blue ocean strategy

3 Companies that Dared to Innovate

Traditional competition has become a trap; one that kills 70% of businesses within two years.

Long gone are the days when competition is among a few hundred players, at most. With all the lowered global barriers, competition has become fierce, and the traditional approach of vying for a slice of an existing market pie is proving increasingly unsustainable. 

The key to success lies not in fighting for a piece of the pie, but rather in creating an entirely new pie. This is the essence of the Blue Ocean Strategy, a school of business that focuses on innovating products and services that create uncharted waters, or markets, to lead.

There are a myriad of global players who leaped from competition-invested red oceans to calm blue ones. There are many ways to achieve this shift, however, in this feature, we choose to focus on three examples of businesses that shifted their primary product into an enhanced version, allowing them to exist on a completely new level.

The Nintendo Way

During the 1980s and well into the early 2000s, a console war led the video gaming market. A term used to describe the ferocity of competition among console makers and a phenomenon that was going to kill Japanese video game company, Nintendo.

Nintendo created its first video game console in 1977, before becoming globally known following the release of the games Donkey Kong and Super Mario Bros. in 1981 and 1985, respectively. 

In the early 2000s, Nintendo started to lag behind as Sony began to dominate the industry.

As of June 2003, Sony’s PlayStation 2 had 74% of the market, leaving Nintendo’s GameCube and the console newcomer Microsoft’s Xbox at 13% each.

To regain its lead, Nintendo adopted a blue-ocean approach and innovated it’s way out of the console war. In 2006, the Japanese company launched Wii, a video-game console that’s functional and interactive with a focus on fun rather than computing power, pulling in traditional non-gamers.

Nintendo eliminated the hard disk and DVD functionality that were thought to be vital in most game consoles and reduced the processing quality, sound, and high-definition graphics. But it introduced new features, including a wireless motion control stick and the ability to play in a larger social group.

By 2007, Nintendo’s Wii outsold Sony and Microsoft gaming products. With 6.3 million Wii consoles sold that year in the US, it handily beat Microsoft and Sony with sales of 4.6 million for the Xbox 360 and 2.6 million for the PlayStation 3.

However, Blue Ocean Strategy isn’t a one-time deal, the market and consumers evolve every day. 

Less than a decade later, Wii sales began to suffer after the dramatic disruption that came with downloadable games on mobiles and tablets.

In response, Nintendo again tapped into a new blue ocean in 2017 introducing the Nintendo Switch, a small device that allows users to play games both on a TV and on the go.

By 2018, just 10 months after its release, the Nintendo Switch became the fastest-selling home video game system of all time in the US, selling over 4.8 million units.

Even today, the Nintendo Switch continues to grow outpacing even the Wii in sales. As of September 2023, the Nintendo Switch sold over 132.5 million consoles worldwide, compared to the Wii, which sold 101.6 million units across the world, according to data by Statista.

Meta’s Switch

Today several companies are developing their own version of the metaverse, however, Meta has a unique position as the dominant player in the social media industry to shift the public from regular social media users to virtual beings existing, partially, in a virtual world. 

The familiar story of Mark Zuckerberg’s launch of Facebook in 2004, expanding beyond the limits of university students in 2006, and dominating the social media industry thereafter, doesn’t shield him from the limitations and repercussions of existing in a red ocean.

That’s one of the primary reasons, he mentioned in his October 2021 letter, announcing the rebranding to Meta and ushering in the era of the Metaverse. The move came with a big bet on the future and an initial investment of $10 billion.

The Metaverse, a term coined in 1992 in the sci-fi novel Snow Crash, has been the dream of many mega players, and an achievable goal since the rise of virtual reality (VR) and augmented reality (AR) technology. 

However, as the owner of the four biggest social media platforms, Facebook, WhatsApp, and Instagram, Meta has the unique capability of creating and leading a new blue ocean.

“It will let you share immersive experiences with other people even when you can’t be together—and do things together you couldn’t do in the physical world,” according to the 2021 statement.

The global metaverse market was estimated at $65.5 billion in 2022 and is expected to rise to $82 billion this year, before jumping to $936.6 billion by 2030, according to an April report from Statista, a global research company.

The benefits of integrating social media use with virtual existence have unlimited applications and benefits. Global virtual events, access to world-class education, and virtual government entities are just a few examples of the metaverse’s application.

That said, the journey is still very long and comes with a list of barriers and disadvantages. One of the key barriers is hardware’s high cost, it will take time for everyone to own the needed phones, VR glasses, and other AR gadgets. 

In terms of deterrents from its adoption, the list is long, from crime and law implementation, to identity theft, to privacy, and many more. Meta has a long way to go before it reaps the benefits of its new uncharted waters.

Netflix Strategy

Founded in 1997, Netflix initially launched with a DVD rental service, before innovating the streaming service, launching a completely new market.

The company appeared on the scene when Blockbuster Video, a US video rental store chain, was at the top of the game. Netflix reinvented the market with a blue-ocean approach to introduce a DVD-by-mail rental service, an easier and more cost-effective option compared to brick-and-mortar stores. 

Its flat-fee monthly payment model addressed two major issues: return deadlines and late fees. Customers also had the option to browse and select a video to rent, without having to leave their homes.

Over the quarter century, Netflix mailed 5.2 billion DVDs to 40 million unique subscribers with its familiar red envelopes

The company upgraded to a new uncontested blue ocean in 2007, switching from DvDs to the then-innovative streaming service. The service allowed subscribers to watch the movies and TV shows they wanted with a click of a button.

As the streaming landscape became competitive, Netflix was quick to differentiate itself from its rivals and began producing original content. This move allowed it to broaden the scope of its business and, thus, access new customer segments.

The bottom Line

While it demands a deep understanding of market dynamics, a willingness to experiment, and a commitment to continuous innovation, the potential rewards of the Blue Ocean strategy are substantial. 

The above examples highlight the transformative power of this school that enables numerous businesses to escape the confines of the Red Ocean, redefine market boundaries, generate new value propositions, and achieve significant growth.

However, it’s crucial to acknowledge that the Blue Ocean Strategy is not without its limitations. Implementing this strategy often requires a significant shift in mindset, a willingness to challenge conventional wisdom, and a substantial investment in resources. 

More importantly, the long-term viability of any strategy depends on the company’s ability to adapt and innovate in the face of ever-changing market dynamics.

Despite these limitations, the Blue Ocean Strategy remains a compelling approach for businesses seeking to break free from the constraints of competition and create entirely new market opportunities. The case studies presented in this article serve as testaments to the power of this strategy and provide valuable insights for companies contemplating its adoption.

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