Despite efforts to differentiate, most companies inevitably end up gravitating towards the same sort of offerings as everyone else in the industry. If one player introduces a product with new features or expands into new markets, the others follow. There may be minor differences in quality or customer service, but in the end, most companies struggle to differentiate and suffer from low margins.
Years ago, W. Chan Kim and Renée Mauborgne introduced a new approach to planning called Blue Ocean Strategy. Its goal is to help you break away from your competitors by developing truly differentiated offerings with the added benefit of a much lower cost structure. Following are four steps you can take to find your “blue ocean”:
- Conduct an inventory of all of the common features you and your competitors offer to your customers. Examples include product specifications, breadth of product offerings, number of locations, approaches to customer service, etc.
- Consider whether there are classes of customers (either current buyers or potential buyers) that do not value all of the features currently offered.
- Now step back and consider whether you could completely eliminate or reduce the features that the customers identified in step 2 do not value. That’s right, think about the potential impact of completely eliminating a feature that everyone else in your industry offers. For example, if everyone else has a physical presence in a market, perhaps you could eliminate that factor and sell online. If your competitors all offer full service to meet the needs of a broad base of customers, perhaps you could introduce self service offerings to target a subset of the market that doesn’t value full service (think IKEA). If everyone else touts geographic reach, you could focus on a handful of local markets, and engage the community in ways that larger players can’t.
- Next, consider introducing new features (or emphasizing existing features) that the customers identified in step 2 might value. For example, in many industries offerings gradually become more complex to meet the needs of larger customers. In circumstances like this you might be able to simplify an offering (introducing a new feature, ease of use) to meet the needs of smaller customers left behind by competitors.
If you do this right, once you are done you should have a unique offering in an uncontested space – your new blue ocean. Additionally, you should have a business with a much lower cost structure, providing you with a cost advantage that you can use to rapidly accumulate market share.
Contact me to learn more about techniques you can use to reinvigorate your strategy.
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