Are you in a market where the biggest players control the majority of the market and the remaining 25 percent is split between wide varieties of companies like yours?
Do you spend your time trying to figure out how to compete on price or trying to differentiate your products from the competition?
Most of us do precisely that and compete in what authors W. Chan Kim and Renee Mauborgne of Blue Ocean Strategy call a “red ocean.”
As an example, in the $20 billion wine industry, the competition was fierce. Everybody in that space waged titanic battles over price, distribution, terminology, product positioning and sophistication to distinguish them from the others. They succeeded only if they could take business away from a competitor, drawing “blood” in a battle that creates a “red ocean.”
Along came a new player from Australia, Casella Wines, who decided that they were going to create a “blue ocean,” a new market free of competition. They found that for the mass of American adults, wine is a turnoff. It was intimidating and pretentious, and the complexity of wine tastes created flavor challenges for the average person that left him or her exhausted.
What was their solution? Target those beer and cocktail drinkers with a wine that was simple to understand. It was called Yellowtail. The wine was inexpensive and you had only two choices: Chardonnay and Shiraz (white and red).
It became the fastest-growing brand in the history of the Australian and U.S. wine industries and the number one imported wine in the United States, even surpassing France and Italy. And they did it without any promotional campaigns.
Word spread in the beer and ready to drink cocktail market that this wine was sweeter and easier to drink. It was uncomplicated and was instantly appealing to the mass of alcohol drinkers. It had upfront simple fruit flavors that appealed to this crowd. It was an easy-to-drink wine.
Why did so many wine manufacturers miss the boat to a new “blue ocean”?
Steve Laughlin, cofounder and chief executive of marketing firm Laughlin Constable, has learned the answer from experience. He contends that most management teams developed the habit of cautiously extending their brands by tweaking them for incremental improvement. A classic example is Colgate-Palmolive, which works to alter existing consumer products only slightly to improve market share. They find it difficult to develop whole new products that have not been thought of before.
So what do they do instead? How did they become the biggest name in soft soap? Simple. They surveyed the market and found that a Minnesota company invented liquid soap. The product was only marginally successful until Colgate-Palmolive acquired the company and used their marketing horsepower to grow the brand.
The authors of Blue Ocean Strategy would agree with Laughlin. Too much time is focused on incremental improvement in the no-win competitive battle. Not enough time is taken to study what they call “value innovation.” By that they mean exploring a value proposition that would appeal to customers and noncustomers in a different way than anything they’ve experienced before.
According to Laughlin, corporations are hardwired to think inside the corporate box. How do you get yourself and your management team to think outside the box?
Laughlin offers an important guide:
- Spend upfront time to define the problem. This is very difficult for Americans to do. Harry Quadracci had a favorite saying: “Shoot, Ready, Aim.”
- Once you have fully understood the problem and define it clearly, take a timeout. Do not look for solutions. Laughlin calls this the “incubation” period. Your brain will process all the information it has like a computer and wrap it around that problem.
- Then one morning you wake up with the answer or emerge from a shower with some solutions. These are called epiphanies.
One thing you should consider as part of the problem definition analysis is talking to customers. Don’t rely on surveys. Talk to them yourselves. See how they use your product and what they perceive to be its positives and negatives.
Do not just talk to your customers. Reach out to nonusers as Casella wines did, and see if there are markets you might be missing. Callaway Golf did the same thing when it reached out to non-golfers and found they would golf if it were made easier to hit the ball. They introduced the Big Bertha and the rest is history.
That’s the essence of innovation. It requires you to get beyond your comfort zone and explore oceans were nobody has gone before.
If that doesn’t work, then I suggest you buy a case of Yellowtail wine and see if it helps you in the creative process. It may not work, but at least you’ll have a lot of fun!
Dan Steininger is the president of Biz Starts Milwaukee, managing partner of the Wisconsin Early Stage Fund and director of the Successful Entrepreneur Investors angel network. He can be reached at: Dan@BizStartsMilwaukee.com.
