My pet peeve this week (and it wouldn’t be a good week if I didn’t have something to complain about) is how many people (entrepreneurs, VC, executive management, etc.) reference “Blue Ocean” without understanding the key concepts (and value) behind it. I have found the book Blue Ocean Strategy by W Chan Kim the most useful business book I have ever read (the most enjoyable was Dan Ariely’s Predictably Irrational).
Developing and implementing a blue ocean strategy involves four crucial actions: eliminate, raise, reduce and create. These are changes to your existing product or a way a market segment is approached. To put it in the context of social gaming (hence, the title of this blog), let’s say you found a market segment you considered underserved, for example teen agers. To pursue a blue ocean strategy targeting this segment
- the first step would be to eliminate. As teenagers are generally more tech savvy than typical social gamers, you might eliminate tutorials.
- The next step is raise, that is increase something in the product so it appeals more to this segment. Since teens are more comfortable with traditional gaming, you might increase the Player vs Player (PvP) elements and add IP that is popular for teens.
- The third step is to reduce. In this example, since you are increasing the use of IP, you can probably reduce your performance marketing (Facebook) ad spend.
- Finally, you need to create, that is add in new functionality for the target audience. If you are creating products for the teen market, maybe you would add in chat and music features, since they are both quite important to this market.
Above is how you should attack a potential opportunity to create an effective blue ocean strategy. Unfortunately, what most companies and investors think of when they refer to a blue ocean, is finding a market where there is not competition. The problem with this simplification is that you usually create an offering that is easy for others to compete with (hence, turning it quickly into a red ocean) or one that your competition beats you to (there are other issues also too but I don’t want to overly bore you).
There are no shortcuts when developing strategy. Taking the simple or fastest way will usually lead to an undefendable position or just failure. If you do take the time and energy, however, to go through the steps to create a real blue ocean, you are on the path to become the next Zynga (which did it in the gaming space) or Spotify (which did it in the music space).