Grow By Creating Markets, Versus Killing Competitors

For your business to continue to grow, there are really only two ways to get customers. One way is to take customers away from an existing player, and the other is to create a new market with a new product or service that didn’t exist before. Examples of recent “new market” big wins include Apple with iTunes for digital music, Uber for ride sharing, and Airbnb for renting a spare room.

Business growth by creating new markets is now popularly called the “blue ocean strategy,” based on a classic book with the same name. The alternative is a “red ocean strategy,” where everyone is swimming within the same predefined industry boundaries, and cutthroat competition is turning the ocean a bloody red. A blue ocean means new and uncontested territory.

I just finished a recent update by the Blue Ocean authors, called ”Blue Ocean Shift,” by W. Chan Kim and Renee Mauborgne. It compares the successes and failures of blue ocean business efforts in recent years, and offers some specific guidance on shifting to this strategy. I am impressed by the authors’ five-step systematic approach, paraphrased here, for implementation:

1. Target the area where you have to most to offer and gain. It all starts with broadening your scope of thinking, assessing your own strengths, and focusing on areas where you bring the greatest advantage. For example, Apple already had the digital and file management expertise, and they recognized an unmet need with music sharing.
   Equally important is the effort to put together, isolate, and motivate the best team for the journey ahead. Do you have the mix of skills, with the level of functional and hierarchical authority required? You want to select people who are good listeners, are known to be thoughtful, and are willing to raise questions when others don’t.
2. Build an objective view of the strategic landscape. When the team sees the strategic reality and agree on the need for change and growth, only then can you create real alignment and a collective will to make the shift. If this is done properly, you won’t have to tell people to move to the new ocean strategy – they will viscerally feel it and do it.
3. Uncover hidden pain points that limit your industry. This will help everyone identify the unexplored spaces where value is trapped and waiting to be unlocked. Pain points will be seen as blatant opportunities, rather than constraints. Remember that the total customer experience is now much broader than just product features and price.
   Identifying all of your non-customers in the current space allows an assessment of the total demand landscape that lies outside the current industry understanding. Airbnb realized there was an opportunity to extend the hospitality industry beyond the capital-intensive world of hotels and resorts, and hotels were a pain point for young travelers.
4. Reconstruct market boundaries to allow new solutions. This is where you put random brainstorming aside and apply systematic logic to re-create markets and industry boundaries. The result is firsthand insight into practical ways to reframe existing industry problems and create break-through solutions that will excite a new class of customers.
5. Finalize your move with market tests and business models. The goal of this step is to take the politics out of the commitment process, and obtain validation and feedback on the strategic options. What you want is a clear decision, validated by key stakeholders, with a wealth of insight on how to prevent gaps in execution.
   Now is the time to tighten and refine your plan to maximize its market potential, and then formally launch it. This ensures that the move you roll out generates not only a leap in value for buyers, but also quickly accelerates growth in your own business. It’s important to move while the team’s energy is high, and they are fully committed to the shift.

These steps are essentially the same, whether your business is mature, or a startup. I see more and more blue ocean efforts these days, but unfortunately not many have the discipline and rigor outlined here. Perhaps it’s time to take a hard look at your own business growth strategy. It’s a lot more fun to systematically explore new territory, than to endlessly chum the existing sharks.