Show notes from Podcast Episode 52.
I’m sure you’ve heard of the “blue ocean strategy”. It was coined by W. Chan Kim in his book of the same name and expanded in the more recent book “blue ocean shift”.
The concept makes a lot of sense on the surface. A red ocean is an overcrowded market with cutthroat competition.
The books main premise is that there is a third area to compete beyond price and value – finding a new untapped market through innovation.
The blue ocean is a market without competition. Instead of competing head to head with other companies you find a new untapped market and take it all for yourself. You innovate and add value in a totally new way to create a league of your own. You create a new market through creative disruption. Overcome old technology to gain a huge competitive advantage.
Like so many of the big business books of today there is a big selection bias in this book.
Cirque du Soleil is the main case study. They got away from the ultra competitive red ocean circus industry and invented an entirely new type of entertainment. It moved from a red ocean to a blue ocean. It had no competition and the market all to itself.
It also uses Pfizer’s Viagra. A totally new market right? They also spent and gambled billions. Who the heck has that kind of power?
It also uses Apple. Yet another Apple case study! The iPod was genius. The iPhone was genius. Pure innovation and they had a market cornered. How the hell am I supposed to do this as a inexperienced entrepreneur without world class talents?
What about the millions of other new inventions that didn’t prove to fill a real need?
What is the better approach? Inventing a new type of circus or a staying away from the circus business all together if its oversaturated and a race to the bottom?
This strategy might work great for fortune 500 companies with massive capital and influence. They can afford to bring new products to market. They can afford to spend millions a year in R&D. They can take risks funded by the core business operations.
Blue oceans are incredibly expensive to develop. The customers don’t know you exist. You have to educate a market. The marketing spend can be massive. All in the “hopes” that there is actually a need.
There aren’t enough of them to go around. If you spend your time and energy trying to find a blue ocean you’ll likely end up spending years sitting on your hands or failing over and over again.
Books like this propagate this “idea fallacy” that is the foundation of modern entrepreneurship culture. What is your business idea? Whats your differentiator? Have you found your blue ocean?
I personally believe this is the wrong way to look at entrepreneurship if you want to have a shot to actually get something going and start the ball rolling.
Entrepreneurship is about momentum. Its about starting really small and getting your feet wet. Something simple. Something local. Something other companies are already doing and customers are already on the market.
The successful entrepreneurs aren’t great at spotting ideas – they are great at spotting opportunities and they have the decision making skills to figure out which ones to chase.
The same people looking for ideas are the ones that are trying to figure out how to find their blue ocean. They believe competition is bad. They are looking for a market or a niche or a product they can enter and have all to themselves. Thats the essence of an idea and thats not how most successful entrepreneurs operate.
This type of mindset is what leads people to never taking a leap. Always sitting on their hands waiting for the next big blue ocean idea. Failing over and over again because the odds are against them and never actually becoming an entrepreneur.
I like thinking about every market as a pie. Can I get a piece of the pie and how big would that piece be?
I laugh when people ask me what my original business idea was. It wasn’t an idea. It was a current market with businesses and customers all already out there doing their thing. I looked at it and studied it and thought hey this is an opportunity. I could carve out some of this pie because I can do it a little bit better than the businesses out here doing it. I could probably replace a salary with it and maybe more.
There is a framework for building a decent business. How to market. How to manage. How to organize it all. If you can do these things well you can win in almost any market. Targeting a market thats growing and has weak competition is just icing on the cake.
You’ll never agree with 100% of what you read in any book. You have to look at them with an open mind and take bits and pieces and apply them the right way. This book has some gems.
What did I take from the book?
Find the balance between a red ocean and a blue ocean.
Avoid the ultra competitive markets that aren’t growing. Avoid competing on a global scale. Avoid selling or depending on someone esle’s platform (Amazon).
Differentiate yourself so you do not need to compete on price. If you try to do the exact same thing in the exact same way as all of your competitors you are in a red ocean. You are competing on price and there will always be somebody willing to work a crap load of hours and be super stressed out all the time for $50k a year.
Any market can be a red ocean if you choose to let it be.
Find a pink ocean.
A market that exists. A problem that is already being solved by a handful of companies. A market that is growing every day. A market with weak competition. A market that you can study. A local market that doesn’t compete on a global scale. A market where you can carve out a piece of the pie and build a great business.
Blue Ocean also uses Group Seb’s ActiFry as a big case study of brilliant innovation. A fryer that only uses a tablespoon of oil to make french fries. Instead of risking millions trying to do what nobody has ever done why not just start selling french friers when fries are getting popular and the market is exploding?
Forget blue ocean. Spot opportunities where you can carve out your piece of the pie. Start small. Get momentum and enjoy the larger and larger opportunities that come your way.