Disruptive and Blue Ocean Entrepreneurship

There are 3 main entrepreneurship strategies which all startups today must eventually decide between taking to define their course of action and possibly determine their success in the future.

The first strategy- value chain entrepreneurship involves a startup cooperating or competing with established companies (incumbents) and creating a value chain in the process of bringing a product to the market. Here, competition is limited to the extent that startups do not capture the market share of incumbents and put them out of business. Most businesses- large or small in most markets follow this strategy.

In this article, I will focus on disruptive and blue ocean entrepreneurship.

Disruption is a word which is so widely used- particularly with reference to businesses that it is often misunderstood.

It can be defined as an interruption in the usual way that a system, process, or event works.

A disruptive entrepreneur seeks to challenge and often overthrow the existing order. Such startups tend to enter the market as underdogs (Not considered a threat and ignored by incumbents) and offer consumers something new and out of the box. The products are usually low priced and entrepreneurs must bear the cost. However, the benefits that accrue out of this are unfathomable- the startup slowly acquires a greater market share at the expense of incumbents and thereby disrupts the market.

There have been several examples of disruptive entrepreneurship in the past few decades-

1. Air BnB and Oyo rooms (India) : These startups offer low cost accommodation, targeting customers with low budgets. As a result, both appealed to a large segment of customers and gained market share. As Airbnb grew in popularity, the quality and price of its offering increased. They began to also address the needs of customers with higher budgets that would otherwise stay at a nice hotel. As a result, the startups acquired a significant market share at the expense of budget hotels and bigger chains- which couldn’t compete inspite of asset-heavy business models
2. Netflix: streaming services are continuing to disrupt the entertainment industry. They have put physical video rental stores out of business and are slowly allowing more and more customers to cut their cable subscriptions. OTT options emerged seemingly out of nowhere, as a low-cost alternative to conventional subscriptions, and when they caught on, customers couldn’t help but think about their media in a new way.
3. Wikipedia: For centuries, encyclopedias were written and published for profit. Wikipedia is updated constantly, and is available for free, though it didn’t carry much trust at first. It overcame the disadvantages of costly hardcover encyclopedias and tremendously reduced their demand.

It is worth mentioning that although uber revolutionised or reformed the taxi and conveyance industry, it did not disrupt it. This is because uber gained market share but traditional taxis are still in business- uber is merely providing them with competition.

Whereas, blue ocean enterpreneurship is the strategy which involves identifying a new market and introducing a new and innovative product which was earlier unknown to customers.

The concept was first introduced by W. Chan Kim and Renee Mauborgne in their bestselling novel.

As per the strategy, the market comprises of two sorts of oceans: red oceans and blue oceans.

Usually businesses enter an existing market, and make less innovative offerings (less product differentiation) with products similar to their competitors’ — with a few tweaks. They enter shark-ridden red oceans characterised by perfect competition. Red oceans refer to the existing market space.

Meanwhile, blue oceans are characterized by unchartered market space, demand creation, and the opportunity for highly profitable growth.

It is by far the most difficult strategy and rarely seen because it is not at all easy to identify and create a market for a new product ‘out of the blue’ in the 21st century where so many new markets have already emerged. entrepreneurs must create value through innovation rather minor product differentiation and become adaptive to disruptive technology. Innovation in entrepreneurship- through blue ocean entrepreneurship is the key to the further advancement of society.

Some examples are- circ du Soleil since 1980, a crazy idea which became the worlds most sophisticated modern circus with top performers and a new market for modern circus (standards set by circ du soleil) which is very different from traditional circus. The fact that it is a pioneer in modern circus indicates that this is an example of blue ocean entrepreneurship.