entrepreneurship

What Do You Prefer: a Blue Ocean or a Red Ocean Strategy?

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Blue or Red Ocean Strategy
Blue or Red Ocean Strategy

 

A short note about the advantage of a Blue Ocean Strategy.
Imagine you are going to dive. What is more attractive?

Jumping in to a blood filled red ocean? An ocean full of sharks who are fighting to eat and survive?

Or jumping in to a blue ocean? An ocean where you can swim and there is enough space for growth? Probably you would answer that a blue ocean is far more attractive.

But what about your business model? What strategy are you following? Did you also jump in to a blue ocean when you founded your company? Probably not. It’s very likely that you jumped straight in to a red ocean at that time.

My next question is: why? Why didn’t you jump in to an attractive blue ocean where there is enough space to grow your business? I’ll give an example why you should have considered this.

Cirque du Soleil is a classic example of a successful Blue Ocean Strategy. In 20 years they achieved more revenues than the world’s leading circuses Ringling Bros and Barnum & Bailey had in an entire century!

According to Harvard Business Review (http://hbr.org/2004/10/blue-ocean-strategy/ar/1) this is the explanation of their success:

…any new entrant to this business would be competing against a formidable incumbent that for most of the last century had set the industry standard.

How did Cirque profitably increase revenues by a factor of 22 over the last ten years in such an unattractive environment? The tagline for one of the first Cirque productions is revealing: “We reinvent the circus.”

Cirque did not make its money by competing within the confines of the existing industry or by stealing customers from Ringling and the others. Instead it created uncontested market space that made the competition irrelevant.

It pulled in a whole new group of customers who were traditionally non-customers of the industry—adults and corporate clients who had turned to theatre, opera, or ballet and were, therefore, prepared to pay several times more than the price of a conventional circus ticket for an unprecedented entertainment experience.

 

W. Chan Kim and Renée Mauborgne studied over 150 Blue Ocean strategy examples in over 30 industries. Based on their study they wrote an excellent book about Blue Ocean Strategies. Everyone who wants to create a new market space and a sustainable business model, has to read this book!

This book uses many examples to demonstrate how to break out of traditional competitive strategic thinking. The four principles of Blue Strategic thinking are:

  1. How to create uncontested market space by reconstructing market boundaries
  2. Focusing on the big picture
  3. Reaching beyond existing demand
  4. Getting the strategic sequence right.

 

Five examples of companies that created new market spaces in the opinion of Kim and Mauborgne (source: Wikipedia):

  1. Cirque du Soleil: Blending of opera and ballet with circus format while eliminating star performer and animals
  2. Southwest Airlines: offering flexibility of bus travel at the speed of air travel using secondary airports
  3. Curves: redefining market boundaries between health clubs and home exercise programs for women
  4. Home Depot: offering the prices and range of lumberyard, while offering consumers classes to help them with DIY projects
  5. Dyson: Cyclonic Vacuum Cleaners.

 

Conclusions:

Step back and take a good look at your business model. In which market are you fighting and what are you offering? Try to imagine what the unknown market space, untainted by competition looks like. Start reconstructing your business model to enter the Blue Ocean.

And move from the Red Ocean to the Blue Ocean. It’s a far more rewarding path!

 

I wish you a great Blue Ocean!

 

Do you want to know more? Please take a look at:

Wikipedia:       http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
Website:         http://www.blueoceanstrategy.com/

 

There are a lot of tools that you can use. For 2 very useful tools to start with:

 

Refine your business model with these tools:

 

 

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Strategy of Razer Games: customer experience & excellent product leadership…

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Why is customer experience & product leadership for Razer games so important?

During Start Up Asia 2014 in Singapore Ming-Liang Tan (founder and CEO of Razer) talked about his company Razer (for gamers – by gamers). Razer develops games, hardware and accessories and is the worlds’ leading gaming brand in the world. Razer was founded in 1989 in San Diegio and has 9 offices worldwide.

As a co-founder of startup Tabluu which has just launched an online feedback and social referral tool, I was very curious if Ming-Liang Tan would unfold some secrets of Razors’ success to his audience.

Ming-Liang Tan started immediately with the advantages of developing software:
– Low capital, high expenditure
– Open source possibilities
– Scalable server capacity when hosted in the cloud
– Time spend on smartphones grows enormously
– Software has extremely high margins.

But this isn’t enough to become worlds’ number 1 in the gaming industry. Razer focuses on 2 strategies and executes them with more than 100%:
– Building the best hardware and software products a gamer can buy
– Using a high premium pricing model for maximum investment in R&D for the best product development a gamer can wish.

And after having explained the industry advantages and strategy of Razer, Ming-Liang Tan unfolded the 3 core values on which Razer is build:
1. Mindset: everyone is a team member. Employees, suppliers and customers. Only teams can build the best products!
2. Focus: figure out what not to do. Don’t start something because of starting something. Step back and keep extremely high focused.
3. It’s all about the gamer and his experience: Razer develops, hardware and accessories as well. This fits perfect in their strategy of product leadership.

With these 3 core values, Razer creates the ultimate brand awareness which can be demonstrated by pictures of gamers who wear Razer tattoos:

Razer tattoo
Customers wearing Razer logo’s

How many brands have customers who wear their logo? It’s the ultimate customer loyalty!


Summary:

Razer has a very high standard and listens always to their customers. Customers engage, communicate and anticipate in everything what Razer does.

By creating super products which exceed customers’ expectations, Razer achieved a number 1 position in the gaming world.

In my opinion the best part of this story is that every company can become a leader. By listening to their customers and keeping highly focused on 1 strategy (product leadership, operational excellence or customer intimacy), every company can set a new standard in their industry. And increase their lead over the competition!
Patrick Nelissen, co-founder of Tabluu. The easiest feedback & social referral tool for business owners!

 

PS take a look at Tabluu as well for the easiest online feedback & referral tool!

 

15 First-Time Entrepreneur Misconceptions

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David Cummings on Startups

Entrepreneurs are a unique bunch. So much ambition, optimism, and blissful ignorance all wrapped in a desire to change the world. First-time entrepreneurs are especially exciting as they don’t know what they don’t know, making for even more limitless possibilities.

Here are 15 misconceptions for first-time entrepreneurs:

  1. The destination is more fun than the journey
  2. The initial product idea will be successful
  3. All money is created equal
  4. Things happen fast
  5. Great products sell themselves
  6. If you build it, they will come
  7. Failure to raise money is due to a lack of investors that get it
  8. Culture is one of many items that can be controlled
  9. Timing a market is easy
  10. It’s lonely at the top
  11. Work/life blend isn’t possible
  12. Scaling a business takes the same skills as starting one
  13. No competition is a good thing
  14. Business plans are required
  15. The company with the most funding wins

Often, you have to experience something first-hand to…

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Thoughts on Early Talks With a Potential Acquirer

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David Cummings on Startups

Over the course of the five-and-a-half years Pardot was in business as a standalone company, we received a half dozen overtures from potential acquirers with differing levels of seriousness. After a startup gains quality market traction, potential acquirers will start sniffing around. Now, most of the inquiries are just to gather information for a corp dev spreadsheet, but occasionally there’s more to it.

Here are a few thoughts on early talks with a potential acquirer:

  • Remember that there’s little chance a deal will happen, so try and keep the expectations low (don’t start dreaming of a big pay day as it’s very distracting)
  • Use the interaction with a potential acquirer as a learning experience
  • Even if you don’t want to sell the business, it’s a useful exercise to learn what acquirers look for in a startup
  • Continue to grow the business and don’t lose sight of building a great company
  • Mutual NDAs are standard but…

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