Blue Ocean Strategies
A Blue Ocean Strategy was coined by W. Chan Kim and Renee Mauborgne, I read the book its definitely worth a look.
So how would I describe a Blue Ocean Strategy? Its leaving behind the murky cut throat bloody waters to strike out in an uncharted territory where predators and competition are non-existent.
I was having lunch today and came across one such example of a Blue Ocean Strategy: Burger King
Hail to the King baby!
Got that sinking feeling
A few years ago Subway came out with a rather disruptive premise based on a man Jared Fogle who lost 245lbs. eating at the franchise. The advertising promised a healthier fast-food solution that would help customers lose weight. This in its own right was a pretty great Blue Ocean Strategy, as for years fast-food was known more for the grease than goodness.
In just a few short years traditional fast-food franchises stumbled over each other to make up ground on the health food craze.
Why Health Food?
Fast-food has become a juggernaut especially with the rise of two parents being employed at the same time, and as workers began working additional hours. Unfortunately there was a market that is harder to capture for the traditional fast-food fair…… women, who tend to be more concerned about the healthy aspects of the offering.
As all these restaurants moved to target this space, the offerings became more focused on creating offerings that appealed to women.
The King Strikes Back
With its major competitors going health crazy (which is slightly amusing given most of the offerings still are not very healthy) Burger King decided to embrace their traditional offering. Turning their marketing and branding focus towards capturing the males (the traditional audience that was now being left behind).
Viral advertising by Crispin Porter +Bogusky coupled with product offerings like the Angry Whopper, or Burger Shots completely captivated their core audience. I must say just sitting down today to my Angry Whopper with the Most Valuable Bag gimmick I definitely felt that Burger King had hit their audience.
Take Aways: Blue Ocean Strategies remind me of a famous quote from a ballplayer from the early 1900s used to give as advice to new players “Hit ‘em where they ain’t”. We’ll see if the bet pays off for Burger King, but its defiantly a solid differentiation strategy.
After partially making it though the book, I think you may have incorrectly identified this with the Blue Ocean strategy. At a micro level, yes they have tried something different, but at macro level they are still just selling hamburgers. Let’s say for instance, if they found out that these burgers can cure cancer. If they started a new line of burgers that would be dedicated strictly to cancer patients, and did it before McDonalds and Wendy’s arrived, then perhaps you would have a case for blue ocean strategy.
In the eightees, I was part of a group of people who developed medical billing and patient electronic medical records software. This company was the first to really get into electronic medical records, and we were the first to introduce image storing (chest x-rays for example). The billing software market was (and still is) a very cutthroat environment, but the EMR market was non-existant. I have no idea how many copies of this we sold before some of the competitors started getting into it as well. Given my exposure to the material, this would be a better example of blue ocean strategy.
Within the tech world, perhaps the new blue ocean is tablet PCs. Those that are out there are very expensive or lack the features of a full blown PC. Both Apple and Microsoft have toyed around with the idea, but neither really has come up with something that EVERYBODY has to have (like an iPod or Microsoft Office). Microsoft has included this with Window’s 7, but they really lack the direct hardware connection as part of their organization. As a result, they may have positioned Apple in a better spot to jump into this ocean. It really would be a final achievement for Steve Jobs if his engineers could pull it off.
And what happened to the magic table that Microsoft was working on? That thing WOULD definately be a blue ocean. Nobody has that type of functionality, and if they could get it to the market, they would dominate.
I disagree with your assessment but as you’ve stated before I’m a “marketing guy”. My blog post for this morning was going to be about understanding what your product actually is (but that may get pushed back).
I firmly believe a blue ocean strategy isn’t just building a new product its also in positioning a product to meet the needs of an ignored audience. When Subway started there was no such thing as “health fastfood” that then is a Blue Ocean Strategy.
Then when everyone was rushing to create a healthy food menu at their burger joint Burger King said screw it lets double down on unhealthy and target men. I would argue Burger King has done a wonderful job of distancing themselves and adding products that speak to men such as the Angry Burger.
Maybe we’ll agree to disagree.
Ah you read the swan-song for Steve Jobs tablet piece on CNN? Was an interesting article sounds just like your comments.
As far as the big ass magic table “Surface” the problem is cost with that piece of hardware. Interestingly enough they were everywhere in the Vegas bars, but yeah interesting concept need to get the price down to a level where you could see it go mainstream.
Well, I spent time this weekend and finished the book. As you get a bit deeper into it, they do describe it to include new markets for existing products. Again, perhaps the medical software example is a bit better then the burger advertisement. Your example of subway may be a better example as well. It was around the time that they started promoting the health values of their products that New York adopted the transfat ban and McDonalds changed their fry oil (and lost any resemblance of taste to their fries). While Jared may be a tool, that whole marketing line really was blue ocean.
More please on this topic….
Also, I didn’t see the Apple write-up in CNN but I just found it. Interesting that they are similar in several places, but again, I have some more criticisms of what they are doing. I’m afraid to share these with you because you will label me a “hater”. It may demonstrate your inexperience in dealing with scholars who view everything with a critical eye.
I actually referenced Subway specifically because I felt their actions were a Blue Ocean strategy. At the same time their success really moved the entire market which created an opportunity for Burger King to focus on a group left behind by the exodus Subway caused.
Another interesting I don’t really want to call it Blue Ocean but a strategy Subway pulled out that has again moved the entire market was the $5 footlong meal.
This has caused a movement towards a $5 value menu across many competitors including Quiznos, KFC, and others.
They mention two specific tools for developing a blue ocean strategy. First, the strategy canvas (pg 25) would identify the specific characteristics of the marketplace, and map out the opportunity. If you see multiple items that are found only in your product, then it could be a good candidate. Secondly, they mention the four actions framework (pg. 29). These include reduce, create, eliminate and raise factors. One clear example they gave was Yellow Tail wine (pg. 32). Compared to the average premium wine and the average budget wine, Yellow Tail was the only one that offered easy drinking, ease of selection and fun and adventure (debatable of course).
Using these toolkits, Subway is the only one offering the five dollar pricing and the healthy alternative. Viewed as individual events, they would not be a strong case for blue ocean but viewed together as a much larger strategy, one could argue that they are.
Take another section of the book. They discussed the six utility levers (pg 123) that are involved in the customer buying experience and the role of execution (pg. 174). Without direct insight into the internal strategy sessions of Subway it is only speculation; however, it appears that they were intentional in these areas as well. Timing the price cuts for a time when the recession was hitting people was excellent. Also, it appears they have an intentional plan in place for the customer buying experience. Again, well done!
The biggest criticism is that few companies have adopted this strategy formally. We may be simply reading in this idea into a situation where it does not exist. The fact that Subway made the rest of the market respond to these two items seems to lend credibility to the idea that it was blue ocean strategy. Without the internal knowledge of operations at Subway, it would be impossible to confirm.
Good thing you referenced the Yellow Tail example as I’m completely obsessed with that one hah. To be honest I cannot recall all the info as its been a good 2 years since I read it.
I agree we could conceivably consider the price cut as a blue ocean strategy but I’ve always been loath to consider price cuts an effective value strategy (but thats more of a personal bias than anything else).
These could just be coincidences or us reading in this is true but that doesn’t change the value of the example. If someone inadvertently finds a Blue Ocean space we should analyze that because even if it was just right place right time we can still learn from understanding how they deviated and the success it caused.
I’ll fill you in sometime on my own wine blue ocean strategy which unfortunately I haven’t had a chance to get off the ground yet.
Perhaps you have been influenced by Microsoft and Apple too much? Apple is the worst at this one. They have (arguable) great products, and have been revolutionary in the field, but they will not come down on their price. Just imagine if they started offering their low-end MacBooks at a competitive price to some of the low-end garbage Dell and HP puts out there. They would absolutely crush that marketspace.
Price breaks are wonderful things to include in a value strategy. Think of Wal-Mart. They have made a very successful business model undercutting the competition. PRICE is what makes them, because many would agree their products can be very low quality.
See that’s just the problem I see a place like Wal-Mart and I see it as a lack of differentiation that forces them to compete on price. Could just be my bias though, but every time I’ve ever gone into a Wal-Mart I’ve had a terrible experience.
I’d rather pay more for great service, but then again that just makes me service oriented which is outside the market niche they fill which is “cost/value conscious” customers.
If you’ve looked at Apple’s market cap I don’t think there’s a lot to argue with on the strategy of moving the masses to higher end products. In a time where the PC market is being consumed by netbooks Apple has managed to weather the price-conscious storm and has even been gaining market share.
Interesting dialog. Let me posit that Wal-Mart does have differentiation. Other stores will try to specialize in fewer products that have a higher degree of quality. Wal-Mart simply throws a ton of stuff at the consumer in the hopes that they will buy something in the store. That is especially true here in the midwest where they are part supermarket, part retail store, part automotive, etc. Then they put the thing next to a Sams club that offers the same stuff, but in bulk. It is kind of like putting up flak and flying a bomber through it. Eventually you are going to get hit.
One could argue that Microsoft uses a similar strategy. They try to get into everything in the hopes of making something stick. Let me give you a recent example. They make a great mid-tier database product (SQL Server) and they own the desktop office marketplace (MS Access). Well they want to compete with Oracle, and have take some steps in SQL Server to do that (partitioning for example) but they lack a good Business Intelligence product. Their answer was this garbage called SQL Server Reporting Services. It is not bad for small little reporting systems, but if you try to tie it into a data warehouse it completely chokes. They were trying to compete with the likes of Business Objects, Cognos and SAS but really failed on execution. That whole industry is pretty cut throat, and with IBM buying Cognos and BO buying Crystal, you see a trend of consolidation. In short, they tried to dive into the Red Ocean and were eaten by the sharks.
I will go back to my original observations. They do Office really well. If they want to differentiate themselves, then produce enhancements to that product line.
Apple has it’s own problems with this type of strategy. Yes they have done very well, and they continue to see market share and stock price increases, but how much of this company is tied to Jobs? When he is unable to continue to move it forward, they do not have the energetic leader to step into those shoes. Microsoft has that whack-job Balmer, and under him there are a number of competent leaders. Microsoft is also not as closely tied with Gates that his departure would result in a significant loss for the company. They continue to have the high prices, people are losing their jobs at a record pace, and nobody will have the money to buy the product. This is why the cheaper netbook options are very popular. When you only need to update Facebook and post to Nick’s blog, the netbook seems like an extremely tempting proposition.
One final parting shot. I can argue that Lenovo strikes the balance between these two strategies. They focus on a core set of products, and make them technically solid. Instead of trying to be a Wal-Mart, they try to sell a few really good models. Their prices are slightly more then the netbooks, but they are not as high as Apple. As a result, they are striking a good balance between price and functionality. They are also not tied to an individual leader, as some of these other organizations are. Perhaps they are better suited for the long-term?
Now after which I will stumble across a post like this and I’ll recall that there really are even now fascinating pages on the web. ^_^. Thanks.