Red Ocean, Blue Ocean
At the risk of making The Drift seem like the Digerati version of Oprah’s Book Club, I need to add a recently consumed– although not new — book to my strongly recommended list of “must reads.” Blue Ocean Strategy. I’m already into my second reading, with an eye on mapping the “Blue Ocean” concept to the world of online advertising and marketing.
First things first. The master premise is that in formulating strategies, companies spend far too much time benchmarking the moves of their competitors; defining exactly who is in the competitive set, what they do, how well, and how to do it better or cheaper. Because of this, most companies end up competing in “Red Oceans” for tiny margins through incremental improvements in performance or reductions in price. These are called “Red Oceans” because they’re crowded with other fish and the water is quite bloody. In our business it’s almost impossible to miss this phenomenon playing itself out across ad networks, digital agencies, technology players, data providers and sales organizations. Massive human capital, creativity and energy is burned away in a dispiriting ‘race to the bottom’ that’s inherent in a Red Ocean World.
Many breakaway successes, on the other hand, employ “Blue Ocean” strategies in which they create whole new market spaces for themselves, spaces where “…competition is irrelevant because the rules of the game are waiting to be set.” There are a handful of core principles and strategic moves explored in the book — “Value Innovation,” looking across market boundaries, and creating a ‘New Value Curve’ — and it’s far more detailed in its tactics and examples than just about anything else out there.
And it’s hard to argue with the examples of successful strategies here: Cirque du Soleil, Southwest Airlines, [yellow tail] Australian wine, Bloomberg, NetJets and even the NYPD all employed Blue Ocean strategies and achieved magnificent results. The best part? A Blue Ocean Strategy doesn’t rely on a massive influx of funding or new resources: one of its strengths is that it helps you manage resource tradeoffs to maximize your customer value and zag while all of your former competitors are still zigging.
Think quickly of the three most dominant names in the digital media and entertainment world today and arguably you’ll come up with the same list I do: Apple, Google, Facebook. None of them achieved market dominance through benchmarking and iteration, and all created — and dominated — their own Blue Oceans. I’ve got more work to do but I’m convinced these principles can help many other talented companies break out of the Red Oceans that are sapping their value and burning out their best people.
If you’ve got your own thoughts on “Blue Ocean Strategy” please add your comments below. If you’d like to explore the concept together, drop me a line.