How to innovate and create demand for your product using Blue Ocean Strategy?
Before Ford’s Model T was introduced in 1908, the 500 automakers in America were building customized Novelty cars only. Even though numerous automakers were there, the automobile industry was small and produced cars were unappealing and overpriced. The cost of a single automobile back then was $1500, averagely twice the annual salary of Americans.
The model T came out in 1908, had only one color (black) and solved all the disputes with price and reliability. The Model T cost $850 in 1908 which got reduced to $600 by next year, 1909, with a tagline in their brochure proclaiming “Watch the Ford Go By, High Priced Quality in a Low Priced Car.” As cars were also easy to repair, the cost dropped down to $240 by the end of 1924.
Ford called it an automobile “for the great multitude, constructed of the best materials.” The price was friendly, the design was standardized, parts were interchangeable and options a customer had were limited. Ford’s model T replaced the skilled and creative labor with normal unskilled ones by executing a small task, time and again with more efficiency. It was made easier by building an assembly line. The idea was taken from a slaughterhouse where carcasses were hung on hooks mounted on a movable monorail. Cross-industry innovation did wonders here and Ford developed world’s first assembly line on the production grounds of model-T which decreased the labor hours by 60%.
Ford’s triumph was constructed using a highly profitable business model. His Model is one of the best examples of innovations following Blue Ocean Strategy where you focus on value innovation which helps you capture a segment where no competition exists.
Your market is an Ocean
Your market is an ocean divided into two areas- Red and Blue. Red, as the name indicates, is the part where a lot of competitive products exist. The market in the red ocean is crowded and is on the verge or is already saturated. Products become commodities and your organizational growths, as well as revenues, degrade if not fought tooth and nail with the competitors.
Blue Ocean, on the other hand, is a business strategy under which you find ways to gain market space without competing with anyone. You focus on creating a product with high differentiation and of low cost.
It helps you innovate and gives a new direction to your organization. This new direction takes you away from the crowded red ocean where a cutthroat war is going on. All this give you an early mover advantage while making competition irrelevant.
Which Components help you create Blue Ocean Shift?
The first component you need is to expand your mental horizons. Open your mind to accept challenges leading to major discoveries. This strategy will compel you to “shift your know-hows” to where the opportunity lies”.
Here are few idea generation strategies – SCAMPER, Morphological Analysis – that can help you expand your mental horizons to find the blue ocean in the red one.
Next component is to have the required tools to successfully move forward. Here comes one of the most challenging aspects of Blue Ocean Strategy. You wish to make billions and know a revolution needs to be brought. You have achieved the mindset required and all set to.
But what if you have an inadequacy in the requisite intelligence-generating tools and proper guidance to use them? You can never bring your Blue Ocean perspective to existence! Here is one tool that can help you in the pursuit: How NorthStar helps improve your research focus?
The third and last component aligns with the humanistic behavior. Something you call “human-ness”. Now, you’ll be standing in need of the next step – after a luminous idea, a clear strategy and the best tools to have a new value-cost frontier.
That step would be creating confidence in people that work for you, inspiring them so as to have their volunteering cooperation and ultimately generating “don’t give up no matter what” attitude in them. The article, Blue Ocean Leadership, on HBR captures the essence of the leadership strategy you should follow.
Two approaches to creating a blue ocean in your market
Demand is created rather than fought over. There can be numerous opportunities that need to be innovated in or around your business to have both, rapid growth and huge revenues.
In order to create a blue ocean, you can follow two distinct approaches. The first one is creating an entirely new market just like eBay did with its online auction industry. They followed a concept that was floating far away from their ocean.
Before they sailed their boat in 1995, in order to sell the unwanted stuff, a person had to release a newspaper advertisement. The ads had no visuals of the product and were limited to a two-liner description only. After the launch of their market-changing tool, the sellers hopped on to eBay’s online paid services from the free adverts on newspaper and made the company hit a turnover of $16 billion by 2013.
In the second you create a blue ocean out of a highly crowded red ocean. It’s done by coming up with an idea that pushes the existing boundaries of your business. The example of Ford Model T which I provided at the beginning of the article is an example.
A red ocean trap R&D should avoid
“Right”, R&D is a key driver of growth of an organization and in exploiting the blue ocean strategy. Sometimes leaders confuse technological innovation with market creation. This leads to channelizing R&D in the wrong direction and falling in the red than the blue ocean.
Tech leaders, hence, instead of focusing on technological innovation should focus on value innovation. The products resulting from their R&D efforts should offer their consumers a leap in the value. iTune, for example, was a value innovation which at a time when artists were frustrated with copyright infringements and consumers with the hassle of purchasing the whole album to listen to a song, solved both issues.
On the other hand, Google Glass was a technological innovation and a value one. Instead of providing value, it raised privacy concerns among its consumers. The result was that even before it would have shifted from early adopter to mainstream consumers; it got banned in bars, movie theaters, hospitals, and classrooms.
“I found that it was not very useful for very much, and it tended to disturb people around me that I have this thing.”
~ James Katz, Director of Emerging Media Studies, Boston University on usage of Google Glass