Platt Perspective on Business and Technology

Opening up the online business model for new and emerging opportunity 3: blue ocean strategies and business models 1

Posted in book recommendations, startups, strategy and planning by Timothy Platt on May 14, 2013

This is my third installment to a series on new and emerging online business models and on developing best practices for finding and creating new and novel online business opportunity (see Part 1: outlining some of the basic issues and challenges and Part 2: online target demographics oriented marketing.)

I wrote Part 1 of this series with two goals in mind: to set up a basic foundation for a more detailed discussion to follow, and to raise some basic and still open questions that have to be addressed, and that do not have simple, standard, algorithmically applicable answers. I began addressing them with Part 2, where I wrote about group marketing demographics in a globally reaching online context. And I continue that here in this posting where I address some explicitly identified open questions, beginning here with this:

• When is pursuit of a true blue ocean strategy and business model realistic and how might a new business’ chances be improved for succeeding there in an online context?

There is a reason why I started this overall discussion of open issues in Part 2 with a discussion on defining and understanding group demographics and using that insight in marketing more effectively in a geographically and culturally open online context. Any valid answer to the above question on blue ocean strategies has to be at least partly grounded in how you address that set of issues. So I begin addressing this question of blue ocean strategy and opportunity in terms of marketing demographics and from the fundamentals about both: blue ocean strategies and businesses and the development and offering of the disruptively novel, and the demographic groups that you would have to reach to make that work.

• When you think and plan and develop a business with a blue ocean strategy and performance goal, you do so with an objective of offering something to the overall marketplace that is disruptively new and that breaks away from what is already out there and also from consumer expectations as to what is out there for them to choose from. That is what blue ocean means – if you pursue this goal of moving past and away from any current competition, that calls for coming up with and successfully offering something that no one else provides or can provide, at least now and through the near-term future and that no one has provided before. (As a basic reference on blue ocean strategies and businesses see:
Kim, WC and Mauborgne, R. (2005) Blue Ocean Strategy: how to create uncontested market space and make the competition irrelevant. Harvard Business School Press.)
• And this means you are going to be building into uncertainty. That includes uncertainty as to what precise marketing demographic to market to and uncertainty as to how best to present and represent your new product or service even where you do have a clear idea as to who to market to. And I add the people you would want to reach also start out unaware of the existence of what you would offer them or the possible value to themselves from what you would offer them.

I have written a number of times in this blog about the issues of that last bullet point and about adaptor curves and finding and bringing in involvement and interest among pioneer and early adaptors. I have also written about the role of social networking and viral marketing there, so my goal in this posting is not to simply recapitulate what I have already written on these issues. The question that I would address here is actually a core risk management issue.

If you offer a completely novel and disruptively new product or service to the marketplace, you might or might not succeed in bringing it to market and generating revenue flow and profit from it.

• A novel product for example, might or might not cost-effectively scale up for production and with sufficient quality control for you to want to ship your new products out the door.
• Assume you can build your new offering at a commercially viable scale and cost-effectively and with good, solid, consistent quality control. You might or might not actually know what your best target market is, and who would, by demographic characteristics, be your best marketing audience and most reliable customers. Experience shows that truly novel offerings tend to attract unexpected primary buyers and markets.
• Assume you do have a clear idea as to who you should market this offering to. You would have to be able to effectively reach these prospective buyers with a marketing message and a sales opportunity, but simply offering a new idea or product on the internet in general, and even with carefully selected and targeted pay per click and similar marketing might or might not cost-effectively work.
• The issue that I write of here can all be reduced to burn rate challenges, where you need to develop a business out of a new offering and with all of the expenses that involves before you run out of the funds you have available to commit to this – before you run out of liquidity for this venture (see my series: Understanding and Navigating Burn Rate at Startups and Early Stage Businesses, postings 67-78.)
• So the question that I noted towards the top of this posting is about what else you can and should do that might not offer as much prospect as a successful blue ocean venture, but that is fairly certain to bring in a steady stream of revenue that can among other things help bankroll that blue ocean attempt.

And this brings me to what can perhaps be seen as a fundamental paradox:

• Established businesses can approach blue ocean novelty opportunities from a position of having significant cash reserves, and having successful if more standard business lines that can serve as sources of new venture support. But an established business might not be as nimble in what it could consider doing, in taking a blue ocean strategy risk. And their business-as-usual systems might thwart the innovative exploration of new possibilities that would make their trying to develop a blue ocean venture possible. Established businesses can become set in their ways and anything but agile in having an ability to conceive or pursue new.
• Startups might start out with less organization and strategic rigidity and with more openness to the possibility of developing and offering something dramatically new, but they generally lack the cash reserves and the supporting, stable business lines that an established business could tap into in support of innovative advancement.

I am going to continue this discussion in a next series installment where I will address this paradox where:

• The businesses most able to support innovation financially, can be the least able to do so strategically and organizationally, and those most able to do so strategically and organizationally can be least able to do so from a firmly supportive financial base.

And the goal of any such discussion is to explore and present approaches for combining sources of necessary strength so “able” and “willing” can come together in support of innovative excellence.

Meanwhile, you can find this and other related postings at Startups and Early Stage Businesses. You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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