Yesterday, we saw some of the counter-instinctive ways to start a business that moves from 0 to 1 as opposed to 1 to n. It was all about building the future.
However, I reckon those type of companies are not going to be many. In fact, the chance of it happening is less than 1%
But, all companies are the same and for the reason they fail – not escaping competition.
This book is by Chan & Reneé, two people I greatly admire their research works; they provide a well detailed and refreshing view on competition. Now, this book is not for one of those anti-capitalism people who do not believe in the idea of free markets or it’s existence.
There are three major types of businesses in a market:
- “Me Too” Business
When I pick up your product or service, I cannot differentiate it with another in the market. This is true when a market is saturated by people who only view the same thing the same way which may still be working, but for how long? You could think about mpesa agents here. When the idea started, most pioneers made millions & sold their businesses. Today, everyone thinks that’s the best option so they also start an mpesa shop (with KCB, Equity … too) – the edge being a prime location.
- “Me Better” Business
Most people from marketing & sales school are trained so well on this they crammed it and passed with flying colors. But marketing does not work in absolutes. When a market is saturated & people just want to dominate by competition, that’s when you know it’s done. Unfortunately, this is when brilliant marketers are fired by many corporations for “more schooled” ones. The new ones come in and bring these crazy fancy ideas. So, instead of beating competition, they court it and try to stand out. A good example is the airline industry.
- “Me Only” Business
This is the blue ocean way. Where you go in the market and disrupt. It can be a zero-to-one model like Facebook or The blue ocean strategy like AirBnB. What is that one thing that only you can do better and have no competitor? That is the blue ocean.
The Blue Ocean strategy is simply coming up with new value innovation focusing on making competition IRRELEVANT.
The hotel industry for long had been a change laggard. When AirBnB was founded, they did not approach hotels, they approached anyone with a free space at home. They changed that to a hotel room. Suddenly, hotels realized they could not compete with people’s houses. For the rigid ones, instead of adapting and also listing on AirBnB, they lowered their costs and improved their services – eating into their margins and slowing expansion which took away their edge. They put themselves in a red ocean.
A red ocean is a market space several companies have already explored and competing in. You are in a red ocean if you are competing for an existing market, aiming to beat competition, and only exploiting existing demands.
A blue ocean, is a market space not contested by anyone for an unknown industry or innovation. To move or be in a blue ocean, you need to create uncontested market space, create and capture new demands and above all, MAKE COMPETITION IRRELEVANT.
The FREE MARKET is like going to war. Survival is the only guarantee of success. That’s what people and governments fail to learn. Also the reason innovation, beats laws and breaks rules.
Marketing is all about perceptions. Before you start a business, think of it like laying down a plan for war. If you fail in your marketing, you have lost your business regardless of any other strengths and weapons in your arsenal.
The blue Ocean Strategy is about critical thinking – having a paradigm shift.
If you are a leader, constantly innovate to beat competition (move from the red to blue ocean). When Snapchap took over social media by storm with their unique idea of “short stories that could disappear after 24 hrs,” many people moved from Instagram to Snap. But IG went on to tweak the Snapchat code so as they don’t breach the patent rights, and introduced Instagram Stories which later scaled to Facebook and Whatsapp. Instagram survived the onslaught, Snapchat now find themselves in competition with Facebook’s IG.
But that is not what happened Uber. You can also disrupt an existing market by thinking differently and creating a paradigm shift that makes COMPETITION IRRELEVANT. Uber saw the taxi industry and made everyone with a car a taxi driver. This made Uber taxi cheaper since it created a new order in a competitive environment by flooding the supply and making demand their constant through taking comissions from drivers & passengers using Uber plartfom for convenience. And as the taxi cartels were soon to discover, they had been out of business and could do nothing about it apart from lowering their prices – a validation of the idea of free markets and capitalism. That in the end; it works for the good of the market when competition improves human life.
In summary, picking the two examples above, the blue ocean strategy operates in two major principles; formulation and execution.
The formulation principles include:
- Focusing on the BIG picture.
- Reconstruction of market boundaries.
- Reaching beyond existing demands.
- Getting the strategy right
To execute the principles you need to:
- Firstly, overcome organization hurdles
- Build execution into STRATERY.
- Align the value, profits and people prepositions.
- Finally, at the end of the cycle – renew the blue ocean. Don’t ever waste too much time in trying to hook a dead fish.
Never strive to beat any market! Don’t fish in dirty chartered waters, sail to still clear blue waters 🤓
I clearly haven’t done this review justice. So, you may want to read this one to figure out the many valuable things I’ve left out – a great book on marketing.
If you’ve read this book, drop your core message in the comments. This book is based on a study of over 100 business start-ups over a period exceeding 15 years. It’s not based on nothing. If you’ve not read it, I highly recommend it to all future entrepreneurs, VCs and investors alike.