There’s No Such Thing as ‘Blue Ocean’
There was a time when the term ‘Blue Ocean’ swept the entire nation. The term originates from the popular Bestseller ‘Blue Ocean Strategy,’ written by W. Chan Kim and Renée Mauborgne, professors at INSEAD Business School. The book sold 3,500,000 copies worldwide. Nowadays as I invest, lecture, and develop products, it’s a term I find myself thinking about a lot.
Honestly, I’ve come to realize that in general, there is no such thing as ‘blue ocean.’ To clarify, the meaning of the blue ocean to which I’m referring is blue, pristine water; wide-open — not tainted by anyone staking their claim. A wonderful place that elicits the exact opposite feeling of a ‘red ocean,’ water stained with the blood of a crowd of competitors.
I went back and found the definition of the blue ocean strategy in the book. Here’s what it reads:
a strategy that creates a new market (blue ocean) through value innovation, rather than an existing, fiercely competitive market.
A red ocean strategy, on the other hand, is thusly defined:
a traditional competitive strategy that seeks profits through differentiation or cost-cutting in existing markets with limited demand (red oceans).
So according to the definition laid down by two professors, a blue ocean is something you create yourself. It’s not an existing place or market. The most important words here aren’t ‘new market,’ but rather, ‘through value innovation.’ There is nothing new under the sun. The first humans that scientists refer to came into existence no less than 2.5 million years ago (according to research referencing the Bible, Adam lived 120,000 years ago). Either way, after all those years and all those billions, if not trillions of people who’ve lived and died — continuously making new things — it’s perhaps foolish to suggest that there is a previously non-existent new idea or market out there.
A few months ago I took a deep dive into Angelist, looking for a good idea for a product. The more time I spent on the site, the more I felt that not only was it hard to come up with a new idea, but that there was in fact someone pursuing every possible idea in the world. Needless to say I was discouraged. If you reduce the search area to Silicon Valley for startups on Angelist, at least 18,365 companies pop up. Even if you narrow it down to startups in San Francisco there are 10,110. Among that list are the profiles of Pintrest, Uber, and Airbnb. Given that Angelist is a relatively new site, and you’d believe that among all the startups, only some have profiles on the site. Even if you presume that about half are no longer operating, it’s still easy to conclude that there are close to 10,000 startups in Silicon Valley. A great number of these startups were founded by graduates of Harvard, Princeton, Stamford, MIT, Berkeley, and other American universities. They cut their teeth at famed companies such as Facebook and Twitter, gaining valuable experience. Many of them managed to attract funding from such prestigious as Andreesen Horowitz and the SV Angels.
These 18,000 startups are positioned everywhere; to the point that you could say ‘every open space is taken.’ Recently, as food delivery services such as DoorDash and Eat24 have gained popularity, the term Food Tech has also become in vogue. So I decided to find out what startups there were in this so called ‘food tech,’ and I discovered the chart below. There are startups for all the fields you can imagine related to food; not only food delivery, but also food reviews, recipe collections, coupon deals, online grocery shopping, etc. Seriously, is there any empty space out there?
Every now and then I get an email from an entrepreneur asking for funding, claiming to have a new idea; claiming that were the idea to come to fruition the potential market value exceeds one billion dollars, pleading that nobody has done it yet and we have to move quickly. Seriously?
Let’s say I had an idea that would change the world, checked a site like Angelist, and found that there was nothing like it. Rather than revel in the fact that I’m making ‘the world’s first’ whatever, I’d probably worry that I’m making a product for a market that doesn’t exist, or entering a field where countless people have already tried and failed.
Peter Thiel sums up a better way of thinking in his book ‘Zero to One.’ He states that you should create a small space that you can enter and set up camp there. You have to first enter this space and establish sole position, using a brand or technology.
Founding a startup is like entering a bloody battlefield. Picture the countless deceased strewn about. The giants standing firm above them. And the little guys scampering in the giants’ shadow, trying to take a tiny piece for themselves. If you want to enter that kind of battlefield, you’ve first got to have a sword and spear, carry a shield and armor yourself. If you enter the battlefield you’ve got to endure. If you’ve got your mind set on it, better to team up with someone with a different skill and go at it together; one a warrior, another a wizard, another still an archer. Of course, as your team gets bigger and you get less number of rewards for each, so it’s best if you can kill the biggest monster with the least number of people.
There’s no such thing as a blue ocean, only the strategy to create one.