Imagine the “Jaws” theme here.
Are you going to be the shark fighting for other fish, or the shark that finds a new feeding ground?
This month, our plug is Heat Up St. Louis! If you would like to donate, please visit their site at https://heatupstlouis.org/
SOURCES
https://www.blueoceanstrategy.com/blog/7-powerful-blue-ocean-strategy-examples/
https://voodoodoughnut.com/weddings/
https://www.blueoceanstrategy.com/tools/six-paths-framework
The Marketing Gateway is a weekly podcast hosted by Sean in St. Louis (Sean J. Jordan, President of https://www.researchplan.com/) and featuring guests from the St. Louis area and beyond.
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TRANSCRIPT:
About 20 years ago, Nintendo released a new video game console called the Wii, and it was unlike and video game system that had ever come before it because Nintendo decided to do something very different with it:
Model the game controller after a remote control and emphasize motion controls.
And to show off their concept, Nintendo included a game called Wii Sports where multiple people could play games like Tennis, Bowling, Boxing and Baseball together by swinging their remote-control like Wiimotes around in their living room in front of the TV. Even the name of the console – Wii, with two lowercase I’s, sort of like little people – emphasized the fact that Nintendo wanted this game console to get away from the tradition of gamers sitting slack-jawed in front of the TV, controller in hand and focused on pushing buttons to complete tasks. They wanted mom and dad and grandma and everyone else to get up and play too, and to accomplish that, they had to make the system easy to understand and accessible.
And Nintendo’s big swing paid off. The Wii was one of the bestselling video game consoles of all time, vastly outselling both the Nintendo 64 and the Nintendo Gamecube that came before it. Wii Sports was the system’s most popular game by far, and many people bought the system specifically for it. Even today, the Nintendo Switch and Switch 2 have motion controls built into their joycon joysticks, and though few games use that feature, Nintendo didn’t want to give up on the discovery they’d made that motion controls are enticing to people who aren’t really big video gamers and turn a game console into the potential life of the party in a living room setting.
And this was a very different approach from Sony and Microsoft’s own consoles at the time, the PlayStation 3 and Xbox 360, making Nintendo stand out not just as an alternative to those brands, but something so different that they weren’t even really competing anymore. Many people who owned a PS3 or Xbox 360 also owned a Wii, and many Wii owners who were more casual gamers didn’t have any interest in owning another game console. Nintendo had truly found a way to stand out and stand apart, and it positioned them for massive success.
Nintendo’s strategy was lauded at the time as being an example of the Blue Ocean Strategy, a concept detailed in a series of articles in the Havard Business Review and then a book by W. Chan Kim and Renée Mauborgne in the early 2000s. The gist of the idea is this. When a new product or service category emerges, competition starts to heat up over time it’s like a feeding frenzy where the sharks are going crazy eating all the fish. This makes the waters around them red with blood. Being in a red ocean means fighting not only for the available food, but your own survival.
But if you can find an area in the marketplace where the water is calm and the ocean’s still blue, you can stave off those competitive forces for awhile and do your own thing, potentially realizing far greater profits and a more favorable reception from the public because of the lack of competition. That’s the Blue Ocean Strategy.
Unfortunately, this strategy sounds a lot easier to put into place than it actually is, and for all of the examples out there of companies who have succeeded at following it, there are also plenty of other times where marketers have tried to find their own Blue Ocean and found that it doesn’t work because consumers aren’t willing to follow to those calmer waters with them.
So let’s take a look at this enticing, but tricky, marketing philosophy and see if we can tease our what makes it work… and what doesn’t.
I’m Sean in St. Louis, and this is the Marketing Gateway.
So, before we go too far down the road of examining the Blue Ocean Strategy, let’s first look at some of its success stories. On the authors’ official website, they mention seven different examples. One of them is Nintendo, which I’ve already mentioned.
Another is Marvel, the comic book company, which transitioned in 1999 from licensing its properties to film studios and instead decided to start a film studio of its own, eventually building a connected cinematic universe based on some of its most popular stories and most visible characters like Iron Man, Captain America, Thor and The Incredible Hulk. This led to the team ups in the Avengers movies, which are some of the highest grossing films of all time. In fact, there’s even a new one coming out later this year!
Another example is Yellow Tail, a brand of wine from the Australian Casella Winery that entered into the US market in 2001 by focusing on making its branded wines interesting and fun to consume rather than stodgy and traditional like most wines were. By shedding the snobby pretention of wine consumption, Yellow Tail was able to become a popular brand among people who just wanted to enjoy wine without having to become masters of the complexity of it.
Another example is Cirque du Soleil, which is one of the major case studies the authors have traditionally presented when discussing the strategy. The story basically goes this way. Circuses were once one of the most popular forms of live entertainment, but they got stale and hokey over time and people weren’t interested in attending them. A group of French Canadian circus performers got together and modernized the experience with more intimate traveling shows featuring dance, storytelling and acrobatics along with stunning art design, exceptional music and theater-grade lighting and effects, and also eliminated old mainstays like live animals and traditional circus attractions. The result was a fresh take on what a circus show could be and the entertainment company became so popular that it began opening permanent shows at destination cities like Las Vegas and Orlando and even inspired many copycats. But its unique brand, strong track record and ability to amaze and astonish audiences has kept Cirque du Soleil firmly ensconced in its own category of circus performances ever since.
Three other brands mentioned on the website are Stitch Fix, which is a personalized clothing service, HealthMedia, a company that shifted from being a traditional health care company to a digital health coaching company, and Nickel, a French fintech that made the unbanked and lower-income financial consumers its core customers by offering easy, convenient digital banking services. These are all interesting case studies, but they’re also not quite as dramatic as the more familiar brands I just mentioned. All three are essentially companies that found a niche to serve within an existing industry and really focused on it.
And that is a common criticism of the Blue Ocean Strategy – that it’s more of an after the fact description of what worked for some really distinctive industry players than a real strategy anyone can implement. We’ll talk about that in a moment, but let me first explain how the authors say the strategy is supposed to be utilized.
The guiding principle of the Blue Ocean Strategy is Value Innovation, a concept that means searching for both differentiation and low cost. So for example, if I wanted to create a Blue Ocean-style donut business, I wouldn’t want to go for a strategy where I was competing on ingredients or quality or distribution or price – those are all red ocean characteristics.
I’d want to find something I could do that would be truly different, like Voodoo Doughnuts’ approach of making their doughnut shops destinations for hand-crafted doughnuts that include a voodoo doll with red jam inside so you can feel like you’re causing someone pain when you bit into it. They really go all out on their locations and even allow people to get married by saying “I dough” in one of their shops.
And yes, they really do encourage that!
But that’s exactly the strategy that’s made Voodoo Doughnuts locations a destination for travelers. You can get doughnuts anywhere, and many doughnut chains treat their products like they’re not a big deal. Voodoo Doughnuts, on the other hand, celebrates its unique artisan doughnut designs and focuses on providing an amazing customer experience. The Value Innovation comes from offering a low-cost product but making it special and different enough to be distinctive.
But the authors don’t just recommend arriving at that Value Innovation through a flash of inspiration. They offer a four actions framework to help businesses get there. The actions are:
Raise, as in figuring out how to raise the bar in some way,
Eliminate, as in figuring out what is being offered by the current market but really isn’t needed
Reduce, which means looking for ways to lower costs or activities to deliver a better value for the product or service provided
And Create, which means looking for ways to be innovative or stand apart from other key players in the market
With those four actions in mind to establish value innovation, the authors also recommend searching for blue oceans by using what they call the six paths framework. These paths are all basically about redefining your focus on an industry to get away from competitive thinking and to instead think about how you’d like to dare to be different. Maybe you serve a different target market, or partner with different buyers or suppliers, or find complementary products or services to add to your own, or think differently about the functional-emotional state of things or the trends that you can help shape.
The ultimate goal is to break free of traditional competitive thinking and to start thinking instead about defining yourself as something different. And the book and website and Blue Ocean Strategy courses and all sorts of other materials go into great detail about how to put this all into practice.
I personally love the idea of the Blue Ocean Strategy, because it’s quite appealing to see a brand or organization pull it off. Disneyland found its Blue Ocean in rethinking what an amusement park could be, and it wound up being the template for future theme parks as well as one of the most popular and visible in the world.
Tesla redefined what an electric car could be and how it could be sold to consumers. While Tesla is a flawed brand due to its association with the very polarizing Elon Musk, there’s no denying that it stands apart from other auto manufacturers and electronic vehicles by focusing on different features – acceleration, range, driving experience and assisted driving – as opposed to horsepower, fuel efficiency and so forth.,
Airbnb, Uber and Venmo all applied Blue Ocean thinking in determining how they could serve customers differently in stodgy industries like hospitality, transportation and financial transfers. All of them opted for a peer to peer model instead of a more traditional B2C one, and even though they inspired newer competitors as well, they’ve stood out as prominent brands disrupting traditional systems of serving customers.
But let’s go back to criticisms for a moment. Many of the businesses I’ve just mentioned are also known for being disruptors who applied new technology or systems – sometimes in violation of established norms or laws – to simply create shortcuts in places where there were none before. This is less about Blue Ocean thinking than it is about technological innovation, and when the ideas are easily copied by up and coming competitors, red oceans inevitably follow.
There’s also the criticism that Blue Ocean businesses are often tapping into novelty more than they are tapping into a new market and that they have to pivot back to a more conventional strategy once they find a way to stand out.
This certainly has happened with Nintendo, which went from the weird follow-up video game console known as the Wii U to the more conventional Nintendo Switch that basically runs the same games seen on other game consoles.
Likewise, Cirque du Soleil wound up becoming a more sophisticated entertainment company and owns its own ticketing tech system, a multimedia production company, a children’s touring show production company and the companies that produce the Blue Man Group and The Illusionists stage shows. The broader entertainment company also produces live performances for broadcast and even has been involved in producing shows for virtual reality, professional sports, theme parks, lounges, nightclubs and even cruises.
Another prominent criticism of the Blue Ocean Strategy is that timing is everything and that many organizations fail to capitalize on strategies that will work because their timing is wrong. Often, Blue Ocean strategies are the result of a considerable amount of research into consumer wants and needs as well as potential for innovation, but sometimes, the technology or process required to deliver the right value innovation is simply not yet scalable and other times, the idea isn’t marketable enough because it’s not something consumers express a lot of desire for despite its novelty or potential to serve them.
And so I often caution marketers to be Blue Ocean thinkers but not to expect runaway results unless they are going to put in the time and effort to really dig into their ideas and refine them well enough to find a viable target market for them. This often means lots of research and iteration and trial and error. When it works, it can really take off!
But when it fails, it can feel like a costly mistake. And nobody wants that.
I’m Sean in St. Louis, and this has been The Marketing Gateway. See ya next time!
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