Every blue ocean will eventually turn red;
Create an unfair advantage instead
by Dan Herman
The vast red and blue oceans of the marketing world tsunamied into our awareness and vocabulary a
few years ago, when two INSEAD professors, W.Chan Kim and Renée Mauborgne, claimed that competition
can be rendered irrelevant.
Their book, Blue Ocean Strategy, heralded the news to marketing managers and CEOs all over the
world: after years and years of surviving in red bloody oceans, swarming with murderous
competitors, finally there's a better alternative!
In red oceans, executives captivated in a conception-cage of competitive strategy business
thinking, have been rivaling head to head with their competition over the same consumer segments
doing exactly the same things, only better and cheaper in order to offer customers a better
cost/value tradeoff in order to convince them to stick around with their wallets open. In the
process, these executives wore out their own companies and their profits were ground to dust. Now,
the Blue Ocean enunciation, based on long years of research, claimed that both serenity and
profitability can be amply found in Value Innovation, which creates, via a new business model and
new products, a "Virgin territory devoid of me-too brand propositions and cutthroat pricing"
Let us consider an example of a company which supposedly followed Kim and Mauborgne's Blue Ocean
Casella Wines, an Australian winery, decided to "de-complex" wine for the sake of intimidated
unpretentious adults. It decided to create new wine drinking rules, and to make a fun wine, sweet
and fruity, to suit any taste. The chosen brand name was Yellow Tail; the label was highly
recognizable, the selection targeted the mainstream (Chardonnay and Red Shiraz), and the price just
above budget: $6.99.
The result? The brand quickly became the number one imported wine into the USA, without a
promotional campaign or consumer advertising. In just two years it emerged as the fastest-growing
brand in the histories of both the Australian and US wine industries. Casella Wines even grew the
overall market. Genuinely Impressive.
The big "Blue Ocean" promise took over the business world, but also aroused a great wave of
criticism, partially justified; with the strongest claim being that the text carries no novelty
beyond Ted Levitt's old differentiation directive, remolded with the trendy belief in the
importance of innovation. Personally, I think differently. First, Kim and Mauborgne talked about
differentiation and innovation on the levels of strategy and business model, while most traditional
occupation with differentiation and innovation has been focused on the level of products or brands.
But more importantly, the Blue Ocean thinkers honed a major observation regarding the nature of
In sports competitions, competitors are compelled to completely defined rules while striving to
achieve a superior result. In the business world, competitors also strive to achieve a better
result of the same type: a larger share of the consumer's wallet. However, the competition does not
restrict participants to any specific actions. The contrary is true. And yet, it is in this aspect
exactly that Kim and Mauborgne are wrong and misleading, upon claiming that competition can be
rendered irrelevant. Even in the case of Yellow Tail, which obviously turned many
non-wine-consumers to active buyers, clearly when consumers are buying Yellow Tail they are buying
other types of alcohol that they would have purchased in its absence. The prospect of raising
demand infinitely simply does not exist. This is where the Blue Ocean Strategy finds its
limitation. Since you always take sales away from someone (whether a direct or an indirect
competitor), and being that you will always be surrounded by businesses striving to increase sales,
once your Blue Ocean Strategy works, sooner or later someone will copy or even improve your already
One must credit the writers that they are not blind to this fact. In an interview with W. Chan Kim
posted on www.businessinnovationinsider.com on October 2005, he said very openly: "After a while
the first copycats will arise, competing on the very same value points as you. That’s completely
normal; however it forces the entrepreneur to find a new strategy every several
In other words, the most brilliant BOS will grant you with no more than a limited, relatively
peaceful, period of time. Does this mellow promise of the BOS express maximal possible achievement?
Naturally, you can guess that my answer is no. Introducing the Unfair Advantage. An UA is a
situation in which you become unique and adored by your customers, while competitors do not
Beyond the not so simple challenge of creating a differentiated value innovation, the critical
question is: what can be done which is immune from imitations? Apparently the principle is simple
as it is unexpected: when your innovation and differentiation are improving on benefits considered
central to customers in your industry, fully expected from a product or service such as yours (I
call it On-Core Differentiation), then sooner or later imitations will mushroom, no matter how big
your innovation. Why? Exactly because the benefit is considered relevant by your consumer. On the
other hand, when your innovation and differentiation offer further benefits which are not
considered relevant in your category (I call it Off-Core Differentiation), there is a good chance
of avoiding imitations, even after years of success.
This kind of differentiation, when it manages to excite consumers, is that which creates the Unfair
Advantage. Why will you not be imitated? Because what you offer is perceived by your competitors as
weird, irrelevant, or overly-unique, such which is pointless to imitate. This is the big secret.
This is your competitor's trap.
There are two main types of Off Core Differentiation: Imported Benefits, and Peculiar
Particularity. In many cases we find a combination of the two. The first type happens when you
import a benefit which is important to consumers in other product categories, but are not
considered relevant in yours. Umpqua Bank turned its branches into a unique combination of packaged
goods stores, and community clubs, in order to provide consumers with benefits of a pleasant buying
experience as well as a social neighborhood hangout, to which they go on a regular basis for
various activities and social gatherings. Umpqua is today the largest independent bank in the
Pacific Northwest, and it grew in 15 years from four to 120 branches – which is an imaginary growth
rate in the banking industry. And the best part is – no one even tried to imitate
The other type is a unique style which is not typical to the category. Take Toblerone, the Swiss
chocolate brand. It has been producing its triangular alp-summit look alike chocolate bars since
1908. No one has imitated them. The Body Shop chain has grown to 2,000 shops in 50 states, to
become the second largest cosmetics chain in the world. It is an active crusader fighting for
environment protection, underprivileged rights, human rights and animal rights, worldwide. It fine
tunes its acquisition policy, employee volunteering requirements, marketing communication budgets
etc, for serving these purposes. Again – no one has imitated them.
So I'm challenging you now – do not settle for just the Blue Ocean Strategy, go out there and get
yourself an Unfair Advantage.
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