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Pulse Book Club – Vol. 6 – Blue Ocean Strategy

I often think about what specific event I would have to create to win an Olympic medal. None of the current events suit me. I’m slow, out of shape, and regularly trip over 2 inch cracks in the sidewalk. 

But if I could create something new, the possibilities are endless. Because how many people have actually practiced spinning a baseball helmet on their finger like a basketball? Maybe 100? That’s something I can do. If you need me for the next several months, you can catch me wandering around the Olympic Committee headquarters trying to get someone to listen to my presentation.

The reality is, In order to give myself the best chance to win, I have to purposefully and intentionally differentiate my skill-set in order to eliminate any other players that could compete with me as I strive for Olympic glory.

That is the concept behind Blue Ocean Strategy, a book by W. Chan Kim and Renee Mauborgne.


Escaping Red Oceans of Heavy Competition

Kim and Maulborgne spend their best-selling book helping business leaders understand the ways that they can enter Blue Ocean markets and why that shift can be so transformational for a business.

The concept of Blue Oceans and Red Oceans come from the familiar business concept of sharks in the ocean.

Red Oceans are categorized as market segments and niches that are saturated with competition, where you’re fighting tooth and nail for every scrap of business possible while other firms and organizations are trying to elbow you out of the way. The oceans are red with bleeding competition.

Red Oceans are miserable spaces to operate in as a business. Competing in Red Oceans costs incredible amounts of time, money, and energy. Your strategy becomes less about serving your customers and clients, and more about out-doing your competition in the process, often leading to misspent time and resources.

Blue Oceans however, are where businesses take their goals, strategy, and operational structure to the next level. Companies that intentionally and thoughtfully seek out Blue Ocean Strategies are able to focus on innovation and diversification.

Blue Oceans are places where, instead of working to beat your competition, you are working to make them irrelevant as you seek new, innovative ways to distinguish your company from others.

 

Reconstructing Buyer Value

In order to begin the process of moving from the violent waters of competition into Blue Ocean markets of opportunity, an organization needs to deconstruct and reconstruct their value proposition in order to differentiate themselves from the competition. 

By doing this, firms will quickly recognize ways to increase the value of their product or service, and also factors that will help them reduce cost.

Imagine you are opening an ice cream shop, what would be some components of that shop’s value for a customer?

-Quality of Ice Cream

-Price

-Location

-Variety of Flavor Options

-Customer Experience

I’m guessing there are tens of thousands of ice cream shops in America. I’m sure a lot of them are in great locations, with really affordable ice cream cones, with really good ice cream. They have those top three value components taken care of.

But there is only one place I can go if I care more about those bottom two. Where can I get strawberry ice cream with gummy worms and snickers bars, all while the employees sing ice-cream themed parodies of old pop songs while they spread and chop your ice cream on a frozen block of marble.

Cold Stone Creamery.

By (intentionally or accidentally) reconstructing  buyer value, Cold Stone Creamery was able to enter communities with established ice cream shops and not feel like a competitor. Sure, it was a little more expensive and people usually had to navigate a business park or strip mall to get there, but people flocked there for years.

Because Cold Stone Creamery became its own unique experience. It wasn’t an ice cream shop. It was ice Cream and a show.

 

Capturing New Demand

What reimagining buyer value does for companies is creates new avenues for demand. There have been few major corporations who have excelled at capturing new demand in recent years like Nintendo has.

There have been three major players in the consumer video game market for the past 25 years. 

Microsoft with their Xbox series, Sony with their Playstation series, and Nintendo with their series of consoles.

Microsoft and Sony have been fighting over expert gamers since the releases of their earliest consoles in the late 1990s and early 2000s. But Nintendo has survived by capturing new demand outside of those hard core, tech-savvy gamers.

While Sony and Microsoft has been focused on creating games and systems with incredible graphics and lightning-quick processing speeds, Nintendo knew they couldn’t compete in those areas.

So Nintendo focused on creating fun, bright, easy-to-learn games on game consoles that were specifically designed to be played by at least two people in the same room.

As Microsoft and Sony fought over customers who wanted to buy the most realistic game that took the longest to master, Nintendo was content to sell games that parents could play with their young kids, games that couples could play together, and games that livened up a party.

If Nintendo tried to compete with Sony and Microsoft in the Red Oceans of the consumer video-game market, they may not have even survived past the mid 2000s, but by seeking out new markets by differentiating themselves from their competition, they have been able to build a unique, loyal base of customers that are having great experiences with their products.

The Blue Ocean Strategy

So am I hopeful about being able to one day win an olympic gold medal by applying Kim and Maulborgne’s strategy with the Olympic Committee? Probably not.

But by using Blue Ocean Strategy as a blueprint to understand the ways in which we can intentionally distinguish ourselves from our competition, we can better serve customers and clients, and narrow the focus of our business.

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