What types of innovations open new markets successfully—and help you grow your business by adding value innovatively? And a related question: are you just thinking business innovation or doing it?
Blue Ocean Strategy shows you how to find uncontested market space which you can own
Blue Ocean Strategy focuses on unlocking new markets, described as "blue oceans," rather than competing in existing markets, or "red oceans." By creating a blue ocean of new customers, businesses don't compete for a small, highly competitive pool of existing customers.
How are you attracting customers?
At SAMC, far too many of our clients are working with the same customers in the same way they have always done...until something happens and those customers float away.
As we work with our Blue Ocean Strategy clients, we repeatedly see some great "aha moments" when they realize that amazing opportunities are often all around them. All they need to do is recognize them. This typically begins when clients go exploring with us to "see, feel and think" in new ways—and it is that "seeing" part that is so important.
I'd like to share two stories here, each of which are available in more detail in my award-winning book, "On the Brink: A Fresh Lens to Take Your Business to New Heights."
2 stories to share
1) Healthcare is a field ripe for innovation. A Midwest hospital we worked with was struggling with a market that was saturated with too many other hospitals very much like them. A safety-net medical center which focuses on the needs of the inner city poor, this hospital also focuses its resources on the needs of women. Women, after all, represent 80% of this medical facility's patients, they have babies, and they more often than not make the healthcare decisions for their families, many of which are female-headed households. So why wouldn't the hospital focus on the obvious? (At least, obvious to us.)
So, if women were their users, who were their non-users who could use them but weren't?
A member of the marketing team went out into the field to see who those non-users or non-customers might be. It didn't take him long to come back with his "aha" moment: that non-user was his father. The man was insured and had medical needs but did not have a physician, rarely went for annual check-ups and cared little about staying healthy. If he had a cold or felt ill, he went to the emergency room and sat and waited until someone would see him.
As a result, what this hospital realized was that only 60% of men have primary care physicians. While its emergency room has 75,000 visits a year, almost 75% of those visits are for non-emergent conditions—like the marketing team member's father with a cold.
Here was a population segment just waiting for someone to care for them. The Cleveland Clinic realized that and started holding annual Men's Health Summits, attracting 5,000 men who came and got annual physicals. We were sure our hospital client could do the same. Did they? Find the answer here in this blog.
2) Manufacturing is another industry which can vastly benefit from Blue Ocean Strategy. Perhaps you are not in healthcare but still want to understand how Blue Ocean Strategy could help your company. If so, here is another case to consider. We were working with the firm Benjamin Obdyke, manufacturer of an innovative house wrap which pulls moisture out of wood so that it doesn't mold or rot. When the 2008 recession hit and housing construction stalled, so did Obdyke. So they reached out to us to help them find their Blue Ocean.
Likewise, who could use them but weren't, and why weren't they?
To answer this question, we took them out exploring, specifically to look at their current customers. What could people use which Obdyke could provide if only they knew their pain points or unmet needs? To find out, we hung out at one of Obdyke's clients to see what they were selling. At other times, we took members of Obdyke's management with us to do culture probes with their current clients in order to understand their challenges.
Slowly we began to gain some important insights into the challenges along Obdyke's entire sales chain. There were really no shortages of unmet needs. The local distributor of Obdyke's products said very simply, "We don't have a growth strategy—we're just waiting for the market to recover. But in fact, we are selling a lot of products to homeowners who have stucco remediation issues. Stucco remediation companies are doing really well for us." When we asked the Obdyke leadership team if stucco remediation companies could be new clients for them, they answered in unison, "Yes. But we've never focused on them."
It didn't take much more probing to realize they were missing a lot of possibilities. Just by getting them to listen to their own customers better, we helped them see new Blue Ocean opportunities that were right in front of them. We also found many new possibilities in their email inbox in the form of new business inquiries that their staff were literally deleting. Read more about how Obdyke turned itself around and went from stalled to soaring in my book.
There 4 types of buyers: existing customers and 3 tiers of non-customers
To find unoccupied market space, the Blue Ocean strategic framework helps companies search for four different types of buyers.
1. Existing customers are customers who are already purchasing your product or service and are happy with it. Focusing on customer satisfaction makes sense intuitively—customers who love and support a business deserve loyalty. Any business that does not take care of its customers will eventually find itself in trouble, and it is far cheaper to keep existing customers happy than to find new ones.
2. First-tier non-customers are customers who are purchasing a product or service but long for a replacement. For a myriad of reasons, these non-customers are stuck. (For example, American cable company customers locked into high-cost contracts with mediocre service for internet connectivity.) When their pain points become too great, entrepreneurs will find a way to rectify the problem with new solutions—think Uber and NetFlix.
3. Second-tier non-customers are customers who actively but inexplicably choose not to buy your product or service. This is typically where businesses find new blue oceans. They are not your competitor's customers—they are potential buyers who are not interested in the product or service no matter who offers it. Blue Ocean Strategy focuses on new offerings that appeals to these non-customers but does not necessarily compete with alternatives.
4. Third-tier non-customers are people who do not appear to have any interest in your product or service. They are unlikely to become a sizable mass of customers but can still provide insight into how to build a successful strategy.