by John Rau, President of Ultra-Research, Inc. in Anaheim, CA, and our August 2009 Seminar Speaker
In their article entitled “Blue Ocean Strategy” in the October 2004 issue of the Harvard Business Review, W. Chan Kim and Renee Mauborgne define the business universe as consisting of two distinct kinds of space, referred to as red and blue oceans.
According to Kim and Mauborgne, “red oceans represent all the industries in existence today”. Furthermore,
“In red oceans, industry boundaries are defined
and accepted, and the competitive rules of the
game are well understood. Here, companies try
to outperform their rivals in order to grab a
greater share of existing demand. As the space
gets more and more crowded, prospects for
profits and growth are reduced. Products turn
into commodities, and increasing competition
turns the water bloody”.
If you have an idea for an invention that will compete with existing products and a well-defined market space, then you’re navigating the red ocean where it will be more difficult and challenging to be successful. Examples would include inventions that are marginal or incremental improvements to already existing products.
When you’re in the red ocean, the “infrastructure” already exists for products like yours in the sense that there are already established distribution channels, the market space is generally well-defined and understood, the customers/users are known, the suppliers and developers of like products are known, patents and claims are already documented, like or similar products are available for analysis and comparison, the value (sales and orders) of the market space is well documented, and licensing candidates are generally more easier to find.
If like or similar products are already being produced by one or two companies that dominate the market space, then you’re in the red ocean. Someone is already there. They’ve beat you to the market! They now “own it”!
If the total market value (sales and orders) for products like yours is relatively small and/or there are already numerous companies providing products in this market area, then you’re in the red ocean.
If you have the “mine is better” mindset and the market space, i.e. the users of like products, doesn’t really care or need a better way of doing it, then you’re in the red ocean.
On the other hand, according to Kim and Mauborgne:
“Blue oceans denote all the industries not in
existence today—the unknown market space,
untainted by competition. In blue oceans,
demand is created rather than fought over.
There is ample opportunity for growth that
is both profitable and rapid.”
Depending on the nature of your invention idea, you may have the opportunity to be more successful and reap greater profits if you’re navigating the blue ocean.
When you’re in the blue ocean, you are in potentially uncharted territory. The market “niche” is not necessarily totally understood and/or well defined. You’re not sure who the potential competitors may be and how these entities might react to the introduction of your product idea. It is, however, a great opportunity for “first to market entry”, but, as a consequence, it may be more difficult and/or challenging to find licensing candidates.
To “navigate the blue ocean” may require “thinking outside the box”. Come up with an idea that isn’t necessarily a better way to do something that is already being done and where you must compete in a defined
and limited market space. For example, in his “Think Big” article in the January 2000 issue of Business Start-Ups, Nick D’Alto suggests:
· “Imagine a restaurant with no waiters, no tables and no silverware. (You just described the first McDonalds.)
· Imagine a bookstore with no books. (You just created Amazon.com.)
· Imagine a glue that hardly sticks at all. (You just invented Post-its.)”
The difference is that in the red ocean your invention will be competing in existing market space and exploiting existing demand whereas in the blue ocean you are creating an uncontested market space and creating and capturing new demand.
To put things in perspective, in the June 2006 issue of Quirk’s Marketing Research Review, it is mentioned that, according to Chicago-based Mintel Custom Solutions, “more than 156,000 new products took their spot on store shelves around the world in 2005”, which “equated to approximately one new product introduction globally every three minutes in 2005.” With this type of competitive environment, you really need to know whether you are in the red ocean or the blue ocean as you “chart the course” for your new idea or invention.
If you believe you’re in the blue ocean when in reality you’re in the red ocean, then you’re in for a real
surprise! That’s why market research is so critical in the invention development process. You need to know where you are (that is the “color of the water” you are trying to navigate) and what you need to do in order to be successful as there is a different set of challenges in each ocean.
If you’re conservative and not a “risk taker” then follow the advice of Jo-Anne Hayes-Rines in her “Editor’s Voice” article in the July/August/September 2006 issue of Inventors’ Digest in which she says “Invent in an industry you know and understand; that is advice all inventors should heed”. On the other hand, if you are truly looking for that idea that no one has ever really thought of and you sincerely believe that you could create a need for it, then move forward. Think outside the box! But be careful as a “need” is not synonomous with “someone will buy it”! Bon voyage!