How can a small business successfully compete in a mature and heavily contested market place? The global market for cricket is certainly mature and dominated by long established "businesses". The schedule for international test and one day cricket is set five years in advance. Surely there was no room in this market for a new competitor? Hello IPL!
The authors of an excellent business strategy book called Blue Ocean Strategy* subtitled their book How to create uncontested market space and make the competition irrelevant. This is exactly what the IPL has done. Red oceans are said to be existing markets. Blue oceans are said to be markets that do NOT exist today. Red ocean strategy is about exploiting existing demand, adapting to trends as they occur and beating the competition. Blue ocean strategy is about creating uncontested market space, creating and capturing untapped demand, shaping trends and making the competition irrelevant! The IPL is a beautiful example of "Blue Ocean Strategy". Admittedly, we are yet to see if it works, but if as a punter you always "follow the money", you would be brave to bet against the IPL.
What happens when a new venture seeks to compete in red oceans instead of creating its own blue ocean? MyHome.com.au was a late entrant in to the online real estate sales market - by now a red ocean. Realestate.com.au (REA) dominates this market space and had "first mover advantage" - tying up a very high percentage of Australia's real estate agents long before the existence of MyHome. Domain.com.au is the next biggest competitor. Being tied to print media (and advertising) giant Fairfax, Domain has a good story to tell. It certainly has some competitive advantages - as an adjunct to print advertising for example, not to mention the pulling power of Fairfax's online newspapers. MyHome, as a late entrant to this market space, needed a very good story to tell in order to succeed. One would be hard pressed to imagine what that story might be given the dominance of REA and Domain, and their strong competitive positions.
According to the Australian Financial Review, MyHome is now on "struggle street" and in trouble: "It is believed to be missing its revenue targets by tens of millions of dollars" (AFR p18, 11/02/08). Oh dear. And the CEO of REA says "I don't see [MyHome] at all as a threat or event relevant to our business". Ouch!!
The lesson for SME's here is that rather than compete with larger businesses head on in red oceans, they should seek to create value by creating blue oceans.
I highly recommend the book, but accept that some ninjas are "time poor" - so here are some online resources on "Blue Ocean Strategy":
http://blueoceanstrategy.typepad.com/about.html
http://www.slideshare.net/pchitchai/blue-ocean-strategy-bos-258800
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy#Tools_and_frameworks
As always, feedback is most welcome!
*Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant, W. Chan Kim and Renee Mauborgne, Harvard Business School Press
The Cash Flow Ninjas
