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Blue Ocean Strategy for New Product Development

Article 7

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One of Sony’s cofounders, Masaru Ibuka, traveled often for business and found himself lugging Sony's bulky TC-D5 cassette recorder around to listen to music. He asked Norio Ohga, then Executive Deputy President, to design a light weight, playback-only, stereo version, optimized for use with headphones. Ibuka brought the result — a compact, high-quality music player — to Chairman Akio Morita and reportedly said, "Try this. Don't you think a stereo cassette player that you can listen to while walking around is a good idea?" Mr. Morita, liked the idea and asked that the “Walkman” be commercialized. (ref. 1)

Sony sold over 300 million Walkmans, a tiny pocket stereo cassette tape player, between 1979 and 2010.

After the Walkman was successful, one of the journalists asked Mr. Morita, “Why did Sony commercialize Walkman? Was it not too risky? At that time there was no market for such a tiny cassette player. Mr. Morita, smiled and said let me tell you a story.

An American shoe company wanted to sell more shoes. They sent a shoe salesman to interior of Africa to sell shoes. After three months exploration, the salesman sent a telegram to home office.

Natives go barefoot, I am coming home.

Six months later, the American shoe company sent another shoe salesman to Africa. After three months, he sent a telegram

Natives go barefoot. Send me all the shoes you can find. (ref. 2)

In 1984 Toyota introduced Lexus(ref. 3), first luxury car in Toyota’s lineup to compete with Mercedes Benz, General Motor’s Cadillac, and Ford’s Lincoln. In those days, the eight cylinder cars were very noisy; to make these luxury cars very quiet, Mercedes, Ford and GM used heavy blankets to insulate the passenger cabin from that noise. The Chief Engineer of Toyota had different ideas. He asked his manufacturing manager, if there was a way to reduce noise by ultra-precision machining of the engine cylinders and engine block to eliminate the noise? They did. They also extended the same machining technology to precisely machine the transmission and reduce the transmission noise. Toyota also involved world class acoustic engineers to design the interior passenger cabin so the cabin interior provided concert hall sound quality. Lexus became history. Ford’s CEO said, it was one of the best cars he had ever seen!

MicroCredit Loans by Grameen Bank is another example.

Sony’s Walkman, Toyota’s Lexus, and Grameen Bank’s Microcredit Loans are examples of products developed using Blue Ocean Strategy, long before the “Blue Ocean Strategy” term was coined or the book written.

What is Blue Ocean Strategy?

According to W. Chan Kim and Renée Mauborgne, authors of Blue Ocean Strategy (ref. 4-5):

Market place can be divided into two parts, “red oceans”, where there is fierce, sometimes bloody competition for growth and survival, and “blue oceans,” the uncharted territory, the uncontested market place.
Companies should look to create new demand in uncontested market space (blue oceans) instead of competing head to head in an existing industry (red oceans).
Operating in uncontested (blue ocean) market places leads to faster growth and higher profits.
In a blue ocean strategy approach you want to pursue low cost and differentiation at the same time instead of one or the other.
If you want to make a difference, to create a company that builds a future where customers, employees, shareholders, and society win, consider Blue Ocean Strategy. Authors are not saying it is easy, but it is worthwhile.

How to Create a Blue Ocean Strategy Product?

To assist in creation of a “blue ocean” product, the authors provide a simple, visual graphical tool, called a Strategy Canvas.

Use a simple graph paper, or Excel spreadsheet.

1. Identify key competitors for your proposed new product.
2. Analyze key competitive products and their features/benefits.
3. Draw a chart, with vertical axis as performance score, ranked 1 to 5, and on horizontal axis identify key performance characteristics.
4. Show as line chart, each competitive product.

To assist in creation of a “blue ocean” product, the authors provide a simple, visual graphical tool, called a Strategy Canvas.

Use a simple graph paper, or Excel spreadsheet.

1. Identify key competitors for your proposed new product.
2. Analyze key competitive products and their features/benefits.
3. Draw a chart, with vertical axis as performance score, ranked 1 to 5, and on horizontal axis identify key performance characteristics.
4. Show as line chart, each competitive product.
5. Now identify “new” characteristics that you want to provide through your new product. Plot data on Strategy Canvas.

1. For example, for Moto X, create custom colors. (see Figure 1)
2. Repeat for each new characteristic.

6. Try to modify characteristics for your new product to increase product differentiation and improve competitive performance. Consider Eliminate/Reduce/Create/Raise for each product function.
7. Prototype, evaluate, reiterate.

Figure 1: Blue Ocean Strategy Canvas – (ref 7)

Homework:

Create a Blue Ocean Strategy Canvas for Apple Watch by answering following questions?

1. Who are some of the competitors in Analog and Digital wrist watch market?
2. What are some of the “must have” products attributes that these products offer?
3. What are some of the “desirable” product attributes that Apple Watch has that the traditional products do not offer?
4. What did Apple do to move away from Red Ocean to Blue Ocean?
5. Is this a low risk or high risk strategy? Why?

So crank up your Product Development engines… Let us speedup new product development and growth rates. And let the fun begin!

References:

1. A Brief History of The Walkman, By Meaghan Haire, Time Magazine, July 01, 2009
2. Extraordinary Entrepreneurship: The Professional’s Guide to Starting an Exceptional Enterprise, By Stephen C. Harper, John Wiley & Sons, 2005 )
3. The Lexus Story, Jonathan Mahler, Melcher Media 2004 B
4. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, W. Chan Kim, Renée Mauborgne, Harvard Business School Press 2005
5. http://sm.avito.nl/wp-content/uploads/2013/02/Chan-Kim-W.-R.-Mauborgne-2005-Blue-ocean-strategy-USA-Boston-Harvard- Business-School.pdf
6. Blue Ocean Strategy Summary, Slideshare, Jay Robinson 2012 http://www.images-et-reseaux.com/sites/default/files/medias/blog/2012/02/Blue-Ocean-Strategy.pdf
7. The InnovativeManager, Jake Nielson, http://www.theinnovativemanager.com/strategy-canvas-template