Creating Blue Oceans for Your Product
Radical Innovation Cuts Through Competition
This is an era of competition, when companies are fighting over holding on to market shares, retaining loyal customers, attracting the prospects and bonding with channel partners. With every passing day, the competition is getting more and more intense. Only the fittest could survive this, who is able to curve a niche in the consumers' minds. Innovation, thus, becomes the key success factor. When Sony came up with Walkman, it initiated a revolution. With other brands of portable personal stereos coming later into the market, Sony, however, never has lost its position and image among the consumers.
The Red Ocean
Every innovation, however radical it might be, never can stop being imitated. That is why, after a certain gestation period, every market gets clogged with me-too products, fighting fiercely with one another, and eventually biting at the innovator's share of the market pie. This is where the concept of 'Red Ocean' creeps in. All the competitive and marketing warfare strategies and even the famous generic strategies of Porter focus on and serve the Red oceans.
The Blue Ocean
A blue ocean, in contrast, is a divergent method of positioning strategy where demand is created and not competed for. A radical innovation, thus starts in a Blue ocean making competition irrelevant. The trick lies in creating compelling products to get out of the vicious cycle of commodity competition. Although the term Blue Oceans is new, their existence is not. In fact, most Blue Oceans are created from within, not beyond, Red oceans of existing industries.
The Radical Innovation
The difference between incremental innovation, which marketers are regularly opting for to confront the fast changing preference patterns of their existing customers and to ward off competitors in the Red Ocean scenario, and radical innovation, lies in the degree of 'radical ness' and the amount of risk involved.
How 'Radical ness' is Developed
A radically innovative product addresses a new clientele, either by developing something beyond the current business context of the company, or by identifying the gaps between its current market offers or by repackaging an existing technology or product concept in a uniquely new (radical) way. The more radical an innovation is, the more is the chance of emergence of a new market.
The Blue Ocean and Radical Innovation
Value innovation is created when a company's actions favorably affect both its cost structure and its value proposition to buyers. Eliminating competitive factors decreases cost. Creating elements that the industry has never offered increases buyer value. Over time, costs are reduced further because of economies of scale due to the high sales volumes that superior value generates. In case of radical innovation, the strategic aim is to create new best-practice rules by breaking the existing value-cost trade-off and thereby creating radical offers that target and serve Blue Oceans.
Expanse of Blue Ocean
Companies that create Blue Oceans can go uncontested for 10 -15 years. This is because they can create sufficient economic and cognitive barriers towards imitation. The economic barrier is in form of economies of scale leaving new entrants at a cost disadvantage. The cognitive barriers are created through establishment of brand loyalty among customers, which is, in turn, a result of accentuated value.
Bibliography:
Chan Kim and Mauborgne R. (2004), "Blue Ocean Strategy", HBR, October, 76-84
Dahlin Kristina and Behrens Dean (2005), "When Is An Invention Really Radical? Defining and Operationalizing Technological Radicalness", Research Policy, Vol. 34, pp. 717-737, available at http://www-935.ibm.com/services/sg/igs/pdf/vn-strategy-canv.pdf
Blue Ocean
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