By Brian E. Clark
MILWAUKEE – In author and commerce professor Renee Mauborgne’s world, there are two kinds of companies: Ones that swim in a bloody red ocean where they compete in the same kill-or-be-killed markets, or innovators who break free to a blue ocean that is all but free of competition and has huge growth potential.
That was the essence of a Wednesday talk by Mauborgne, co-author of the best-selling “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.”
She spoke to more than 700 people attending the Small Business Times’ Wisconsin Business & Technology Expo in the Exposition Center at State Fair Park. The Expo runs through today and features speakers, seminars and scores of businesses on the hall floor.
Mauborgne, whose book has sold more than 1 million copies and has been published in 30 languages, is also a fellow at the World Economic Forum.
She said United States’ commercial world is overcrowded with “me-too” businesses whose products have been turned into commodities by global competition. Worse yet, their profits are shrinking as companies become their “own worst enemies.”
“And it’s only going to get tougher, rougher and even more bloody as the Indian and Chinese economies continue to rise,” she said.
The alternative, she said, is to generate new ideas that can cut costs and increase sales with a fraction of the effort.
She cited Cirque de Soleil as a “blue ocean” model because the circus drastically trimmed its costs by doing without animals and star performers.
“At the same time, it shifted its focus to adults and charged $120 for tickets,” she said. “And within 20 years, it was beating Ringling Bros. Barnum & Bailey without really even competing with it.”
Even though “blue ocean” companies may be profitable, Mauborgne said many executives do not understand them or how they innovated to become successful.
“The problem,” she said. “Is that there has been no robust analysis of blue ocean firms. Too often they were considered a ‘black box.’”
To quantify what successful and innovative companies were doing, Mauborgne and co-author W. Chan Kim studied 30 industries during the past century to quantify what they had done to achieve high growth in new market areas.
The companies analyzed include Southwest Airlines, which she said decided to compete against the automobile for its business “instead of become another Delta.”
“They asked, ‘how can we compete with the car?’” and then got rid of many of the frills offered by other air carriers,” she said.
Similarly, the Australian Yellow Tail wine company has captured a sizable chunk of the U.S. market by making purchasing wine easy to understanding and dumping things like vineyard prestige, aging and other things most consumers did not understand.
But Mauborgne said blue ocean swimmers do not need to be new, upstart companies. She said Chrysler had great success when it came up with the minivan, and Apple reinvented itself with the iPod.
“It’s up to you,” she told her audience of executives. “You could become the next WalMart or Yellow Tail.”