Monday, January 21, 2008

Blue Ocean Strategy in the Mobile Sector

2008 will be an exciting year for developments in the mobile sector, a year in which we will witness the narrowing of the gap between traditional and mobile web, the so-called mobile convergence.

It is also a year that promises to offer economic challenges to new and existing start-ups, particularly in the mature western markets, as the trickle down of the US-led credit crunch will be begin to make its presence felt, especially to the middle-class consumer.

I would argue that this offers a perfect opportunity for companies in the Mobile 2.0 space to go for so-called ‘Blue Ocean’ strategies (W.Chan Kim and Renee Mauborgne, first published in HBR 2004) and seek new markets with little, if no, competition. This would represent a shift from today’s preference for competing in the ‘Red Oceanspace, where competitors abound and intense fighting between them leads to much ‘blood spill’.

Examples of web-based companies that succeeded in developing a blue ocean include e-bay and skype (their shared philosophy makes it easier to understand how they are now both under the same roof).

If we look at skype’s value proposition compared to that of the best voice communication alternative at the time (toll-free international calling cards), we can better understand the strength of its positioning (Value range, 0=lowest, 5=highest).

Admittedly, skype may not be as convenient as a calling card (easily available at retail points and used on traditional phones) but for all other value elements, it set itself completely apart and rendered its competition irrelevant. Not surprisingly, skype now gathers together around 10 million subscribers worldwide.

So, how can companies involved in Mobile 2.0 adopt Blue Ocean strategies?

  1. Stay clear of crowded markets –yes, they are tempting (other people are making money there!) but success is less likely than in the calmer waters of the blue ocean
  2. Think carefully about what value you are adding to the consumer above what is currently available to him/her –and make sure that value gap is as wide as possible!
  3. Ignore existing demand for existing services –dare to be different! Look at areas where existing products or services fall short of expectations and then offer something completely new to potential consumers. Turn that non-consumer around to bring him/her back into the market.

Applying these types of questions to existing business models will at the very least provide a litmus test of the intensity of competition a company may face. Applied using a bottom-up approach, it has the potential to generate genuinely new markets or industries we cannot yet even imagine.

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