Parting the Red Sea

“Creating blue oceans rather than finding them:
a firm doesn’t find new ways to delight the customer,
it creates them.”
Steve Denning

Once upon a time, the oceans and seas were red. Companies fought over confined waters, exhausting their resources in an attempt to outfight and outcompete each other. Firms accepted market boundaries and rules of engagement as given and unmovable, and were limited to maneuvering within them. The resulting environment was bloody and ruthless, dominated by the biggest and the strongest sharks. 

Then the red seas gave way to blue oceans. Blue Ocean Strategy, the new millennium’s most influential leadership concept, showed how companies can break free of cutthroat competition and establish market spaces all to themselves.  By challenging conventional wisdom and overstepping perceived boundaries, organizations could break out of suffocating red seas and enjoy blue oceans of high customer relevance, profitability, and growth.

But after a while, the blue oceans started to turn red again. Copycat competitors entered, and customer demand tapered. The waters became once again subject to the same market pressures as in the red sea. Clearly, creating a blue ocean space is a marvelous achievement, but it is difficult to accomplish and doing it once is not enough. On its own, it is not sustainable. What we need is a way to continuously stay in blue oceans. We must part the red sea, and keep it parted for good. This is an especially critical challenge in the wake of COVID, which is forcing every organization to re-imagine itself.

To observe the most striking example of this cycle, look no further than the mobile telecom industry. This is an industry like no other in business history. It bolted into public awareness in the early 1990’s, and in the twenty five years since, the industry has gone from market introduction, market acceptance, to exponential market growth, market saturation (as of 2013, the number of mobile phones exceeds the number of people in the world) and ongoing market transformation (as of 2012, voice communication - the original, core use of mobile phones - was replaced by data as their leading application). Can you think of any other industry ever, with this sort of rapacious growth and impact? Try all you want, the answer is no. Simply put, mobile telecom is an industry on steroids, which is why it provides an unparalleled display of dynamics that impact your industry but at a slower pace.

The trailblazing company of mobile telecom was the Finish firm Nokia. Even though the mobile phone was developed at Motorola in 1973, it was Nokia that popularized it in the early 1990’s. On a side note, I had the privilege of a private meeting with Marty Cooper - the inventor of the cell phone – at his oceanside residence in San Diego. It is not every day that one gets to converse with someone whose invention changed the world. Believe it or not, the first mobile phone was two and a half pounds (1.15 kg), 10 inches long (25 cm), and could only be used for 20 minutes before the battery died.

Nokia parted the red sea of the fixed line phone industry and opened up such a vast blue ocean market space, that its global market share in mobile telecom exceeded the combined market share of its three principal competitors until 2010. Yet in 2013, just three years on, Nokia was forced to sell its telecom business to Microsoft for USD 7 Billion, a pale fraction of the company’s market capital of USD 77 Billion three years prior. Why this sudden tidal wave knocking Nokia from the crest of blue ocean back to the red sea? Because Nokia could not keep up with the pace and direction of innovation of the very industry it created. It failed to gain a strong foothold in the U.S. market and a leading position in smart phones. And just like that, its blue ocean turned red again.

Nokia may be down, but not out. Through its 150-year history, the company has been a formidable chameleon, capable of reinventing itself in pursuit of new market opportunities at times of crisis. This is what it did in the early 90’s, when it got into mobile telecom, and is looking to do again by shifting its focus to new market spaces such as data networking, systems integration and autonomous vehicles. The company is determined to find its next blue ocean.

But is it possible to break away from this cycle altogether? To continuously discover blue oceans without falling back into red seas? The answer is yes, but it requires a change of perspective. In over a decade of blue oceanography – guiding organizations worldwide to understand and apply the concept of Blue Ocean Strategy – I discovered a telling phenomenon. Namely, that while every company wanted to create blue oceans, in reality very few were able to make it happen, let alone do it repeatedly. There was a significant disconnect between aspiration and application.

Based on this observation, I launched the Slingshot Framework to enable the systematic pursuit of meaningful innovation and reshaping of industry boundaries, without being sucked back into crowded market spaces.

A key premise of the Slingshot Framework is to shift focus from targeting only blue oceans, which is interpreted as transformational or disruptive market moves and therefore seen as elusive and risky. Instead, the focus is on pursuing 3 levels of blue waters simultaneously in a constantly flowing motion:

1. Blue Lake - Continuously refreshing and optimizing your current market offerings and value proposition.
2. Blue Sea - Expanding your offerings to broaden your customer relevance
3. Blue Ocean - Creating new offerings that offer unprecedented value

By simultaneously pursuing all 3 levels of innovation – from incremental to transformational – the waters blend together. A blue lake idea can expand into a blue sea or blue ocean opportunity, while a blue ocean must be continuously refreshed by inflowing blue lakes. This allows you to create ongoing distinction and separation from competitors without being forced back into red waters.

And notice that in the process you are also debunking the assumption that only extreme market moves can lead to blue waters, which makes our approach highly practical and repeatable. What’s more, the Slingshot Framework provides a single, effective methodology to guide innovation on all three levels, and a powerful tool for jumping between them – which will be the subject of follow-up articles. This way you can link all your strategic initiatives and innovation streams from short term and tactical to future-shaping and long term. And just as blue lakes can flow into blue seas, which can flow into blue oceans, you may start out with a seemingly small innovation, which then opens the floodgates to a transformational market move.

So how about you? What will you do as you find yourself at the water’s edge, pushed there by the impact of COVID? Will you seize the moment to part your red sea, and set sail for ongoing blue waters? Be part of the conversation, share your challenges, approach, and successes!

Gabor George Burt is a guest author for The Conference Board Innovation and Digital Transformation Institute. Gabor is a global business transformation pioneer, creator of the Slingshot Framework – the frontline, step by step guide to re-imagining boundaries - and one of the original experts of Blue Ocean Strategy. 
See: www.gaborgeorgeburt.com