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by nopinsight
4348 days ago
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The market is probably the most important factor for businesses using Blue Ocean strategy [1] targeting uncontested market space. However, competition is probably a more important factor in established markets. (Anyone having an alternative viewpoint is welcomed to discuss it here.) For example, any startup has a minuscule chance to become a substantial player in search keyword advertising market today, given the resources and market positions of Google. Google had the chance because all the market leaders in those years did not have a very good product and few user were very satisfied with their search results. Today, if you and your team are geniuses, maybe you can do a bit better than Google. But enough to entice a large portion of users to switch before Google can catch up with you? Highly unlikely. This point, to a different extent, also applies to other markets. In addition to product-market fit, we will need to consider the strength of competition in the market before jumping in. How would our offering significantly improve a part of the user's life is they decide to adopt it? [1] http://en.wikipedia.org/wiki/Blue_Ocean_Strategy |
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First, satisfaction is hard to judge accurately in retrospect so it's hard to say things like 'people were not really satisfied with search at the time'. There were search engines before google. People thought they were pretty good. Google showed them otherwise. People were famously happy with shoulder mounted boom boxes for portable music before Walkmans came out.
Google could be surpassed the same way if a new search engine (or new way of finding things online) took off. If it's a feature in the search engine, they could add it, but if it's something that interferes or competes with their various goals like advertising clicks, or social media stuff they might be in trouble.
These things are by definition hard to speculate about.
Facebook's market was not a 'new market' depending on the narrative you subscribe to it either evolved from a a college hot or not site or it took over a market that Myspace was dominating.
Whatsapp is competing successfully in a fairly well defined and mature market. So is Waze. Timing was really important in both these cases.
Is Waze a new market (social maps), a merger of two markets (maps + satnav) or a small but feisty shark in a bloody red ocean?
If a new site called furkl.me came out with a look up site for people that worked really well and people started furkling instead if googling their blind dates, is that a blue ocean (people lookup) or a red ocean (google/search)? What if they quietly added companies to the mix? Then products?
It's hard to tell the difference between a beachead into an existing market or a new market.
'Blue vs Red Ocean' is very similar to 'penetration vs differentiation' that's always been in the Marketing 101 textbooks. It's mostly related to pricing strategy. The synopsis is that you can either price competitively, maintain a low margin and focus on efficiency and try to get volume or you can price high, focus on differentiation and sell less.
You can be Dell or you can be Apple, but you can't be both. Differentiation is good for new markets or niche players in established ones. Penetration is for big players in established markets, or those who aspire to be.
The big difference in startup world is that software has no marginal cost, it's often free and 'business models' are only occasionally based on charging people money in exchange for a good or service. That means pricing strategy is not conventional.