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How to Make Competition Irrelevant

The fundamentals you need to know about Blue Ocean Strategy.

Tracy Lee Nicol

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The authors

W Chan Kim and Renée Mauborgne are the authors of Blue Ocean Strategy, first published in 2005. It’s a business management and organisational strategy book based on a Harvard Business Review article by the same authors.

The theory in a sentence

Blue ocean strategy illustrates how companies can break away from traditional models of competition (red ocean) by creating a new and uncontested market space (blue ocean) – making competition irrelevant.

But changing strategy involves risk. Why go there?

There is a rising need for creating blue oceans in business. Improved technology has increased industrial productivity and the array of products and services.

And, the trend toward globalisation means supply exceeds demand, information on products and prices are instantly available, price wars ensue and profit margins shrink. When products and services are forced by competition to become similar, consumers increasingly select based on price.

Need more incentive?

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Look at this graph. The authors studied 108 companies and found 86% of their launches were line extensions – incremental improvements within a red ocean market space. But, these new launches only accounted for 62% of revenue impact and 38% of total profits. By contrast, 14% of the launches aimed at blue oceans generated 38% of total revenues and 61% of total profits

How to make your own blue ocean

Fundamentally, blue oceans use strategic logic called value innovation. Value without innovation focuses on incremental value creation – at the end of the day you won’t stand out in the market place. Innovation without value tends to be technology-driven, market pioneering or futuristic, shooting beyond what customers are ready to accept and pay for. Value innovation occurs only when companies align innovation with utility, price and cost position.

  • CONVENTIONAL BELIEF: Companies can create greater value for customers through higher cost or reasonable value at lower cost.
  • BLUE OCEAN FACT: Industries and companies pursue differentiation and low cost simultaneously.

 Here’s an example

Cirque du Soleil started out in Canada in 1984. Since then it’s been seen by over 40 million people in 90 cities around the world. In 20 years it achieved a level of revenue that took circus industry giants Ringling Bros. and Barnum & Bailey more than 100 years to attain.

How is this possible in a declining industry? Cirque didn’t compete; instead it created an uncontested new market space of theatre meets circus that made the competition irrelevant. It appealed to a whole new group of customers: Adults and corporate clients prepared to pay a higher price for an unprecedented entertainment experience.

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  1. Reconstruct market boundaries to create commercially compelling blue oceans. How?  Blue ocean companies need to look across alternative industries, strategic groups, buyer groups, complementary product and service offerings, the functional-emotional orientation of an industry, and even across time.
  2. Focus on the big picture, not the numbers Most strategic planning is based on red oceans, driving companies to compete within existing market space. Drawing a strategy canvas visualises a company’s current strategic position and helps it chart its future strategy.
  3. Reach beyond existing demand Don’t fall into the trap of finer market segmentation, this risks creating too-small target markets. Instead, look to non-customers and build on commonalities in what buyers value. This allows companies to reach beyond existing demand to unlock a new mass of customers that didn’t exist before.
  4. Get the strategic sequence right By fleshing out and validating blue ocean ideas to determine their commercial viability, you dramatically reduce business model risk. Your company therefore needs to build strategy in the right sequence.

To be big you need to think big. What you need to know about thinking like a big business: Click Here

 

Tracy-Lee Nicol is an experienced business writer and magazine editor. She was awarded a Masters degree with distinction from Rhodes university in 2010, and in the time since has honed her business acumen and writing skills profiling some of South Africa's most successful entrepreneurs, CEOs, franchisees and franchisors.Find her on Google+.

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Start-up Advice

6 Resources For Start-ups Looking For Funding

Here are 6 online resources that can help you pay the bills and grow your business at the same time.

Josh Althuser

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Anyone who has ever considered starting their own business, or is currently in the process of doing so, knows that every little bit helps when it comes to making ends meet. Part of the charm of start-up culture is the low-budget creative atmosphere that seems to continually fuel innovation. But, eventually you’re going to have to keep the lights on and water running, and you can’t do that with creativity alone.

Whether you are a business that is just starting out, or already well on your way, there are plenty of online platforms that offer start-ups advice and funding opportunities. Here are 6 online resources that can help you pay the bills and grow your business at the same time.

1. Kickstarter

kickstarter-logoAt one point it seemed that anyone with a clever idea could make a video showing why the world should invest in the next big thing. While a lot of crazy projects have gotten funded over the years, utilising a crowdfunding platforms like Kickstarter continues to be a viable way to get your project off the ground. Of course, if you want to reach your funding goals, it’s best that you have already done your market research, have a solid plan, and treat crowdfunding like a global VC.

Visit Kickstarter here.

Related: 4 Tips To Secure Funding For Your Start-up

2. Toptal

toptal-logoThose who are new to the start-up world might not know exactly where to start when it comes to looking for funding. While the freelance economy has grown immensely in the last 5 years, it’s important to know where to look.

Platforms like Toptal offer a wide range of freelance professionals that specialise start-up funding. Start-ups seeking a consultant on Toptal can also rest easy knowing that they carefully screen each candidate, ensuring they have the necessary professional background and experience to guarantee a successful project. 

Visit Toptal here.

3. Appbackr

appbackrIf you couldn’t already tell by the name, appbacker is definitely worth checking out if you are a start-up working in app technology for both Android and Iphone. The platform helps people discover different apps through the crowdsourcing model. Investors can scroll through apps from around the world, and if they like what they see, they can choose to invest. Funding incentive is based on an investor’s ability to purchase an app at the wholesale price, eventually making a profit once the app starts flying off the shelves in the official app store.

Visit Appbackr here.

Related: 7 Strategies For Development As An Entrepreneur

4. Gust

Gust logoInvestors are more likely to invest locally, which is why Gust is an attractive option for start-ups around the world, as they represent over eighty countries worldwide. Founded by a team of investors and lawyers, Gust knows their way around the start-up world.

With portals for both start-ups and investors, the platform seamlessly connects those seeking funds and those looking to invest. Start-ups can create a profile on Gust, and also have access to tools and tips to help them regulate finances and legal matters. 

Visit Gust here.

5. AngelList

angellist-logoNot just for investment, although that is a major part of the platform, AngelList is also a great place to find start-up jobs as well as recruitment. Those start-ups that are looking to expand can greatly benefit from this feature, while also getting their name out there to potential investors.

Their syndicate platform, led by technology experts make room for those who are looking to invest the chance to apply to a lead or directly invest in a fund.

Visit AngelList here.

Related: 6 Steps To Building A Million-Dollar Ecommerce Site In 60 Days

6. Seedrs

seedrs-logoFrom top corporations to big name accelerators, Seedrs aims to simplify the funding process for investors. Providing a vast network of investors from 48 different countries, who tap into an additionally impressive network of start-ups, there is plenty of room for collaboration on this platform. Seeders also encourages investors and start-ups to continue their relationship after the transaction is made. Their online and offline networks aim keep both start-ups and investors in the loop.

Depending at what stage of development your company has currently reached, exploring various funding options available to you is a worthwhile endeavour. Rather than blindly pitching investors, investigating each potential platform, whether it’s crowdfunding or a hiring a freelance funding expert, will save you time and resources so you can focus on the right type of investment based on your needs.

Visit Seedrs here.

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Start-up Advice

Picking Your Lane: Maximising Your Chances Of Success And Happiness

How do you choose? What do you prioritise? What’s right for me is almost certainly not right for you.

Anthony Miller

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Most entrepreneurs start businesses out of necessity.  They do what they have to.  They don’t think far ahead.  They fight fires every day.  They are the foundation of every economy all over the world.  Some succeed, some fail, few shoot the lights out.  Some are happy, some are not.

For me, there’s nothing more thrilling than building a business.  Seeing your ideas turn into reality.  Seeing your team exceed your expectations every day.  Seeing your customers’ lives improved by your products.

But, entrepreneurship is not for the faint-hearted.  You pour blood and sweat and tears into your business.  You get more than your fair share of punches in the nose.  It’s hard, but if you’re lucky and you persevere, the rewards are great.

So, how do you maximise your chances of getting into the ‘happy and shooting the lights out’ club?

Related: 9 Quotes Every Entrepreneur Should Live By

Picking the right lane – figuring out what you’re going to do – is probably the most important decision you’ll make.  Once you’ve figured that out, you can get down to the nitty gritty of picking your team and building your business.

But, how do you choose?  What do you prioritise?  What’s right for me is almost certainly not right for you.

sweet-spot-modelThe Sweet Spot Model, which has been drifting around the web for years, provides great guidance.  If you do what you love, the hard yards won’t feel like work.  If you do what you’re good at, you’ll beat or (even better) outstrip the competition.  If you provide something the world needs, you’ll feel a sense of purpose.  If someone will pay for it, you have a business.

When I co-founded Simply, I wanted to tick all 4 boxes AND work from Cape Town AND be extremely flexible (so I could prioritise family health).

I worked on three different ideas: A GIS-platform for solar and other utilities; a transaction platform for stokvels; and a cheeky online life insurance play.

The life insurance play quickly emerged as my best choice (it helped that my partners are top actuaries J):

  1. What I’m good at – doing start-ups, connecting people and teams, and using technology and data to solve business problems.
  2. What I love – working with people I like and trust to build businesses that solve hard problems and make the world a better place.
  3. What the world needs – most adult South Africans have one or more funeral policies. Few have life or disability cover and policies are often very expensive.  There’s a clear need for simple, convenient, well-priced life, disability and funeral cover.
  4. What someone will pay for – the market we’re targeting is huge – nearly R7.5Bn of new premium is written annually.

Related: 7 Strategies For Development As An Entrepreneur

With the stars lining up, we pressed the go button in early 2016.  It’s now twelve months since we launched to market and early signs are good:

  1. Our innovative, online products – Family Cover, Domestic Cover and Group Cover – have been well received and are improving all the time.
  2. We have an amazing, engaged team – inspired by the purpose of protecting vulnerable people.
  3. We’ve sold more than 4 500 policies to date, providing more than R2.5Bn of cover to more than 20,000 people.
  4. We’re based in Cape Town, working hard and having fun, and I seldom miss a swimming gala, netball game or opportunity to go mountain biking.

While picking the right lane is no guarantee of success, it definitely helps stack the odds in your favour. You’re going to need all the help you can get. So, take the time to pick your lane. I bet it’ll be worth the effort.

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Start-up Advice

9 Quotes Every Entrepreneur Should Live By

Entrepreneurship takes great perseverance. Failure is common. In fact, it is expected. Over 75% of venture-backed start-ups fail.

Jennifer Keithson

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Entrepreneurship takes great perseverance. Failure is common. In fact, it is expected. Over 75% of venture-backed start-ups fail.

There are great learning opportunities that present themselves when we fail, but we must be willing to continue on and try again in order to learn anything at all.

It can be quite an arduous task to strive for your own means, to create your own vision and to rally the support within yourself that starting and running your own business requires.

Thankfully, we’re not in it alone. The wisdom of others can greatly ameliorate the process learning from our missteps and hiccups.

Taking from sagacious investors, inventors and thinkers can help you pick yourself up and make something meaningful out of your quest to become a successful entrepreneur.

By studying the thought processes of other entrepreneurs, we can become more enriched and more aware of how to approach the challenges we face in business and in life.

Here are 9 quotes every entrepreneur should live by:

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