Advocates of change
Before the global economic collapse in 2007, Wawa perfected 3 separate businesses on one piece of property! Wawa was selling fuel, selling convenience store goods and selling food service. In fact Wawa's volumes were some of the highest in the 3 industry combined. Wawa inside sales was thrice to 7-eleven, a major competitor and they had some of the highest gas volumes in the country. However the marketplace was converging, and it was becoming a bloody red.
They needed to take Wawa game plan to a new level. They adopted tools, process and frameworks to their business and created a new strategic plan. They said to themselves, currently we are a gasoline retailer in a convenience retailer that happens to sell food service but to get into uncontested market space they felt they needed to be a restaurant that happened to sell fuel and happen to sell convenience goods.
That was a huge change in the way they thought about their business. They completely re-engineered their processes to deliver quality food service fast. They expanded the product line with fresh healthy products. There never been a restaurant in the country that was outstanding in terms of freshness quality and appetite appeal that also sold fuel.
They partnered with some of the best logistic suppliers in the nation to provide low-cost in speed that enabled Wawa's customers to have a great selection for breakfast, lunch and dinner and by not having drive-through or inside seating they were able to save costs and create a win-win situation for their customers. Wawa employees own 40% of the company through an employee stock ownership program. They are committed to putting a shift in action selling MORE as a partner, than merely an employee! Wawa was recognized as a restaurant and they've been given awards for innovation in the restaurant industry and recently even appeared in a wine and food magazine. What made them so popular, and why? Read on.
But, before we begin,
Imagine a market universe composed of 2 sorts of oceans - red and blue. Red oceans represent all the industries in existence today this is known market space. Blue oceans denote all the industries not in existence today. This is the unknown market space. In the red oceans industry boundaries are defined & accepted and the competitive rules of the game are known here. Companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded. the prospects for profit and growth are reduced. Products become commodities and cutthroat competition turn the red ocean bloody.
Continue to challenge everything you thought you knew about competing in today's crowded marketplace with strategic moves by creating untapped new market space ripe from growth. Business has caught on for many who adapts change and companies around the world are skipping the bloody red oceans filled with competitors both small/large and creating their own blue oceans.
Blue oceans in contrast are defined by untapped market space. Demand creation and the opportunity for highly profitable growth. Although some public oceans are created well beyond existing industry boundaries, more are created from within red oceans by expanding existing industry boundaries. In blue oceans, competition is irrelevant. The rules of the game are waiting to be set it and will always be important to swim successfully in the red ocean by out competing rivals. Red oceans will always matter and be a fact of business life.
The supply exceeding demand in more industries competing for a share of contracting markets or necessarily will not be sufficient to sustain high performance companies. Competitors will feel the necessity to create blue oceans and put the clock forward 20 years or perhaps 50. How many unknown industries will likely exist then? The need to be competing needs to be beyond competing to seize new profit and growth opportunities. If you are 10x better than your biggest competitor in a new niche, its a BLUE!
Value innovation is the cornerstone of the blue ocean strategy. Instead of focusing on beating the competition you focus on making the competition irrelevant by creating a leap in value for buyers and your company. You are opening up new and uncontested market space in the process. Value innovation places equal emphasis on "worth-it" factor, the substance and creativity. Value without innovation tends to focus on value creation on an incremental scale something that proves value but is not sufficient to make you stand out in the marketplace. Innovation without value tends to be technology driven, market pioneering or futuristic, often shooting beyond what buyers are ready to accept and pay for.
Cost savings are made by eliminating and reducing the factors the industry competes on by a value that is lifted by raising and creating elements the industry has never offered over time. With reduced cost, scaling economics kick-in. Due to the high sales volumes, superior value generates a new uncontested market space, that far has no agreed competition.
Blue ocean strategy should be about risk minimization and not risk taken. The key questions to challenge an industry - strategic logic and business model. Which of the factors that the industry takes for granted should be eliminated, to which factors should be reduced well below the industry standard and which factors should be raised well above the industry standard and for which factors should be created that the industry has never offered to reconstruct market boundaries.
Look across alternative industries.
Do sellers think consciously about how the customers make trade-offs across alternative industries? For example – NetJets strategic question was "Why would corporations choose one alternative industry over another?" By focusing on the key factors that led corporations to trade across alternatives, they are eliminating or reducing everything at risk. NetJets created a stratrgy for corporations to choose commercial airlines for only one reason COST. NetJets offered its customers a part ownership of an aircraft to be shared with fifteen other customers each entitled to 50 hours of flight time per year. Customers get the convenience of a private jet at the price of a commercial airline ticket.
Look across the strategic groups within industries.
Most companies focus on improving their competitive position within a "strategic group". Mercedes, BMW and Jaguar, for example focus on out competing one another in the luxury car segment, as economy car makers struggle on selling more cars over one another, the strategic group at its inception is defined. The moral: Define the boundary.
Curves were seen as entering an oversaturated market earning its offering to customers who would not want one and making its offering a significant blander than the competition's in reality however Curves exploded the men-dominated US fitness industry, unlocking a huge market of women struggling and failing to keep in shape. Curves built on the decisive advantage of 2 strategic groups. Traditional health clubs and home exercise programs. It eliminated or reduced everything else.
Look across the chain of buyers.
In most industries, competitors converge around a common definition of 'who' the target buyer is in reality. Though there is a chain of buyers who are directly or indirectly involved in the buying decision purchases, and users influences. Find what influenced them to buy your product in the first place.
Look across complementary product and service offerings.
Top value is often hidden in complementary products and services, the key is to define the total solution buyers seek. Rember how McDonalds upsell coke and fries with every burger? When you choose a product or service a simple way to do so is to think about what happens, before, during and after your product is used.
In the kettle industry, quality of water was not its problem, but one company decided to own the problem of another industry - removing impurities from public tap water. Philips created a kettle having a mouth filter that effectively removed the lime scale as the water was poured. Likewise, babysitting or carwashing are something so essential before people can go to the movies at a car parking.
Part of what the customer needs is to get two jobs done at the cost of one. What is the context in which your product or service is used? What happens before, during and after? Can you identify the pain points? Can you eliminate these pain points through a complementary product or service offering?
Look across a functional or emotional appeal to buyers.
Does your industry compete on functionality or emotional appeal? If you compete on emotional appeal what elements can you strip out of it to make it functional? If you compete on functionality what elements can be added to make it emotional?
Walk across time.
A key customer annoyance factor the need to purchase an entire product when they wanted only one or two features on it. What trends have a high probability of impact in your industry are versatile and are evolving in a clear trajectory? How are these trends impact your industry? Given this, how can you open up unprecedented customer utility reach beyond existing users? Think for non-customers before your actual customers.
Don't convince yourself you can grow into a big fish in a small pond. Swim to a new space. Don't repeat the classic strategy of building a moat with what you know, it never works. Even after beating all small players, if you even manage to be the largest fish, you are still battling all the odds of losing your status quo, and starving yourselves to death in a red ocean. In a unsaturated market, there is no absolute necessity to be ranking #1. Beating your neighbouring competitor is just not enough. Relate this with search keywords for content, and you may gain a deeper prespective why long tail keywords, though harder to rank on search, and why it will be easier on competition!
What if you are able to find an environment within a space that is untapped? What if you build your moat in a space that makes your competitors less relevant over time, and disrupts your markets? How can you be the only person in the space of what you do, and dominate a space that makes others irrelevant? How do you differentiate from your competitors?
Did you know, Nutured leads end up spending 47% more, on average. Lead outsourcing is 43% more efficient than in-house generation. Is it worth your time? Consumers have more choices today than ever, and there are so many competitors entering your marketspace on a daily basis. 55% B2B buyers search for info on social media. (Source: Blender).
"Quit trying to do what everyone else does only a little bit better. And instead do something entirely new." - Source W. Chan Kim and Renee Mauborgne, BOS book. If history is any predictor of the future the answer is a lot in in the numbers. 86% of launches were line extensions, incremental improvements within the red ocean to existing market space. They accounted for 62% of total revenues, and 39% of total profits. In short, stop fighting for share in an existing niche, but rather look for opportunities that allow the creation of a new niches. Empower yourselves to think differently.
If you are trying to swim a muddled lake, with lot of fish. This is a deeply saturated market, and often referred as red ocean. Would you continue to battle with the business in a saturated market, or try creating a new one? Don't be a small fish in a red ocean.
What color is your strategy?
Why do some companies suceeed, why others don't. Lack of market focus one, lack of tools to do sales in the relevant market, people elements & more.
The big problem with this changing your market is a mindset issue. Try getting new vendors/suppliers. Try getting new audience/customers/people. Try getting new products/services. The strategy is a product of all these changes. But, a big question is how to add all these blue oceans without causing any disruptions internally. Distruption is one form of innovation. It requires adjustments like non-deceptive creation. Take the micro-financing industry, which never was scalable few decades ago. Many innovators had lack of access to capital & this was disruptive. When you provide a breakthrough solution to an exisiting problem, the new obviously replaces the old. When you see a new opportunity, a brand new problem to be solved, a new lead, the approach will not disruptive to the exisiting sales.
- Test the commercial viability of your idea.
- Maximize your profits, and lower risks
- Be grounded on DATA
- Build exectuion to strategy
- Create win-win outcomes
- Pursue differentiation and low cost
- Create uncontested marketspace
- Empower with process, tools, & frameworks
CitizenM a netherlands-based hotel chain in Times square NYC offers affordable luxury 5-star comfort at a 3-star price, the ocean they are swimming now is deep blue. Really uncontested. Wawa, happened to be a gas station, who started selling food in restaruant, and now they are the other way around. They are so popular chain of bistros known to also sell gas - Uncontested market, yes? Dear readers, what’s a good example of Blue Ocean strategy you know.
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