Blue Ocean Strategy Path 1: Look Across Alternative Industries

Blue Ocean Strategy Path 1: Look Across Alternative Industries

As a follow-up to last week’s posting on Blue Ocean Strategy’s Six Paths Framework, over the course of the next six weeks we will highlight in closer detail each of the Six Paths. We will highlight one Path per week, and as a new Path is highlighted it will become accessible in the Blue Ocean Strategy Basics archives. Today we turn to page 49 – 50 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne) for the first Path:

Blue Ocean Strategy Path 1: Look Across Alternative Industries

In making every purchase decision, buyers implicitly weigh alternatives, often unconsciously. Do you need a self-indulgent two hours? What should you do to achieve it? Do you go to movie, have a massage, or enjoy reading a favorite book at a local café? The thought process is intuitive for individual consumers and industrial buyers alike.

For some reason, we often abandon this intuitive thinking when we become sellers. Rarely do sellers think consciously about how their customers make trade-offs across alternative industries. A shift in price, a change in model, even a new ad campaign can elicit a tremendous response from rivals within an industry, but the same actions in an alternative industry usually go unnoticed. Trade journals, trade shows, and consumer rating reports reinforce the vertical walls between one industry and another. Often, however, the space between alternative industries provides opportunities for value innovation.

Consider NetJets, which created the blue ocean of fractional jet ownership. In less than twenty years NetJets has grown larger than many airlines, with more than five hundred aircraft, operating more than two hundred fifty thousand flights to more than one hundred forty countries. Purchased by Berkshire Hathaway in 1998, today NetJets is a multibillion-dollar business, with revenues growing at 30–35 percent per year from 1993 to 2000. NetJets’ success has been attributed to its flexibility, shortened travel time, hasslefree travel experience, increased reliability, and strategic pricing. The reality is that NetJets reconstructed market boundaries to create this blue ocean by looking across alternative industries.

Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/01/blue-ocean-st-5.html