Are red ocean strategies the dead ocean strategies in the information age?

Organizations that thrive on competing in existing market space and beating the competition that exists are categorically red ocean strategy believers. They believe in getting their hands dirty, struggle and propagate their business. In doing so they try to exploit the available demand by either creating greater value to customers at higher costs or by creating reasonable value at lower costs. In business terms, exploiting the available demand through value cost trade off. The choice of differentiation is two pronged which are directly related to the cost and the service.

Microsoft is the best example to define a red ocean believer. All the factors as discussed above are addressed by Microsoft Windows and Microsoft Office. They have succeeded in the 20^th century. They made huge profits. However it has to be noted that between 2001 and 2014 the market cap raised by a meagre 3 percent ^(Source).

Organizations that consider differentiation while being two pronged will mainly deal with differentiation in service and low cost are blue ocean believers. The differentiation is optimized by saving costs through eliminating and reducing the services that the current industry thrives on and by raising the buyer value through creating elements that industry has never offered. The value innovation that arises from this approach is the blue ocean strategy. In laymen terms, organizations that create an uncontested market space and thus making the available competition irrelevant while capturing the new demand are blue ocean believers.

Apple is the best example to define a blue ocean believer. Since the Macintosh, Apple has been feeding the market with innovative products in those areas that are not maximally tapped by a given market. Macintosh, iPod, iPhone, iPad to name a few. Apple has still considered the value it delivers to its customers while saving costs on industrially varied offerings. Apple’s market cap has improved 75 fold in the period between 2001 and 2014 as its sales and profits improved ^(Source).

In a similar sense, in the current information age (Digital world) considering the network effect of internet of things it is imperative to say identifying the blue ocean strategies are the viable livelihoods for any organization irrespective of the service and business they render. In the current world limiting and fighting for the current market cap is irrelevant because of the pace at which the nomadic customer is willing to move to a future market. This statement is further strengthened by the recent development in retail market in China.

Alibaba, the Chinese ecommerce giant (US$231 billion) started in 1999 as a business to business portal to connect Chinese manufacturers with overseas buyers ^(Source). The company now provides consumer to consumer, business to consumer, business to business sales services through web portals. It has payment gateway, shopping and cloud computing services to sustain its business model. In 2014 on China’s singles day Alibaba reported a sale of more than $9 billion in one day by bringing all its strengths together ^(Source).

The details as listed above makes it a red ocean believer increasingly because it has exploited the current market and by offering value to customers at a differential cost. However, Alibaba sprung up as a blue ocean strategy believer in a manner no one could have ever imagined. Alibaba used the digital strengths it has developed from its e commerce customers like contextualizing, personalizing, customizing and by reaching them at the right time and through right channel etc., Alibaba has entered in to Banking domain. Alibaba has ventured into the Wealth and Investment Banking division and has captured US$100 billion in assets in the second year since its launch. Tencent another online giant is building a financial network based on a huge online platform ^(Source).

Blue ocean strategy has been enticing for the thought leaders, innovators and mere leaders. With the evolution of the Digital world the mechanism of reaching the nomadic customer is neutralized. This neutralization as seen with Alibaba and Tencent will bring in business offerings that are capitalized not only by the industry’s competitors but also by those competitors who are ahead in the Digital strategy from other industries.