You run a large company and you may offer a complex portfolio of digital products or services across several divisions. And you're attracted to the idea of a blue ocean. How else. If not, you wouldn't be reading this article right now. Although the Blue Ocean strategy doesn't directly talk about companies, much less those with complete portfolios, all companies can get into it. Regardless of their size. That's the beauty of it. The only difference is which blue ocean product to choose.
Start-ups and smaller companies will hopefully be excused (for you briefly at the end of the article), today we will focus on established large companies that have a rich portfolio of products or services. So they have a lot to choose from. And the key is to be able to choose correctly. A quick analysis of your portfolio according to Blue Ocean strategy principles will help you do that. It is this analysis that will enable you to select the right candidate for Blue Ocean.
How to analyse the portfolio?
Blue Ocean Strategy has its own portfolio analysis tool, which is referred to in English as the Pioneer-Migrator-Settler Map. Again, this is a kind of "map" that is a tool for innovation and strategic planning and helps companies identify and exploit new market opportunities. I use the term portfolio analysis for simplicity.
If you want to get started, start by dividing your products or services into 3 categories:
value imitating (Settlers)
value enhancers (Migrators)
value innovators (Innovators)
Let's take a look at what each category means.
Value-mimicking products and services
This category includes products and services that are referred to as "me too" in English. The company has had them in its portfolio for a long time, but marketers are not very keen on offering them. They are under enormous competitive pressure and do not bring a staggering margin, even though they are well established in the company and provide a stable income. For a lot of firms, it may be the main product that brings in the most turnover and therefore the firm is afraid to touch it. Nobody innovates it that significantly and the main function of this product category is to keep the firm in the current market, to support the profitability of other products and to optimise costs and efficiency.
Value enhancing products and services
The second category includes products or services that offer an improvement on existing offerings in the market but do not bring radical innovation. They therefore carry a certain added value that makes the company more interesting in the eyes of customers compared to its competitors. These products and services are the result of price/performance optimisation. They can still bring growth, but to a lesser extent than products in the latter category.
Value-innovating products and services
Products and services falling into the last category are innovative, bringing something completely new to the market and creating fast-growing markets and new market spaces - blue oceans. They have a huge potential to significantly change the market and bring high profits. One example for all? The iPhone when it was first launched.
Which product to go into the blue ocean with
Once you have sorted your products and services into these 3 categories, you can start selecting suitable candidates for the blue ocean. How would I go about this and what process would I recommend?
Of the 3 existing categories, I would select products and services for Blue Ocean that enhance or mimic value. It doesn't make much sense to innovate and improve products from the last category that already have huge potential and customers like them as they are.
The question is how big a product to choose in terms of turnover for the blue ocean. Here a lot depends on you and your mindset. If you are more adventurous, you can go for the innovation of the biggest and most profitable element of your portfolio. If you do, you'll experience all the more growth. If you want to test the blue ocean within safer boundaries at the beginning, you can limit any potential risks by starting with the part of your portfolio that, while attractive to customers, delivers less turnover. By taking incremental steps, you can then get to bigger and more interesting innovations.
Benefits of portfolio analysis
Thinking about your portfolio and dividing it into categories will take some time, but it will also give you several advantages. Here are the main ones:
Strategic planning: you will be able to use the analysis to evaluate your portfolio and identify areas for innovation or improvement.
Innovation process: you will clearly see which products or services have the potential to gain innovative value and where you still need to invest in R&D.
Risk management: by dividing your portfolio into 3 categories, you will be
able to map all the risks and start managing your portfolio to get a balanced mix of stable and innovative products.
That is why this tool of the Blue Ocean Strategy is important. If you want your business to be successful, keep your portfolio balanced and ensure that every category is represented. This will give you the stability, flexibility and new opportunities for future growth you need.
What about small and medium-sized businesses?
So far I have been working mainly with large companies. But Blue Ocean is for everyone. The size of the company doesn't matter. How should start-ups, small and medium-sized companies approach the selection of a product or service after the blue ocean?
It's a little different for them. If you have a start-up and are thinking about a new product or service, forget about the red ocean. Start with a value innovation and put your idea through the 6 steps to bring it to fruition. You can find an overview of all 6 steps with links to relevant tools in this previous article.
Do you have a small or medium-sized business, are you thriving, have you started a business and offer one big product (or service) to clients, or do you have a complementary offering? For Blue Ocean, take your main "thing". And keep going with value innovation and the 6 steps to fulfilling it.
Fingers crossed. If you're not sure which product to choose from the portfolio or exactly how to innovate for long-term growth, let me know. We can discuss it together, perhaps in a video consultation.