and was recently valued at 1.5 billion. The Yellow Tail Wine brand has been accused of transforming the worldwide wine industry. As for Henry Ford: the Model T ushered in the era of mass production of complex machines. Try finding anything in your modern life that can’t be traced back to Ford’s methods.
Blue Ocean businesses aren’t always easy to understand at first. In fact, you’ll often find yourself thinking ‘huh?’ and ‘what?’ the first time you stumble across them. That’s a good sign. If a company is truly doing something that is brand new, in terms of the market, it won’t make sense to you because you won’t have a frame of reference. Wine for people who don’t like wine? A circus with no animals, geared for adults? A running automobile in 12 hours? At their origins, none of these products made sense. Now, of course, we expect them. So, what Blue Ocean will you set sail on? Drop me a note and let me know.