Pondering a New Strategy
I just finished reading a book titled Blue Ocean Strategy, by Chan Kim and Renee Mauborgne. It’s not a new book; in fact it was first published in 2005, so many of you may have already read it. It relates to the development of business strategies that move a business or an entire industry, for that matter, into a different realm, a blue ocean strategy instead of a red ocean strategy.
A red ocean strategy is one that many businesses and industries continue to operate in, slogging it out with the competition, continually addressing the same issues, fighting the same fights year after year, sometimes gaining ground, but at a high cost. Unfortunately, this has become the norm for many industries.
As I read the book I kept coming back to the ethanol industry and how such a strategic shift might be just what we need. I bring this up, not as a criticism of our industry or how it has progressed, but more out of curiosity—is there a better way, a blue ocean strategy where we begin to control our direction?
I’m talking about a strategy that looks at the markets, the methodology, the objections and the opportunities in a whole new light.
I’m not promoting the book, I have no vested interest, but there is something rather intriguing about the concept of breaking out of the red ocean and setting sail on a blue ocean in a new direction with a whole new strategic plan. As the book points out early on, “There are no excellent permanent companies just as there are no excellent permanent industries.” The idea is to develop a strategy that creates an uncontested marketplace, makes competition irrelevant and creates dynamic new markets by attracting all levels of consumers, who currently may not even be our customers.
There are literally hundreds of businesses and industries that have successfully developed blue ocean strategies. One interesting example is Cirque du Soleil. They changed the entire circus industry from one of three rings, high cost and dwindling attendance by parents and children, to a whole new uncontested market for adults and corporate clients that made the competition irrelevant.
Another excellent example is the U.S. wine industry. The $20 billion U.S. wine industry is bogged down in a red ocean of competition. Wine snobbery, proper aging, complexity, price and overwhelming selection, has created a market that the average nonwine connoisseur simply does not feel comfortable in. Then along came Casella Wines of Australia with Yellow Tail. Priced right, properly marketed as a social drink, a wine not targeted towards the connoisseur, but to the average consumer, with simple traditional varieties. It didn’t steal sales from the wine industry, it created a whole new market of previously nonwine drinkers and, in 2003, sold 4.3 million cases and was the number one selling red wine in the U.S., outstripping California labels.
Frankly, I’m not sure where this whole story is going, except to wonder, is there a better way for this industry, a blue ocean strategy? The ethanol industry has continued to drive costs down, but have we sufficiently demonstrated product value to the consumer, especially to a huge, yet untapped, customer base? We have successfully fought numerous legislative battles, but have we resoundingly convinced Congress that ethanol needs to be the national alternative fuel of choice? How can we make gasoline irrelevant to the success of our industry? What new market opportunities can be developed to extract us from the red ocean we have swum in for the past three decades?
I offer you nothing more than food for thought this month, and will leave you with a line to ponder: “There are no excellent permanent industries.”
That’s the way I see it.
Author: Mike Bryan
Chairman, BBI International