Blue Ocean Strategy? How About “No Ocean Strategy” 🏴☠
Category creators and category designers do not hop aboard a ship in search of “uncharted territory.”
They create net-new territories.
Category design is about ocean manufacturing, not ocean discovery. Discovery implies there’s one big ocean, most of it is red, some of it is blue, and your job is to go out and find the blue. Ocean manufacturing, however, means rejecting the existing ocean and taking it upon yourself to invent a new ocean, in a different part of the world, that is fundamentally unconcerned with the value propositions, costs, customer behaviors, and even differentiation levers of any even tangentially related legacy ocean or category.
(As our venture capital friends like to language it, “This is a $0 billon dollar category.”)
- “There is no ocean for people who want to turn their home (liability) into a business (income producing asset) by renting it out to strangers (Airbnb).
- There is no ocean for people who want to turn their car (liability) into a business (income producing asset) by performing a transportation service (Uber)
- There is no ocean for people who want to watch any movie, show, or stand-up comedy routine they can think of, in cinema quality, at home on their couch, as much or as often as they want (Netflix).
- There is no ocean for people who want a sushi burrito (remember Sushiritto?)
Every legendary startup, entrepreneur, and high-growth business that has stood the test of time did not begin with one rudder rooted in the (as is) ocean. Forget red oceans and blue oceans. They rejected the idea of an existing ocean to begin with. When Marty Cooper invented the cell phone, he didn’t say to himself, “How can we create a differentiated product by using value innovation (Blue Ocean Strategy) to reduce the business’s cost structure and increase value propositions for the customer, thus successfully separating us from corded telephones?” That’s a very managerial, tactical (and dare we say nose-picky) way of thinking about it. And with the words “blue ocean strategy,” it misleads the thinking. It tricks the mind into thinking Marty Cooper went out into the existing world and “discovered” the cell phone.
When, in reality, Marty invented a new H2O formula no one thought could ever exist.
You’re not Christopher Columbus in search of “The New World” (new & different territory that exists somewhere out there, but still within the ocean).
You’re Pablo Picasso inventing Cubism (radically new & radically different territory that fundamentally did not exist until Picasso created it).
Category Designers Create The Weather
Blue Ocean Strategy is just a languaged way of saying, “Better than the competition.”
No Ocean Strategy is where you take someone who says, “Never in a million years would I ever be interested in doing a thing like that,” and you convert them into your category. You turn them into a believer. You turn them into Superconsumers of the new and different. And as a result, you change which way the wind blows. And you do it by inventing something that did not exist before you came along and made it so.
We call this The Green Eggs & Ham Strategy.
When you start by rejecting the premise (“There is no ocean — now what?”), it allows you to reimagine the problem in a way that would be impossible had you started with what currently exists. The No Ocean Strategy (aka category creation/design) is where you take something people think they don’t want (Green Eggs & Ham) and help them understand why they should want it. For example, is going to the spa to get a facial something guys typically like to do? Not really. But for HydraFacial, 30% of their customers (and growing) are men. Why? Because HydraFacial isn’t two cucumbers on your eyes and a lavender scented washcloth around your neck. It’s technology, and guys like technology. Second, it’s fast (like a spa day with a shot of espresso). And third, they show you all the gunk they sucked out of your nose and face after the fact — which guys think is “cool.”
HydraFacial would not have grown into a $3 billion-dollar company had it started with the ocean of “beauty and cosmetics,” and then tried to find or even create blue territory within that big, existing ocean (“reinventing the circus”). HydraFacial has grown in large part because of its ability to get non-beauty consumers to become Superconsumers of HydraFacials. The company created net-new demand by educating people who never before wanted, desired, or ever thought they would eat green eggs & ham to consider, try, and fall in love with green eggs & ham. (Value creation. Not value capture.)
No Ocean Algebra
The algebra of categories and category growth is:
- Number of consumers
- Units per consumer
- Price per unit
The No Ocean Strategy is largely dependent upon sparking a dramatic increase in the number of consumers/customers/clients/users/community members/subscribers by converting the hardest non-converters. For example, there are a limited number of consumers in the existing “ocean.” How you make the math work in your favor isn’t by finding new, unclaimed consumers in the existing ocean, but rather creating net-new consumers. (Legendary category creators don’t just grow revenues — they grow the category.)
This is what casual games did in the gaming category.
Before Candy Crush and many of the swipe & confetti games you now see flashing all over people’s iPads next to you on airplanes and subways, “gamers” were thought to be zit-faced, teenage boys and degenerate men who hadn’t completed intellectual puberty (and whose mothers still did their laundry). And it was assumed (“accepting the premise”) that gamers spent the majority of their waking hours in their parents’ basements, escaping into MMORPGs and other immersive games in 3 major categories: fantasy, war, and action games. As a result, many console and PC gaming companies long dismissed both female gamers and casual gamers as potential audiences. They believed “the ocean” was made of men, ages 18–25 years old, with a particular set of interests.
If you were a gaming company in the 90s and 2000s, and this was your perspective of “the ocean,” then your strategy was to create new and different games for this audience. And your Blue Ocean “Strategy” was to find new and different subcategories of games in uncontested waters, but still very much existed in the frame of “this ocean.”
However, if you rejected the premise (“There is no ocean”) and instead looked to invent net-new ocean for net-new consumers, No Ocean Algebra swung wildly in your favor.
Which is exactly what happened with Candy Crush.
“‘Candy Crush Saga’ was launched by King in November 2012, and by November 2017 it, plus ‘Candy Crush Soda Saga’ and ‘Candy Crush Jelly Saga’ had been downloaded 2.73 billion times. King had revenues of $2.1 billion in the fiscal year which ended September 2015, and in November that same year Activision Blizzard announced it would acquire King for $5.9 billion, in an effort to reach mobile gamers. Co-founder Zacconi owned 9.9% of King, meaning his stake was worth about $584 million. That $5.9 billion price tag is higher than the sums paid for Marvel and Lucasfilm, which Disney bought for around $4 billion each,” according to CNBC.
What happens when you create net-new ocean? (Or mountains, or waves, or rivers?)
The legacy ocean (Activision Blizzard, best-known for creating two games aimed at young adult males and hardcore gamers, Call of Duty and World of Warcraft) has to acquire what they had originally assumed “didn’t matter.” The average Candy Crush player — the core market being women ages 35 years and older — plays for 38 minutes per day. It’s not the ~2 hours an average Call of Duty user plays per day. But, as it turns out, both “oceans” are massively valuable.
Once you begin creating net-new ocean (or great plains, or lakes, or streams), the next step of the flywheel is to increase the units per consumer. For example, how many times can a customer buy a video game? If you are asking this question in the context of the existing “ocean,” your answer would be, “Once,” or maybe, “A few times,” if someone is buying the same game for multiple friends or family members as a gift. Blue ocean thinking then would be to question how to increase these unit economics by finding a way to get customers (all the customers already in “the ocean”) to buy the game multiple times — aka a subscription. So now, instead of buying a $50 game for Xbox one time, you pay $15 per month to play that game online with your friends. Not bad!
The real jump here, however, is when you take a No Ocean Strategy approach to unit economics. How do you really get someone to buy a video game more than one time? You make it so they’re not buying the game — they’re buying an item, a product, or access to some feature within the game. Candy Crush is free to play. How the game makes money is that 3% of their users make “in-app purchases” (Note: this is new Languaging. The terms “in-app purchases” and “freemium” did not exist 20 years ago.) That small subset of users is how Candy Crush generates between $1 million and $3 million in revenue per day. Arrrrrrrr!
If you begin your entrepreneurial/creative journey and “thinking” by anchoring to “the ocean,” you will not arrive at any of these sorts of conclusions. Candy Crush didn’t set sail and “discover” a way to sell more games to more gamers. They invented net-new “ocean” for net-new consumers, resulting in a net-new business model, which created massive net-new value.
Creation. Not discovery.
Subterranean Or A Space Odyssey Strategy?
Now, in fairness to the authors of Blue Ocean Strategy, they do talk about creating here and there. Unfortunately (and ironically), their chosen metaphor is a straight jacket that anchors people to the past — the “way it is” — as the starting point for growth strategy.
But the pirates, dreamers, and innovators who’ve made the biggest difference in the world and created the most economic value did not do this. They started by rejecting the premise, imagining the possible in an unconstrained, unencumbered way.
Creation is not discovery of any kind of ocean. The great irony of Blue Ocean “Strategy” is we suspect the authors wanted to help innovators pioneer the future, but as a result of a broken metaphor and an anchoring to competition, they missed the mark and inadvertently set an entire generation of innovators down a “better” path.
We’d like to underscore that what most people call “thinking” is actually the regurgitation of someone else’s thinking. Instead, we’d like to encourage you to think about your own thinking. Why do you think the things you think? And be very thoughtful about whose thinking you let inform your thinking.
Blue Ocean Strategy got it half right in explaining, “What the blue ocean strategy brings to life, however, is that this focus on the competition all too often keeps companies anchored in the red ocean. It puts the competition, not the customer, at the core of strategy. As a result, companies’ time and attention get focused on benchmarking rivals and responding to their strategic moves, rather than on understanding how to deliver a leap in value to buyers — which is not the same thing.”
Well, what about those who (consciously or unconsciously) anchor to the idea of “an ocean” to begin with (literally and figuratively)? Are you able to conceive of a world where underground tunnels replace our railroad system, and maybe even commercial air travel? Do you imagine a world where regular humans, not professionally trained astronauts, can take a trip to space? Probably not.
The whole idea behind a No Ocean Strategy (aka category design/creation) is to allow yourself to think in ways that go beyond “ignoring the competition.” We don’t want you to just ignore the competition. We want you to invent what has yet to exist. We want you to not use the past as a point of reference, but a DIFFERENT future you want to create and design. And not just that: we want you to conceive of a world many people believe to be impossible (meaning you can convert net-new customers & believers). We even want you to remove the constraints of thinking your ocean (whether it’s red, blue, purple, green, or net-new) has to be an ocean. What if it’s below the ocean (literally and figuratively)? What if it’s above the ocean in space?
Who knows, maybe there’s even a whole new dimension! (Should we take the red pill or the blue pill?)
This post is based on Category Pirates mini eBook “No Ocean Strategy”
Arrrrrr 🏴☠️
