There’s a new book out and it’s going to turn a lot of marketing thinking on its head. Or should. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant [Harvard Business School Press, 2005]. About time.
I’m a big fan of Michael Porter, and the authors of Blue Ocean Strategy — W. Chan Kim and Renee Mauborgne — take his work and put it into the proper context. They say that it’s time to move away from the prevailing strategic orientation, "competition as the core of corporate success and failure," and shift to a new unit of analysis, "the strategic move." They define this move as "the set of managerial actions and decisions involved in making a major market-creating business offering."
The locus of the move is from the red ocean to the blue ocean. The red is industry verticals as we know them today. The blue doesn’t exist until an innovator or an innovative company, new or existing, reinvents the market space, forming new groups of customers by introducing products or services that speak to their needs and do not exist as yet. Examples include Cirque du Soleil, the Apple personal computer, Dell built-to-order computers and IBM’s System/360. As some of these examples show, and as the authors point out, "most blue oceans are created from within, not beyond, red oceans of existing industries."
I think this is entirely compatible with Porter’s analysis of the five forces of competition and how understanding them helps to shape a company’s strategic approach. Kim and Mauborgne teach that an analysis of the competition is appropriate, but it has to be as a contributing process to the acts of creating uncontested market space, making the competition irrelevant, creating and capturing new demand, breaking the value/cost trade-off and achieving differentiation and low cost, not just one or the other, as Porter established in the 1980s.
Huge message for technology companies here, who often have mental, even emotional, blocks about linking their innovations to what buyers want and value. The bust should have taught us this, but I’m skeptical as to whether we have absorbed the full depth of the lesson. I think it’s this, using the Kim/Mauborgne classification: if you’re going to sell your technology, it’s more important to be a value pioneer than a technology pioneer.
Climb into this mindset and you’re already in the right place for deciding how to build a product, market it and sell it. The factors affecting these decisions turn not on your passion for the technology but your passion for the marketplace’s ability to use it. Take note of the competition, but obsess about the customer.