Last year, I spoke at Casual Connect in Tel Aviv about Blue Ocean Strategy in the game space (see presentation below) and multiple people commented to me how this approach was great but too risky. The belief is that while overall Blue Ocean strategy would be the best approach, it was too risky from a career perspective to pursue. What they missed, and what I obviously failed to convey during the presentation, is that it is actually less risky to pursue a Blue Ocean strategy than a traditional strategy.
The core of Blue Ocean Strategy is that rather than trying to win against entrenched competitors you find and target uncontested market space where the competition is irrelevant. Red oceans are a known market space with many competitors where you fight for market share. In red oceans, it is all about beat the competition and exploiting existing demand. Blue oceans is an unknown market with few competitors where you are creating market share.
Why people think Blue Ocean is riskier
The reason many people feel that red oceans are less risky is the fact that you are competing in a known rather than unknown market space. The unknown is always scary, be it going into space or a haunted house. In many ways, it is scarier in business where people must make their own decisions rather than basing decisions on what somebody else has done successfully. People thus transfer this fear of the unknown to Blue Ocean being a riskier strategy.
The reality, however, is that it is riskier to follow a Red Ocean strategy of trying to “win” against your competitors. The Blue Ocean Institute at Insead can point you to multiple academic studies that show Blue Ocean strategy has a higher ROI than traditional Red Ocean competition. While you can be successful following a Red Ocean strategy (there are myriad examples of companies that have dominated their space by competing better than their peers, such as Disney, Exxon and GE), overall the results from pursuing a Blue Ocean strategy are likely to surpass the results of competing in a Red Ocean. Bringing it back to the risk assessment, your personal professional position is more secure the better your results. At the end of the day, the leaders who deliver the most appealing P&L are the ones who survive and advance (had to drop in that phrase given the upcoming NCAA Tournament).
Some might argue these statistics are a long term play and in the short term it is still riskier to try something new than just tried to beat your competitors on the battlefield. The long term results play out over time but a Blue Ocean strategy creates the opportunity for a quick debacle, if you launch a completely new approach and it shows no traction.
Again, the reality does not justify the fears. It is not that a Blue Ocean strategy has no risks, since it is a new approach there may not be a market for it, but Red Ocean strategies are also incredibly risky. Competitors are smart and always improving. Copying their strategies will always leave you behind them and the gap between you and your competitors is likely to widen.
The Zynga example
Zynga provides a great example of both Blue Ocean success and Red Ocean failure. When Zynga first launched in 2007, it was a Blue Ocean company. Rather than competing the game space by creating more beautiful games or spending more on advertising, they brought a new business model to the United States, free-to-play gaming (they may not have been the first but they were among the first, so let’s not get hung up on this). Moreover, rather than compete in traditional channels with other game companies, i.e. Circuit City, Egghead, Best Buy, etc., they focused on Facebook as their primary channel. The result was a company that at one point had a valuation over $10 billion and saw many leaders enjoy very appealing compensation.
In the last few years, Zynga’s strategy has apparently evolved into winning against other social game companies. They would see successful games and fast follow. Without going into too much detail, in the time I was there I saw the leadership of almost every game team (outside of our slots products) turn over at an incredible pace, with some game teams going through 2-4 General Managers in less than two years. If you compare the job security (and thus amount of risk faced) between Zynga in the Blue Ocean days and the Red Ocean days, the Blue Ocean was clearly a less risky period.
The bottom line is that business is risky. Yes, Blue Ocean strategy may fail and you can lose your job. Red Ocean strategy, however, also can fail and leave you in an equally precarious situation. Given the evidence that Blue Ocean strategy yields superior results to Red Ocean and results drive your personal professional success, Blue Ocean is actually the less risky strategy to pursue.
- While most agree that a Blue Ocean strategy has the highest long-term returns, many fear it is too risky to pursue from a personal career perspective.
- The reality is that it is actually the less risky approach, as the underlying odds favor success via a Blue Ocean approach.
- Given the challenges of trying to win in a competitive industry, finding an uncontested market and growing it is a less risky approach.
4 thoughts on “Why Blue Ocean is actually the safe route”
Unfortunately, the great majority of game developers and small-to-medium sized publishers rely upon outside investment to finance new projects. Those investors respond MUCH better to pitches involving past success stories, compared what they inevitably consider pie-in-the-sky dreams.
Therefore, the organizations with the resources to pursue such strategies are limited to those with significant cash reserves from past successes. Only firms with insanely mature and experienced management have the bravery and vision to undertake Blue Ocean thinking. Most successes, especially in the tech space, not to mention game space, double-down on what they believe they know and understand. Zynga is a great example. I would argue the immaturity and inexperience of the top few management levels almost inevitably doomed the company, not to mention an over-abundance of hubris.
In the game industry, it is nearly impossible distinguish between a “reasonable” Blue Ocean strategy and a “my dream game” personal crusade. This is further obscured by the personal charisma of “famous game designers” who spend more time burnishing their public image than actually building games.
VR devices are interesting example. Every system I’ve tried relies on the assumption that people don’t have significant near-sighted or far-sighted vision, not to mention astigmatism. Yet 75% of American adults use some sort of vision correction, and 64% of American adults actually wear glasses. For this audience, any 3D vision gadgetry, be it 3D movies, 3D TV, or VR headsets, can cause varying levels of discomfort. Is this a big enough obstacle to turn a “blue ocean” into a doomed crusade?