Blue Ocean versus Red Ocean Strategies(1) Blue Ocean versus Red Ocean StrategiesFor the past five decades, competition was in the heart of any corporate strategy. Not only the positions of different managerial positions' naming-chief executive officer, headquarters and other military connotations-strengthen that sense, but reflects the real situation on how business management think, strategize, or envision their intervention to be able to sustain their business in highly competitive environment. In such situations, good analysis of the economic structure, that might include supply/demand ratio and the availability of resources, might generate profit for some, which are active within a specific industry, over others. But still, profit margins have limits as all would be competing on a definite demand scale. The form of strategizing within a definite economic structure, dictated by demand and availability of resources, is termed Red Ocean Strategy. As described by Kim and Mauborgne(1), Red Ocean represents all of the existing industries in a market place.
On the same note and in the past decades, the growth of the communication sector and the number of players in a market arena limited profit and at the same time facilitated the emergence of new industries that created new demand rather than served an existing one. Hence Blue Ocean describes all of the markets that do not exist, whereby the strategizing to create demand and rotate about competition for large and fast profit margins is termed Blue Ocean Strategy, according to Kim and Mauborgne. Blue Ocean Strategies are usually more risky than those developed for well known and definite markets. This is the major reason why despite the profitability margins of blue strategies, most of the world prefers to strive in a competitive yet known return to investment markets, hence contributing to the formation of a larger Red Ocean. Though the Red and Blue Ocean Strategies seem offer two different disciplines of strategizing, they are very interrelated and would constantly feed one another. That is, most of the times, it is the Red Ocean bloody competitiveness is what favors or drive entrepreneurs to foresee and create new and profitable markets. At the same time, new markets, which directly contribute to the Blue Ocean, would draw the attention of investors that want to benefit from the tested and uncovered assumptions and hence would soon turn the blue into red. The table below (adopted from the Blue Ocean Strategy paper; refer to the reference section for more details) summarizes the main difference between Red and Blue Strategies;
Red Ocean Strategy
Blue Ocean Strategy
Compete in an existing market place
Create an uncontested market place
Beat the competition
Make the competition irrelevant
Exploit existing demand
Create and capture new demand
Make the value/cost trade off
Beat the value/cost trade off
Align the whole system of a company's activities with its strategic choice
of differentiation or low cost
(2) Out of the Red and into the Blue ManagementTaking the above mentioned description of the world existing and emerging markets. And taking into consideration that the red was blue and the blue mostly emerges from the red. Change management practitioners and managerial units staff must develop management strategies that would preserve an existing/red market niche (decrease cost while maximizing value) and develop new ones that would pave the way for new profitable demand. That is, management strategies should be able to analyze moves or possible change rather than analyzing the industry or the product alone. As noticed, the blue color refers to innovation. Actually, it refers to this specific innovation that would create a new demand and/or provide alternatives for an already existing market audience. And since innovation brings along change, and change shakes an already existing equilibrium within a highly networked and connected market; it would be essential that innovation realizes several factors that it should be tested upon for it to be successful. In this regard, this research issue rotates about a four framework pillar model(2) while reflecting on a case study for the creation and success of Adobe Company within a highly saturated market with the beasts of software creators. The four pillars of the framework model are:
1. Reason Back from a Target Endgame: envisage and formulate scenarios about future market equilibrium as affected by the intervention of all of the market players as well as potential trends that might arise from the evolution of those markets. This is the major step that would lead to the creation of a successful innovation.
2. Complement Power players: Position your innovation as a complementary product to the most essential products of powerful producers in the a networked market. In this way, you can easily buy power players and hence would assist infuse your innovation rather than resisting it.
3. Offer Coordinated Switching: establish partnerships with market players that would add value to the product and assist in its dissemination and promotion. That is, distribute potential profit.
4. Preserve Flexibility: Design your product and marketing plans to be flexible. That is being able to cope with market changes and evolutions.
The four pillar framework model can be also viewed as a cycle; whereby the first two stages of the cycle are roam in the blue ocean and the two in the red one. it is important to note that blue oceans soon become red, and to maintain innovative thinking, new endgames should be always given room to for the emergence of new blue ones.
As a reflection of the theoretical model is the Adobe Acrobat Portable Document Format Software. An innovation that emerged in the early 1990's in a highly competitive software companies have either failed, remained niche players, or been preserved by giant companies such as Microsoft. In other words, Adobe is a successful blue initiative that emerged from the almost static red ocean. John Warnock and his team started by envisioning the future and elaborating a winner target endgame. They noticed that that most of the electronic documents needed the creator software for reading them, which most of the time the reader might not be interested in buying based on the frequent use. Form this endpoint, Adobe envisioned software that can assist document craters to preserve their creation and readers to be able to read any documents even if they did not possess the creators software.That is, Adobe came to complement power players such as content soft ware creator industry rather than competing with it; whereby Microsoft agreed to integrate Adobe within its software packages as it did not compete with its Office or Explorer software. And as Adobe facilitated the creation of one for all reader software, the very end-user of the software got it for free if in the reader format. This tempted users as well as distributors to adopt this program; therefore, Adobe was able to also coordinate the effort for switching to use the new program. It is also worth to mention that Adobe did not offer its reader version of the software for free. It started by selling the reader to an end-user that did not see his interest in buying the reader version of the program. Moreover, the content creators did not seem to want the product if the reader is not buying the software.
Based on this observation, and after four years of its creation, Adobe realized its benefit is from the creator and was flexible to change its strategy and offer the reader version for free. After five years of implementing this strategy Adobe was able to market more than five million creator copies and was able to disseminate more than 300 million reader-copy of its software.
The successful experience of Adobe and similar initiatives was not only because they were able to envisage the future and find their role. As their future scenarios were full of assumptions, they took the risks. Backed up by the Blue Ocean strategizing scheme, they were able to beat their assumptions and create an evolutionary multi million dollars business in an industry that had no room for new players. That is, and to relate the table presented in the previous section; Adobe was able to initiate their business in an uncontested environment, whereby they were able to rotate about competition by creating a new market demand out of an existing market audience. Furthermore, they managed to beat the value/cost trade and aligned with a whole system of sector like companies and end-users. What is most valuable of their experience is that they concentrated efforts not only to create change but facilitated a new equilibrium afterwards with existing stakeholders.
Think differently and think equilibrium if you wish to succeed infusing your innovation in an interchanging and interdependent world.
