Blue Niche - Growth Mindset

By pjain      Published June 22, 2020, 11:13 p.m. in blog Business-Management   

Blue Ocean Strategy 101 for Companies

Red vs Blue Ocean - New Market Space with Little Competition

  • 86% of of Launches (of 108 studied in the book) had companies treat product development as product line extensions - continuing to make similar products but 62% total revenue rises and only 39% profit from this extension.
  • Red is crowded like feeding frenzy of sharks.

    As red oceans become increasingly bloody, management will need to be concerned with blue oceans than the current cohort of managers is accustomed to.

  • Blue waters are free and open - often zero competition. You’ll be at the forefront of your industry, and you can conquer the world if you so choose. This is what the blue ocean strategy is all about!

  • 14% of Launches (of 108 studied in the book) were blue ocean, 38% had revenue rise, and 61% had profits.

Three laws of blue ocean strategy

These allow us to qualify and validate whether a strategic move is in fact ‘blue':-

  • Challenge the industry’s conventional strategic logic by breaking established rules of competitive engagement;
  • Seek out ‘noncustomers’ and de-segment the market to create large untapped markets, aka ‘blue oceans’; and,
  • Break the value-cost trade-off by pursuing differentiation and low cost simultaneously.

Importance of Blue Strategies for Companies

Why Seek Blue Niches?

New Management Principles and Strategy is Needed

Top Level Management Support is Needed

  1. Blue Oceans and Niches are not accepted by companies as first - seen as risky or too different

  2. Proper planning and execution can help Blue Niches be profitable

Why and How Blue Niches are Created Continually

New Blue Nices Created Continually

Continuing Creation of Blue Oceans

  • 1908 Ford Model T
  • 1970 First Mouse at Xerox PARC - but couldn't monetize
  • 1980 CNN Real-Time News 24/7
  • 1984 Apple Mac
  • 2002 Apple IPOD
  • 2007 Apple iPhone

Technology Change Creates Opportunity

Productivity Rising

Globalization competition - forcing disappearance of niches and monopolies

Supply exceeds Demand

Greater Diversity, Range of Products of Services - New Niches Emerge, Old Disappear

Blue Pioneer Strategic Analysis, Framework

  • Value Innovation vs Incremental vs Stuck-in-Past "Settlers"

1 Positioning Analysis - Identify players/offers

  1. Identify the players in the BROAD market and their products ("Offers") and compare to yours
  2. Settlers : companies to yours, maybe larger, even monopolies, economies of scale - identify them with their "market standard" Offers
  3. Emigrants: Companies with some value improvements or competitive offers that are "above average"
  4. Pioneers: Businesses with Niche and UNIQUE offers - may not appeal to standard fare, but they know something about or target new niche

2 Identify Buyer USP, Value Dimensions

Identify Key factors, Dimensions of Value - beyond Product-Packaging-Price-Promotion

3. Growth-Profit matrix - Find the Drivers, Trends for players/offers

  • Settlers likely to have low growth offers - since part of crowd - all appear same to customer - dominated by price usually
  • Emigrants expect reasonable growth, having a reason for users to seek incremental value
  • Pioneers if they get their niche right, can expect rapid growth AND if well designed, good profits

4. True TAM, expected Market size - Ongoing disruption chances

  • This is where many large companies (settlers) make an error - for example YouTube did a lot of expensive video uploading for free, but 15 years later is highly profitable via ads.

Blue Strategic Frameworks - All very different

  1. The Engelbart Connection

  2. There is NO single strategic framework, or even a custom one that lasts for long. Since they are NEW and DIFFERENT, they don't conform to any management theory or framework. So you need to be very adaptable.

Buyer Experience Analysis Process

  • Together they form a grid to help analyze existing entrants and openings for blue ocean strategies

Buyer Experience Cycle

The Buyer Experience is a process or a cycle in six phases from purchase to disposal. - Similarly there is a set of dimensions of utility key factors

  1. Purchase
  2. Delivery
  3. Use
  4. Supplements, Accessories
  5. Maintenance
  6. Disposal, Version upgrade

You can create market research questions

Buyer Utility Levers Analysis

Buyer Utility Levers/Factors include such things as ..

  1. Customer Productivity
  2. Simplicity
  3. Convenience
  4. Risk
  5. Fun and Image/Status boosting
  6. Environmental/Sustainability/Social Approval

Analyze Obstacles in Buyer Cycle

  • You need to answer what are the obstacles

Factors Analysis Raise-Reduce-Eliminate-Create

You can define a new value curve for your business. A "Four Actions" framework requires you to answer these key questions or brainstorm ideas.

  1. Raise: Which factors should be raised well above the industry’s standard?

  2. Reduce: Which factors should be reduced well below the industry’s standard?

  3. Eliminate: Which factors that the industry has long competed on should be eliminated?

  4. Create: Which factors should be created that the industry has never offered?

Creativity in Buyer Utility Value Innovation

As you analyze the Buyer UX and Value chain, filling in the full matrix would point to opportunities and new buyer benefits within the market segments.

But there is scope for lots of idea generation. Also, obvious why there would be gaps/unmet segments

Customer Conversion Funnels for New Niches

New niches will also need new Customer Conversion Funnels

Blue Niche Practical Strategy Pragmatics

Be Different - Find a Different Niche

Value Innovation needed

What is happening? Simultaneous Pursuit of Differentiation as well as High Margin yet Low Cost needed

Value innovation is vital in rapidly changing Blue Niches.

  • instead of focusing on beating the competition, focus on making it irrelevant by creating a LEAP IN VALUE for the customer - IN THAT NICHE!
  • Must align innovation to utility, price and cost and must time entry accordingly

Timing is critical

  • Must time entry accordingly

NEW Problem: TAM, Nature of Market Changes

Faster and More Courage Needed

The blue ocean strategy is not for the fainthearted. The work and analysis you need to do upfront aren’t going to be simple. The rewards, however, will be more than worth it.

Evolution of Product Strategy from - 4Ps to Industry to Strategic Moves

Crafting higher Profits in Blue Oceans, not Pioneering/Seed Losses

Examples and Cases

Blue Oceans over time

  • 1908 Ford Model T
  • 1970 First Mouse at Xerox PARC - but couldn't monetize
  • 1980 CNN Real-Time News 24/7

Apple in High-end Consumer Electronics

  • 1984 Apple Mac
  • 2002 Apple IPOD
  • iTunes launch to monetize services, music delivery.
  • 2007 Apple iPhone

Apple already had tens of millions of PCs, but nowhere close to the billions of consumer electronic devices.

  1. Friction of Going to store to buy CD/Tape.

  2. HIT SONGS on radio. "Girls just want to listen to music on radio".

  3. Exploit to PIRACY fears by studios from P2P services. Apple observed the flood of illegal music file sharing that began in the late 1990s, enabled by file sharing programs such as Napster, Kazaa, and LimeWire. By 2003 more than two billion illegal music files were being traded every month. While the recording industry fought to stop the cannibalization of physical CDs, illegal digital music downloading continued to grow.

  4. TECH CHANGE - Digital Music. With the technology out there for anyone to digitally download music free, the trend toward digital music was clear.

  5. Apple had already launched iPod - Huge success. The trend to digital music was underscored by the fast-growing demand for MP3 players that played mobile digital music, such as Apple’s hit iPod. Apple capitalized on this decisive trend with a clear trajectory with the creation of iTunes in 2003.

  6. One Song vs Expensive CDs to get at one song = BUYER EXPERIENCE/Value Proposition. By allowing people to buy individual songs and strategically pricing them far more reasonably, iTunes broke a key customer annoyance factor: the need to purchase an entire CD when they wanted only one or two songs on it.

  7. Use Greed to get Studios to Sign Distribution. In agreement with five major music companies—BMG, EMI Group, Sony, Universal Music Group, and Warner Brothers Records— iTunes offered legal, easy-to-use, and flexible à la carte song downloads.

  8. Divide and conquer for left over - Disney eg Brittany Spears was not an original signatory - but later conceded as they lost too many sales by not being involved.

  9. CREATE: QUALTY, New Digital EASE. iTunes also provided a leap in value beyond free downloading services via sound quality as well as intuitive navigation, search and browsing functions.

Apple was successful in capturing the growing demand of music for users on the go. All the available Apple products have iTunes for users to download music.

Cirque du Soleil

The circus industry is no longer as popular as it once was. The traditional circus catered to kids. But nowadays, there are literally tons of entertainment options kids can choose from (video games, anyone?). However, Cirque du Soleil reinvented the circus and gave it a new, exciting format. Now, both kids and adults can enjoy the circus and experience first-class entertainment!

Southwest Airlines - Bus for the Air

Instead of competing with other airlines (hub to all cities/international), Southwest employed the blue ocean strategy by positioning itself as a competitor to land-based travel (bus from cherry-picked point to point).

Now, people who avoided flying (and preferred driving or riding the bus) due to expensive plane tickets could finally fly on the cheap and get to their destinations quickly.

Ryan Air (European Low cost airline)

Nintendo WII

Resources

Books

  • Blue Ocean Strategy- hv

  • Blue Ocean Shift - Beyond Competing - 2017 by W. Chan Kim and Renée Mauborgne - hv

Web Sites


0 comments

There are no comments yet

Add new comment

Similar posts

Product Market Fit

e Document formats and Conversion

Politics and Social Networks

Blog7: Viral Promotion of Posts SERIES