Creating Blue Oceans

Join my Blue Ocean Party: Nokia’s leap to customer-driven innovation

We’ve written previously about the advantages garnered by customer-driven innovation — most notably with Lego’s Mindstorms.  Now it seems that the world’s largest maker of mobile phones, Nokia, has dialed-up a similar success with the introduction of Nokia Beta Labs — a website where the Finnish handset maker lets users test the latest smartphone software — thus allowing it to gain valuable insight into buyer feedback and ideas from around the world.   

From BusinessWeek:

That's the kind of insight that engineers stuck in a Finnish lab usually can't get. But since Nokia launched the Beta Labs Web site last year, with Sports Tracker as the debut application, it has tested some 20 not-quite-ready-for-prime-time programs directly with users. Other applications have included the latest version of a program that allows users to download maps onto their handsets, and a program that lets people get access to data on their handsets remotely via a PC Web browser.

The site generates more than 1 million page views and about 200,000 downloads a month, according to Nokia. Thousands of users contribute comments. "We are having the positive problem of how to manage all the feedback," says Tommi Vilkamo, manager of Beta Labs.

[Image via Nokia Beta Labs.]

The reinvention or demise of traditional media?

On May 6th and 7th, media and marketing sales executives gathered in Austin, Texas, for the annual Marketing Technology Summit.  The event was organized by CSS, a consulting and training firm specializing in supporting the needs of media, advertising, and marketing sales organizations.

As the featured guest speaker, Gabor delivered the Blue Ocean Strategy keynote address to the audience of 100 media and marketing decision makers.

The central theme of the Marketing Technology Summit was to consider the profound impact of digitalization on media and marketing.  As Gabor’s presentation revealed, the Blue Ocean message of reconstructing market boundaries and its systematic methodology for achieving new market space is highly relevant to traditional media — whose core existence is being challenged by external forces.  With consumers increasingly tied to their mobile devices and the Internet, and advertisers increasingly reaching out to them directly, media companies must find new ways of engaging both.

A copy of the CSS Marketing Technology Summit agenda is available here.  More information about the Center for Sales Strategy is available here.

[Image via Dr. Snafu.]

Blue Ocean Strategy: Third-Tier Noncustomers

Continuing in our series on reaching beyond existing demand, our focus shifts to Third-Tier Noncustomers. Once featured, each entry is then accessible through the Blue Ocean Strategy Basics section of this site.  For an overview of Third-Tier Noncustomers, we turn to pages 109 — 110 of the book Blue Ocean Strategy (co-authored by Professors W. Chan Kim and Renée Mauborgne):

The third tier of noncustomers is the farthest away from an industry’s existing customers. Typically, these unexplored noncustomers have not been targeted or thought of as potential customers by any player in the industry. That’s because their needs and the business opportunities associated with them have somehow always been assumed to belong to other markets.

It would drive many companies crazy to know how many third-tier noncustomers they are forfeiting. Just think of the long-held assumption that tooth whitening was a service provided exclusively by dentists and not by oral care consumer-product companies. Consequently, oral care companies, until recently, never looked at the needs of these noncustomers. When they did, they found an ocean of latent demand waiting to be tapped; they also found that they had the capability to deliver safe, high quality, low-cost tooth whitening solutions, and the market exploded.

This potential applies to most industries.

[Image via James Gordon.]

Spinning to the beat of Blue Ocean Strategy

Radio executives, Deejays and aspiring musicians may wish to take special note of today’s story — about a Deejay turned radio executive and how Blue Ocean Strategy has given her the inspiration to continuously create new opportunities.  The story comes from the Wall Street Journal online which recently published a short interview with Ann Lim, vice president of media conglomerate Singapore Press Holdings Ltd. — operating two entertainment radio stations — Radio 100.3 in Mandarin and Radio 91.3 in English.

From the WSJ interview:

WSJ: Do you have a favorite business book?

Ms. Lim: "Blue Ocean Strategy" by W. Chan Kim and Renée Mauborgne. Both are professors who are teaching at Insead. The book teaches one important philosophy: One has to learn to create new opportunities. However, if you realize everyone else can do what you are doing, it's probably not much of an opportunity. This advice is particularly useful for me, as I am in the creative industry.

[Image via m4ffi4.]

HP creates bigger, bluer oceans by “taking back”

We’ve previously written about HP’s innovative recycling practice being a part of its core strategy.  Now, in a video interview with Business Week, Renee St. Denis, Director of “Project Takeback” at Hewlett Packard, gives us some further insight as to how the program works. 

Tune into the video here.

Blue Ocean Strategy: Second-Tier Noncustomers

Continuing in our series on reaching beyond existing demand, our focus shifts to Second-Tier Noncustomers. Once featured, each entry is made accessible through the Blue Ocean Strategy Basics archive of our site.  For an overview of Second-Tier Noncustomers, we turn to pages 104 — 106 of the book Blue Ocean Strategy (co-authored by Professors W. Chan Kim and Renée Mauborgne):

These are refusing noncustomers, people who either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means. Their needs are either dealt with by other means or ignored. Harboring within refusing noncustomers, however, is an ocean of untapped demand waiting to be released.

Consider how JCDecaux, a vendor of French outdoor advertising space, pulled the mass of refusing noncustomers into its market. Before JCDecaux created a new concept in outdoor advertising called “street furniture” in 1964, the outdoor advertising industry included billboards and transport advertisement. Billboards typically were located on city outskirts and along roads where traffic quickly passed by; transport advertisement comprised panels on buses and taxies, which again people caught sight of only as they whizzed by.

This gave it the idea to provide street furniture, including maintenance and upkeep, free to municipalities. JCDecaux figured that as long as the revenue generated from selling ad space exceeded the costs of providing and maintaining the furniture at an attractive profit margin, the company would be on a trajectory of strong, profitable growth. Accordingly, street furniture was created that would integrate advertising panels. In this way, JCDecaux created a breakthrough in value for second- tier noncustomers, the municipalities, and itself. The strategy eliminated cities’ traditional costs associated with urban furniture. In return for free products and services, JCDecaux gained the exclusive right to display advertisements on the street furniture located in downtown areas. By making ads available in city centers, the company significantly increased the average exposure time, improving the recall capabilities of this advertising medium. The increase in exposure time also permitted richer contents and more complex messages. Moreover, as the maintainer of the urban furniture, JCDecaux could help advertisers roll out their campaigns in two to three days, as opposed to fifteen days of rollout time for traditional billboard campaigns.

In response to JCDecaux’s exceptional value offering, the mass of refusing noncustomers flocked to the industry…. Today, JCDecaux is the number one street furniture-based ad space provider worldwide.

[Image via Gothamist.]

Competition Beware: Nintendo introduces WiiWare

“Eventually, however, almost every blue ocean strategy will be imitated. As imitators try to grab a share of your blue ocean, you typically launch offenses to defend your hard-earned customer base. But imitators often persist. Obsessed with hanging on to market share, you may fall into the trap of competing, racing to beat the new competition. Over time, the competition, and not the buyer, may come to occupy the center of your strategic thought and actions.  If you stay on this course, the basic shape of your value curve will begin to converge with those of the competition.”  From the page 188 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

This week we are looking at two powerful examples of continuous Blue Ocean creation which come from Nintendo’s highly successful and best-selling Nintendo Wii.  Today, for our second example, we turn to the opening of the WiiWare channel.  Nintendo’s Blue Ocean Strategy approach with WiiWare, shared on both the B2C and B2B fronts, positions it to create a whole new marketspace of appreciative gameplayers as well as game developers.

From BusinessWeek:

The WiiWare Channel will allow users to download new games by independent developers for the first time.

The result: a low-cost development model for Nintendo and a larger cast of independent game creators. The upside for developers? Zero production and distribution costs, which normally consume about a third of spending. Selling via the WiiWare Channel "is like having the minimum bet at a casino lowered," says Seigai Kou, development director for Arc System Works in Yokohama, Japan.

And for Nintendo? By giving indies a low-cost outlet, the company expands the games roster for Wii users. It's betting developers will price WiiWare games low, which would appeal to the Wii's eclectic base of customers and help shore up console and software sales as the economy slows. "WiiWare is designed so a big idea can succeed without a big budget," says Tom Prata, senior director of project development at Nintendo of America.

[Image via YouTube.]

Get Fit, Stay Blue

“Creating Blue Oceans is not a static achievement but a dynamic process. Once a company creates a blue ocean and its powerful performance consequences are known, sooner or later imitators appear on the horizon. The question is, how soon or late will they come? Put differently, how easy or difficult is blue ocean strategy to imitate?”  From  page 185 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

This week we have two powerful examples for our readers of continuous Blue Ocean creation which come from Nintendo’s highly successful and best-selling Nintendo Wii.  Today, we start with the latest iteration, the Nintendo Wii Fit.  It seems that with the launch of the Wii Fit, Nintendo looks fit to capture an entirely new marketspace — those interested in health and exercise.  Be sure to turn in tomorrow for our second example.

From the Nintendo website:

The active-play phenomenon started by Wii Sports now spreads to your whole body thanks to the pressure-sensitive Wii Balance Board (name not final), which comes packed with Wii Fit. The board is used for an extensive array of fun and dynamic activities, including aerobics, yoga, muscle stretches and games. Many of these activities focus towards providing a "core" workout, a popular exercise method that emphasizes slower, controlled motions. Family members will have fun staying active and talking about and comparing their results and progress on a new channel on the Wii Menu.

In fact, in advance of its arrival in the USA, the Wii Fit has already been a hit in Japan where it has sold over a quarter of a million copies during the first week it was launched in December 2007.  And by the end of March 2008 it had sold almost 2 million copies there. 

Blue Ocean Strategy: First-Tier Noncustomers

Continuing in our series which takes a closer look at reaching beyond existing demand, our focus advances to the First-Tier Noncustomers. Once featured, each entry is made accessible through the Blue Ocean Strategy Basics archive of our site.  For an overview of First-Tier Noncustomers, we turn to pages 104 — 106 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

These soon-to-be noncustomers are those who minimally use the current market offerings to get by as they search for something better. Upon finding any better alternative, they will eagerly jump ship. In this sense, they sit on the edge of the market. A market becomes stagnant and develops a growth problem as the number of soon-to-be noncustomers increases. Yet locked within these first-tier noncustomers is an ocean of untapped demand waiting to be released.

Consider how Pret A Manger, a British fast-food chain that opened in 1988, has expanded its blue ocean by tapping into the huge latent demand of first-tier noncustomers. Before Pret, professionals in European city centers principally frequented restaurants for lunch. Sit-down restaurants offered a nice meal and setting. However, the number of first-tier noncustomers was high and rising. Growing concerns over the need for healthy eating gave people second thoughts about eating out in restaurants. And professionals did not always have time for a sit-down meal. Some restaurants were also too expensive for lunch on a daily basis. So professionals were increasingly grabbing something on the run, bringing a brown bag from home, or even skipping lunch.

These first-tier noncustomers were in search of better solutions. Although there were numerous differences across them, they shared three key commonalities: They wanted lunch fast, they wanted it fresh and healthy, and they wanted it at a reasonable price.

The insight gained from the commonalities across these first-tier noncustomers shed light on how Pret could unlock and aggregate untapped demand. The Pret formula is simple. It offers restaurant-quality sandwiches made fresh every day from only the finest ingredients, and it makes the food available at a speed that is faster than that of restaurants and even fast food. It also delivers this in a sleek setting at reasonable prices.

[Image via VWVortex.]

Blue Ocean Strategy goes to the movies

We were recently tipped about a company in the USA which is bringing Blue Ocean Strategy to the movies—literally. Opening in 2009 and for US$ 35 a ticket, Gold Class Cinemas will offer customers a ticket to a first-run movie, valet parking, a seat in a cushy US$ 3,000 recliner and a waiter at just a button-push away – creating a compelling new mix of entertainment experience for movie buffs.

It seems that Gold Class Cinemas has tapped Blue Ocean Strategy as a source of inspiration given the significant overlap with Path 4—looking across complementary products and service offerings—from the Blue Ocean Strategy Six Paths Framework (which we highlighted previously). In fact, the book cites the movie industry as an example of how to look across complementary products and service offerings. From page 65 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

Take movie theaters. The ease and cost of getting a babysitter and parking the car affect the perceived value of going to the movies. Yet these complementary services are beyond the bounds of the movie theater industry as it has been traditionally defined. Few cinema operators worry about how hard or costly it is for people to get babysitters. But they should, because it affects demand for their business. Imagine a movie theater with a babysitting service.

[Image via twenty_questions.]