One of the greatest automotive successes in recent years is MINI. The legendary icon, long overshadowed by other vehicles, was resurrected by BMW and has gained plaudits and sales in equally high proportions. People who would otherwise drive a variety of other types of cars—anything from the least-expensive Asian imports to even mid-lux products—proudly put themselves behind the wheel of a MINI. Think about what they've done with that product. As it is comparatively inexpensive—starting at less than $17K—it can appeal to young people who are on a budget. Because it is stylish and legendary, going back to the original product of Sir Alec Issigonis of 1959, it appeals to those whose incomes would permit them to buy vehicles that cost two or three times as much.
The MINI is probably a product that falls under the approach described by Mauborgne and Kim, the strategy that they call "blue ocean." The blue ocean is contrasted with the one that is red. Red as in bloody. As the authors point out, while it is required to deal with the rigors of the red ocean, "with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance." In other words, going after the competition by offering similar but "better" products (doesn't everyone always think that their latest is always better than that which has come before?), by competing on the basis of things like price (or rebates), is not the way that companies can realize improved profitability. Everyone does it. Few, by contrast, take the blue ocean approach, which is to develop comparatively uncontested market space.
Kim and Mauborgne aren't proponents of doing what many consultants advise, such as benchmarking the competition—which merely means that you gauge your products against theirs, which perhaps helps you develop a temporary flotation device but not much more—or conducting focus groups among customers and prospects, because those people may not realize what can be: and it is your job to deliver on that which isn't the status quo (not even if it is a "better " version of what's out there). They note, "As you shift your strategic focus from current competition to alternatives and noncustomers, you gain insight into how to redefine the problem the industry focuses on and thereby reconstruct buyer value elements that reside across industry boundaries. Conventional strategic logic, by contrast, drives you to offer better solutions than your rivals to existing problems defined by your industry." Being better, faster, cheaper is good. But providing something that's different is genuinely better. And provides a significantly superior return.
While they don't use MINI as an example, but rather such things as Cirque du Soleil (which clearly redefined what it is to be a circus) and Callaway Golf (which created the Big Bertha to address the needs of non- or not-very-good golfers), consider: here is a car that combines cleverness and quality, low price and even performance (with a supercharged version at about $21K). Yes, it is still a car. But what do the competitors do? What products do they put up against it? By the time the competitors respond, there is a convertible version. And then there will be something else, something different.
In an aptly named poem, In Memoriam, Tennyson wrote of "Nature, red in tooth and claw." Competition can be bloody if approached in a traditional manner. Yet Blue Ocean Strategy describes what is clearly a better way. No less difficult—perhaps more so, as it requires thinking in a new way ("when we ask executives what prompts them to seek out blue oceans and introduce change, they usually say that it takes a highly determined leader or a serious crisis"), which is discomforting, to say the least. But prosperity doesn't come to the timid, and if the overcapacity and general commoditization of the auto industry don't represent a crisis, then it is hard to imagine when there would be a better time to think things anew.—GSV
Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant
By W. Chan Kim and Renée Mauborgne Harvard Business School Press ($27.95)