fbpx

How to innovate and create demand for your product using the 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, on average 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 was $850 in 1908 which got reduced to $600 by 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 the options for a customer in this price range 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 the 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 the Blue Ocean Strategy where you focus on value innovation which helps you capture a segment where no competition exists. Let us discuss this strategy in detail and how you can be the next one to benefit from it.

Why do we say that market is like an ocean?

Since we are discussing the concept of the Blue Ocean Strategy, you may wonder why we use the word ocean. Well, your market is an ocean that is divided into two areas- Red and Blue. Red, as the name indicates, is the part where a lot of competitive products exist and it is, therefore, difficult to make your product stand out. The market in the red ocean is crowded and is on the verge or 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 an unsaturated area and with the right business strategy, you find ways to gain market space without competing with anyone. You focus on creating a product with high differentiation and low cost. Additionally, this is where innovation will give a new direction to your organization. 

As a result, your product shifts from the crowded red ocean where a cutthroat war is going on to the blue ocean. All this gives you an early mover advantage while making the competition irrelevant.

Which Components help you create Blue Ocean Shift?

The Blue Ocean Strategy sounds simple but to implement it, various components play an essential role. Here are some components that will help you make a shift from red to blue ocean.

Mindset:

The first component 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-how” to where the opportunity lies”. At times the red ocean seems to be safer since the market is already tested. While, the blue ocean needs exploring out of the comfort zone, and hence, changing the mindset is essential to build a Blue Ocean strategy.

The right research:

The next component is to research the market in the right direction to successfully move forward. You wish to make billions and know a revolution needs to be brought. You have achieved the mindset required and are all set.

But if you do not know how to move forward with the right research and with the right team at your side, you can never bring your Blue Ocean perspective into existence! Through GreyB’s Open Innovation services, you can avail guidance on how to move forward.

Human-ness:

The third and last component aligns with 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 a “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 in newspapers 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 the Ford Model T which I provided at the beginning of the article is an example.

Expert suggestion for R&D to avoid a red ocean trap 

Undoubtedly, R&D is a key driver of the 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 into the red than the blue ocean.

Hence, Tech leaders should focus on value innovation instead of technological innovation. The products resulting from their R&D efforts should offer their consumers a leap in value. 

iTunes, 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 not a value one. Because, instead of providing value, it raised privacy concerns among its consumers. The result was that even before it would have shifted from early adopters 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

Blue Ocean strategy is more than just developing a strategy or implementing a single initiative. Right from performing market research to directing the innovation in the right direction, you can contact the GreyB team for the best game plan.

Authored by: Annie Sharma, Marketing team

Leave a Comment