Crisis hand in hand with opportunity - Blue Ocean Strategy

Crisis hand in hand with opportunity - Blue Ocean Strategy

In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody. (Blue Ocean Strategy, p. 4)

Many industry experts agree that 2006 was one of the worst years in decades for the real estate market, and the outlook for 2007 looks just about as gloomy. But as the saying goes “Crisis and opportunity are a couple.” In fact we see the bust of the real-estate bubble giving rise to the creation of Blue Oceans Strategy.

Supporting this claim is an article written by the team at Transparent RE, an outfit focusing on transparency and new business models in real estate. The article draws an enlightening comparison between the resistance of the newspaper publishing industry to the Internet, and the current condition of the real estate industry.

As the article describes, rise of the Internet gave way to new journalistic voices, new sources of information as well as the creation of new business models like Craigslist. Each of these elements gradually began to chip away at traditional newspaper revenues, which in turn forced cost cutting. With profit margins shrinking, and competition becoming more fierce, the Red Oceans just became more and more bloody.

And the same scenario holds true for the real estate industry, where “brokers' initial response to the Internet's transparency threat was to hunker down, reasoning that they controlled the agents and the Multiple Listing Services (MLS).”

The author elaborates:

Here's the book to read: Blue Ocean Strategy - How to Create Uncontested Market Space and Make the Competition Irrelevant - by W. Chan Kim and Renee Mauborgne. The byline says it all... the real estate industry has so many inefficiencies, new market spaces will open up quite quickly.

We certainly second that notion, and, in the meantime, will be paying close attention to the implementation of Blue Ocean Strategy across the real estate industry for discussion in future posts. In the meantime, we invite you to share your stories and thoughts with us about the future of the real estate industry.