How to BEAT any Competition
Blue Ocean Strategy
No matter how good the startup you work for is — Competition will kill it.
Unless… You don’t compete
In today’s article, we’ll see how YOU can create and recognize a Blue Ocean.
Fun fact:
Orel here. Back in 2022, when I was into stocks, I thought I found a company that created a blue ocean for itself. I even created the famous blue ocean graph to make sure of that.
Later in the article, I’ll reveal which company, how it ended up, and the graph I created :)
But first,
What are Blue oceans?
Simply put, these are uncontested markets. For example, the LLM market back in 2022. When ChatGPT came out with GPT 3.5, they had close to 0 competition.
Fast forward to today, that blue ocean is now a Red Ocean, filled with fierce competition that grows daily.
To recognize a blue ocean, Kim and Mauborgne present a graphic tool to help you visualize how your product differs from others in the market. It’s a two-dimensional graph:
The horizontal axis is the list of characteristics of competition, meaning the attributes of your product and its alternatives that a customer will consider before buying.
The vertical axis represents the emphasis the company places on each characteristic. A higher score indicates a company offers more of that characteristic.
In the graph, we can see how Netflix created its blue ocean.
By doubling down on things that Cable TV cannot provide and almost killing the others, Netflix created a brand new product.
On the surface, Netflix seems to have removed most of the income sources and put more effort into the costly things. How can they survive this way?
In Netflix’s case, these costly things are easily replicated. You build it once and distribute it cheaply.
Innovation
To create a Blue Ocean, you must be different from your competition somehow.
And that can be done through many channels. Let’s review 3 of them.
1. Price
Here’s the quickest way to not compete:
ask for MORE money.
How? Ask yourself this:
“Can I create a unique offering for which customers will pay more?”
If so, find out which characteristics would motivate the customer to do so.
Example (Dyson)
Superior Technology: Powerful suction power thanks to advanced technology.
Design and Usability: Sleek and modern design makes the Dyson look good and easy to use.
Brand Trust: Dyson’s reputation for innovation and quality assures customers that the higher costs would pay off with durability and performance.
2. Complementary Products
You can beat your competition with the exact same product.
You just need a different wrapping.
Let’s take Apple for example.
I bet most of you visited an Apple store.
The experience is terrific.
Even if you’re an iPhone hater, you will be amazed at what Apple did there.
And once you buy an iPhone? It will seamlessly integrate with all of your Apple devices. I mean, it’s so smooth that it feels like everything is one big connected machine.
Building this ecosystem is what makes Apple so unique and lets them compete in different markets.
3. Add function or emotion
When you decide to buy something, it’s usually because of one of these two:
You are emotional about it.
You just need its functionality.
So the trick to creating a blue ocean is to make something functional — emotional or the other way around.
Example (Tesla)
Before Tesla, electric cars were viewed as utilitarian, eco-friendly vehicles that lacked the excitement of traditional ICE (internal combustion engine) cars. Tesla changed it.
Design: Tesla created visually stunning cars that can compete with any luxury brand.
Performance: Tesla has made driving an electric car a thrilling experience.
(0 to 100 in 2.1s)Innovation and Vision: Tesla's car is compared to an iPhone! No other car is compared to a phone. The vision of a 'better', more green and tech-oriented world, excites the customers.
Final words
It’s time to reveal my attempt with the blue ocean strategy.
The companies I compared were Align Technologies and Smile Direct Club. On the surface, it seems like SDC is the superior product and shall prevail in that battle.
But in the end, no matter how good your idea is, it’s all about the execution.
The company bled money and could not reach profitability. They accumulated nearly $900M in debt and had to file bankruptcy, leaving their customers high and dry.
P.S.
I lost nearly $4k for that. ¯\_(ツ)_/¯
Thanks for sharing your investment story, Orel.
Valuable lessons on all these steps and the overriding aspect of good execution.
Also, thanks for the shoutout!