A "Blue Ocean" Strategy Can Set Your Design Firm Apart From the Pack
[Note: This is a long-form article which will take 12-15 minutes to read. Please allocate sufficient time to read and take notes.]
Don’t Beat Your Competitors; Make them Irrelevant!
That's the provocative subtitle of the best-selling book, "Blue Ocean Strategy" by strategic planning gurus Kim and Mauborgne. The strategy requires a visual analysis through at tool called a Strategy Canvas, and leads to so many valuable questions that this description qualifies as a "long-form" blog post.
Before even starting with the case studies, let me say in advance that I believe it is better for you to utilize the Blue Ocean Strategy not to reposition your entire firm (and brand) but rather to identify those one or two aspects of your current business that you excel in to such a high level that they deserve to have a spotlight shined on them, and that this act alone will help to move you into an “uncontested market space.”
A Change of Mindset
To create a Strategy Canvas that enables you to find an uncontested market space, you must first identify where your competitors are now. This is an extremely valuable (and sometimes humbling) exercise that I encourage you to undertake at least every year or two. It’s no harder than randomly going to 10-20 interior design websites and writing down every service that they say they offer.
Or, perhaps it’s better stated this way: “What factors do interior designers believe that their prospective clients value?” That is the essence of a “value proposition,” is it not? In my ActionMaps strategic framework, the “value proposition” is defined as those areas of excellence that cause a client to choose you over another designer.
When it comes to Blue Oceans, however, we must change our mindset in two critical ways:
- Note that I said, “What factors do interior designers believe that their prospective clients value?” I did not say that they were right! In fact, Blue Oceans depend on traditional players in a niche taking for granted, or becoming out of touch with changing markets and what prospective clients really want!
- And, rather than always envisioning the prospective client who is choosing between different designers because of past experiences, we will pay some attention to the individual who has never used an interior designer before. Are their wants and needs different?
A great case study is found in the wine industry. There is actually some correlation between wine and interior design if you think in terms of the net worth and home value of those who:
- Have fabulous home wine cellars with hundreds of bottles of fine wine;
- Have more modest homes with a wine rack somewhere in the kitchen with a dozen bottles of wine;
- Pick up wine at the super market when they run out
- Drink beer instead of wine
Wouldn’t you think that we could put a net worth and home value on the four groups above and probably be somewhat close?
The Wine Industry
Keep in mind that in any academic setting, from the Harvard Business School on down, it is universally accepted that case studies from outside your own business niche can be far more valuable than case studies from within. (I call these "crossover strategies.") Facebook, for example, doesn’t have that much to learn from Google. They already know 99% of all that “stuff” and have hundreds of employees who have worked both places. But, they might find unexpected and breakthrough ideas from studying, say, Boeing or Exxon. Crossover strategies are often the only ones that provide a true, instantaneous "Aha!" moment, so think deeply about this!
A Few Facts About the Wine Industry
First, a few facts about the market. (From a few years ago.)
- The U.S. has the third largest aggregate consumption of wine worldwide;
- The $20 billion/yr industry is intensely competitive;
- California wine dominates the domestic market capturing 2/3 of all U.S. wine sales;
- The number of wines from other countries and other states is exploding;
- Yet consumption has remained flat, the US being only 31st in the world in per capita wine consumption.
- This competition has led to mass consolidation with only eight companies now producing 75% of wine in the US and the remaining 1,600 wineries fighting over the remaining 25%.
And I suppose I should point out that this sort of vicious competition is what Kim and Mauborgne would call a “red ocean,” and yes, they depict it as blood-filled with sharks circling. This data alone presents a daunting challenge for any new company thinking of launching a wine.
A strategic thinker pursuing a blue ocean strategy would first study the existing industry and identify the factors that these competitors believe customers value. Again note the critical assumption: factors they “believe” customers value. They may or may not be right.
Factors Wineries Compete On
- Price per bottle of wine. This does not necessarily mean high or low price, simply that in a given category, they believe price is important to the consumer. A winery could be competing on price for the $20-30/bottle category, or the $40-50/bottle category, etc.
- An elite, refined image in packaging, including labels announcing the medals and awards the wine has won, and the use of esoteric "enological" terminology to stress the art and science of wine making. (What many of us might call "the snob factor.”)
- Above-the-line marketing investments to raise consumer awareness in a crowded market and to encourage distributors and retailers to give prominence to a particular wine house;
- Aging quality of wine (In most cases, the older the better.)
- The prestige of a wine’s vineyard and its legacy and awards won (hence the appellations of estates and chateaux and references to the historic age of the establishment itself.)
- The complexity and sophistication of a wine’s taste, including such things as tannins and oak;
- A diverse range of wines to cover all varieties of grapes and consumer preferences from Chardonnay to Merlot, and so on.
With these factors identified (are you thinking about the equivalent for interior design?) we can craft a Strategy Canvas. To save space, I’m going to go ahead and plot the points for wines that compete in the two broad categories——Premium and Budget.
Notice that the factors listed above are now shown at the bottom of the chart on the X axis. The Y axis must be thought about carefully. The terms high and low are not directly related to the factor. For example, the fact that Premium wines rate “high” on the Price factor does not mean they are high priced! It means that competitors believe that customers highly value the price! For one Premium wine, this could mean that customers value paying a low price for a great wine (say, $22 for a Cabernet) and others highly value paying a high price for a great wine (say, $185 for a Cabernet). Both the winery offering the $22 wine and the one offering the $185 wine feel their customers highly value price and thus would both fall under the same diamond node on the Strategy Canvas.
The critical point here is that while I have already divulged there are only two broad categories——Premium and Budget, this is not what the 1600+ competitors hoped for. They each went to great lengths to differentiate their wines, hoping to create 100s of different categories, intent on dominating one or more.
But, since they are all competing in a swirling red ocean and have all picked the same factors on which to compete, the market of consumers has become overwhelmed by the “noise” and simply can’t discern the thousands of permutations and nuanced distinctions.
To the consumer, these countless differences got blended into a lump such that all of these wineries becomes “uniquely identical” and all fall on one of the two lines of this Strategy Canvas as either Premium or Budget.
Discovering the Blue Ocean
Wee Willy Keeler was a great-hitting baseball player around 1900 who managed to simplify the game to this: “Hit ‘em where they ain’t.”
Creating a Blue Ocean Strategy is about that simple in theory. Find a NEW set of points and a “value curve” on the industry Strategy Canvas that falls where other competitors “aint.” That is, it falls in the “blue ocean” gaps that exist on a red ocean Strategy Canvas.
In the wine industry, the poster child for success at this is [yellow tail] wine developed by Casella Wines of Australia. Did you notice how I spelled their name—[yellow tail]? Lower case? In brackets? Hmmm. And that’s all there is on their label! Compare that to the more traditional labels with fancy scripts, medals, wreaths, and words that almost no one understands.
When we look at how [yellow tail] positioned themselves into a blue ocean, we can see that they did two things:
- Hit ‘em where they ain’t, that is, tried to identify prospective customers that valued factors not emphasized by traditional competitors in the red ocean;
- Invented NEW FACTORS that were not being addressed at all, but which they believed a NEW SEGMENT of buyers would value.
Here’s where they landed.
We would read this Strategy Canvas as follows: [yellow tail] believed there is a largely NEW SEGMENT of customers who would value. . .
- Price about the same as budget wine drinkers value price
- Have little or no interest in fancy terminology
- Have little or no interest in fancy ads showing beautiful vineyards
- Have no interest in how long a wine has been aged
- Have little interest in the prestige and awards of wineries
- Have no interest in the complexity of taste of a wine (Think of the very rich, peppery flavor of some red wines.)
- Have little interest in a wide range of wine types. [yellow tail] launched with only two—Chardonnay and Shiraz—and that was plenty for their NEW SEGMENT
Also, note that there is a new category on the Strategy Canvas—Premium, Budget, and [yellow tail]. Then they went further and created three entirely new factors by which they wanted to be rated—easy drinking, easy selection, and fun/adventure.
They wanted a wine that was sippable in the way of some non-alocholic beverages and spritzers. They wanted it sold widely and as mentioned, with only two choices. And by fun and adventurous, they meant that they wanted [yellow tail] to be enjoyed in groups—big groups—like those normally dominated by beer and cocktails. Traditional wine is most often enjoyed by groups of just two to four. [yellow tail] wanted more. . . and boy did they get it!
In the space of just two years, in this 100+ year-old highly competitive industry, [yellow tail] emerged as the fastest-growing brand in the history of both the Australian and U.S. wine industries. It quickly became the #1 wine import into the U.S. surpassing the century-old efforts of France and Italy. . . in just 24 months!
The Four Actions Framework
But how did they do it? They did it by applying The Four Actions Framework, also provided as part of the Blue Ocean methodology. This framework asks you to take a look at the factors from the Strategy Canvas that this industry currently values and then to ask these four questions about each one:
- Which of the factors that the industry currently takes for granted, could be eliminated entirely?
- Which of the factors should be reduced to well below the industry’s standards?
- Which should be raised well above the industry’s standards?
- Which factors should be created that the industry has never before offered?
I think if you’ll go back through the process by which [yellow tail] created their blue ocean, you’ll be able to answer these questions on their behalf. We can also think of other companies that created legendary blue oceans such as Southwest Airlines which avoided a fiercely competitive red ocean by:
- Eliminating such things as meals and first class seating, things the industry took for granted;
- Reducing fares below industry standards
- Raising expectations of turnaround time and friendliness above industry expectations
- Creating open seating, one type of plane, etc.
Cirque de Soleil found a blue ocean in the entertainment field by technically being a “circus,” but:
- Eliminating expected things like elephants and peanut shells
- Reducing the complexity of three rings at one time
- Moving from dusty, smelly arenas, to elegant 5-star hotel theaters
- Raising the expectation of magic and athleticism
- Creating new types of dance and costume that defied the categories of either circus or broadway show.
So, now let’s turn to you and your industry, though I must warn that I do so as a first salvo, anticipating your response and modifications. I have chosen to say that most interior designers believe their prospective customers value these factors: (Remember, the phrasing is critical—“…believe customers value…” which may be right or wrong. After all, you can't read their minds, but you can make educated guesses.)
- Visual Appeal
- Experience (Portfolio)
- Project Management
Now let’s put those on a Strategy Canvas, and in the interest of time I’m going to say that, just as in the wine industry, the customer is probably confused and probably lumps just about every interior designer into two broad categories—High End (the wine equivalent of Premium) or Low-end (the wine equivalent of Budget).
You may well have different factors and rankings, but I’m comfortable with this as a starting place. And now we come to the critical question: Can you find a blue ocean in the gaps of this Strategy Canvas? Here’s one I came up with for purposes of discussion:
Please take a few minutes to study this canvas and see if you can "tell the story" of how the yellow line represents a "blue ocean." What you'll see is that this interior designer is introducing a service or product that will appeal to clients who:
- Value price about like budget customers do
- Place little value on exclusivity (the celebrity factor)
- Are attracted to a strong visual appeal (perhaps 3D on your website)
- Don’t much care about your vast experience or portfolio
- Want to know you can complete the project (on budget and on time)
- Don’t much care about who you’ve worked for before (testimonials)
- Do want high technology, perhaps in not only drawing tool but their ability to access project status online
Now, let’s stop here and ask whether this creates enough differentiation so that prospective customers will now see an entirely new category! Will they now see three total categories—High End, Low End... and YOU?
But wait, there’s more! Just like [yellow tail] created entirely new factors to be considered, so has this hypothetical designer, in this case Speed and Simple! How many interior designer websites say, “Guaranteed complete in 30 Days!” I would venture to say, none. Or, “Home Makeover in a Weekend!” (Yes, there are K&B firms who offer quick and dirty renovations, but not living rooms, dining rooms and the like.)
Now, I’m not saying you should adopt such a model, nor that it would be profitable; only the market can tell you that. What I am saying is that there MIGHT BE a NEW SEGMENT of customers who would find a speedy turnaround promise attractive, and who would have only you to choose from!
We could make the same case for the new variable of “Simple.” These customers wouldn’t want 300 fabric samples to choose from; they’d want three. They’d have a matrix or template of choices for their entire living room re-do. Perhaps just 3-5 decisions to make and the other pieces just fall into place with pre-drawn Photoshop designs. (Or whatever tool you’re using.)
Like [yellow tail] we might also have added “Fun” as a factor, and I’ll leave that for you to work on and get back to me.
I’ll end where I began the discussion of Blue Oceans. I’m not sure that a small, entrepreneurial firm has the resources to change an entire industry in the way that [yellow tail] did. . . though I wouldn’t completely rule it out. What I am sure of is that if you can just find one factor that you know you excel in, that you know you perform better than anyone else, then simply emphasizing that one factor (over all others!) may well attract a client type to you in a magnetic way you’ve never seen before.
Is it time for you to sail out of the bloody red ocean and find your own uncontested market space?