Thinking a lot about blue and red oceans these days, which was a topic of a New Venture seminar last week (summary post about that coming up). Still not having completed Blue Ocean Strategy, the book (someone told me, reading the summary would suffice. See slides below), I’m still not entirely sure how to get to a blue ocean. More after the slides.

[slideshare id=61974&doc=blue-ocean-strategy-summary4461&w=425]

I know, from the first few chapters, that you analyse features of a competing business. You list them in some kind of chart and map out how far they go and how to beat them with your own features. Taking the case of gaming consoles, which is as good as any, for the two powerful ones, Playstation 3 and Xbox 360, we would list:

• Online platform (more Xbox360)
• Huge graphical capabilities (more Playstation, but negligible difference)
• Looks better on HDTV
• DVD-drive (huge, unpredictable format-war at launch)
• Games, Games, Games
• Same (more or less) controllers as usual
• Expensive components overall
• Price point in the $500+ (at that time)
• Aggressive marketing strategy, based on above features, targeted mostly at young men.
• Huge multinational corporations with huge budgets
• Lot’s of industry consolidation, virtual and actual
• Added, due to comment: both players may have other motives, apart from pushing their gaming-plaform (e.g. Blu-ray for Sony & Live-platform for Microsoft)

And I could probably go on.

Fighting Microsoft and Sony would require some serious leaps in logic, you would think. You can see that the leap that Sony and Microsoft made was not too far off. It was based on the assumption that any next generation of console would have to be significantly more powerful than the last. And you could see that, them being huge multinational corporations, the thinking was probably that if any drastic industry change could happen (take that format war), they could make it come true. There’s another industry-change that had to happen for both of these to take off like gangbusters, which was that everyone would buy an HDTV. That didn’t exactly happen.

So, essentially, we had several weaknesses, namely that:

• The format war was undecided, confusing customers.
• HDTVs were expensive.
• The consoles themselves were expensive.
• They were eating up each others already small markets (made small by the three preceding factors).

You could also add that they focussed on the same consumer segments as a weakness, but how could they know, right?

Now, if you read into Blue Ocean Strategy, then you would expect for Nintendo to have anticipated these issues. How would that be possible?

For one, they are industry-insiders, just like Sony and Microsoft, so they would have had access to data about production costs of both competing consoles, as well as of the state of HDTVs and HD DVDs, now and in the near future. Two, being a successful console and game producer, they would also have a good grasp on their audience. Three, they would have their own vision and be able to iterate quickly on it.

When you think about it, the leap of logic wasn’t actually happening from those entering the blue ocean, it was from those operating in the red one: Sony and Microsoft.

I wrote this, because sometimes, as a new player on the market, you aim small. You don’t want to upset the big players in the red ocean and instead want to *grow* a blue one. I don’t think blue oceans are grown, they are instead hidden. Growing an ocean is the worst leap of all, because it means changing people’s behaviour. Core-users of Xbox & Playstation haven’t changed one bit, rather you found new customers that weren’t being addressed by those two marketing strategies.

If you do have to make a leap in logic to launch a product, make sure that the price you pay isn’t to expensive.

End of thought.

Vincent

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