Does the GM Volt Cruise into Blue Ocean Space?

GM is trying hard to win back lost U.S. market share and emerge from bankruptcy a sound company with a strong future.  It plans 25 product launches by 2011.  At the forefront of this effort is the Chevrolet Volt.  It is expected to get 230 miles per gallon (mpg) in city driving.  This is the first car to ever earn triple-digit fuel efficiency.  This outstanding performance gives GM a “leadership position” in the emerging electric and hybrid car market, and could shape GM’s image as a “green” company.  GM CEO Fritz Henderson says it “will be a game-changer for us.”   The Volt is scheduled to enter production in late 2010. 

Let’s look at the GM Volt from a Blue Ocean Strategy perspective.  The Volt’s fuel economy is more than four times that of Toyota’s hybrid model, Prius, which currently gets 50 miles per gallon.  If one thinks of the Strategy Canvas for compact or hybrid cars, the dimension of “fuel efficiency” is a key element as it has a high utility among consumers.  With the Volt is dwarfing its nearest main competitors on this key dimension, it is in essence introducing “hyper-dimensionality” along this benefit.  The question then becomes, “Is hyper-dimensionality along a key benefit a new blue ocean or just a knock-out blow in a red ocean?”

To answer this question, let’s analyze how GM’s Volt is able to harness this spectacular performance.  The Volt has an engine which is part electric and part gas which in and of itself is highly innovative and a game charger.  Then look at its power source – it can be recharged by traditional power outlets, and only costs about 88 cents on average.  These are truly blue ocean features in the extended “create” section of the Strategy Canvas for compact and hybrid cars.  Miles per gallon is critical, but it’s still a red ocean element, while “greenness” is a blue ocean benefit.

The hybrid car market was initially blue, but due to the speed of modern day technology and manufacturing innovation – it’s becoming red rapidly.  The Volt will not guarantee GM’s success in the hybrid car market.  This market has been dominated for a number of years by Toyota and Honda.  This does underscore and mark the intensification of competition worldwide to further develop hybrids, electric, and hydrogen cars.  The hybrid market is projected to be 10% of the auto market in 4 years.  Most major automakers are trying to enter this market within the near future.  The key tenet of blue ocean strategy is going places or space where the competition cannot or will not follow.  Give this, the hybrid car market for the auto industry is now a “pink” ocean.  A pink ocean is a space which is on its way to becoming a red ocean where there is intense competition.  In fact, it will likely become a maroon ocean which is simply a red ocean with extreme competition – ala the most current car market spaces.

So, let’s go back to our concept of hyper-dimensionality.  Volt’s off-the-chart mpgs is hyper dimensionality – in fact, a perfect example.  But, this in and of itself does not make deliver blue ocean space.  However, let’s look at matching the Volt to marketspace which leverages this hyper-dimensionality.  The abundant element in any hyper-dimensionality must be matched and leveraged to a market space or niche which strategically appreciates this dimension and usually in some unique way. 

For the Volt to create a blue ocean for GM, it must target a space within the broadening marketspace of hybrids – it must fill a niche within a space of the wider hybrid space.  The job that GM CEO Fritz Henderson and his executives have is to define all the possible sub-spaces within the hybrid car space, and simply figure out where the Volt best fills the unique needs of that sub-space.  For GM, the Volt’s outstanding benefit of astronomical mpg is a great achievement which is accessed by their development of blue ocean features.  Now, the second act and equally as important part, is to uncover blue ocean niches and spaces to leverage the greatness of its engineering.

Tesla Motors Drives Into Blue Ocean Space with High-Performance Electric Vehicles

As of 2009, vehicle companies worldwide have been hit hard by the global economic slowdown with many firms experiencing double-digit percentage sales declines.  U.S. car companies have received extraordinary government assistance, including bail-outs and bankruptcy protection.  Major manufacturers, including the Big Three and Toyota, have implemented creative marketing strategies to entice reluctant consumers to purchase new vehicles, or at least trade-in their “clunkers for cash.”  This is the classic “red ocean” battle for a shrinking pool of profits in a zero-growth market space.

 But one U.S. car company is navigating into “blue ocean” waters through low-cost innovation designed to satisfy unmet consumer needs.  Unlike other U.S. car companies, this company experienced double-digit growth and profitability.  This company is called Tesla Motors Inc. 

Started in 2003 and based in California’s Silicon Valley, Tesla Motors designs and manufactures electric vehicles (EV) suitable for city and highway driving.   As of June 2009, the company had delivered more than 500 vehicles customers in the United States and Europe.  Their vehicles offer double the efficiency of popular hybrid cars (such as the Toyota Prius), while generating one-third of the carbon dioxide.  Tesla’s goals are to increase the number and variety of EVs available to mainstream consumers to reduce our dependence upon foreign oil and eliminate emissions.

In traditional “red ocean” market space, vehicles are targeted at different buyer groups, such as subcompact, compact, midsize, sport utility, premium/luxury, hybrid and sports/performance drivers.  In comparing traditional “green” car drivers with sports/performance drivers, few product attributes overlap in these two distinct market segments.  These two groups have traditionally been mutually exclusive:  the characteristics of a green vehicle (high gas mileage, high reliability, low horsepower) are generally not shared with a premium sports car (low gas mileage, lower reliability, high horsepower). 

But Tesla Motors has changed all of that.  Tesla Motors is the first automobile company to combine the attributes of the green vehicle with those of the premium sports vehicle; i.e., a fast vehicle with plenty of torque with zero emissions.  The Tesla Roadster, the company’s first vehicle, is the first production automobile to use lithium-ion battery cells and the first production EV to travel more than 200 miles per charge.  The Tesla Roadster has performance characteristics competitive with high-end sports cars, including 0-60 acceleration in 3.9 seconds and a top speed of over 120 mph.  Competitors EVs to date have rarely gone faster than 25 miles per hour and are a far cry having sports car characteristics.

Tesla Roadster

 

 

 

 

 

Tesla’s unique driver benefits include:

–        244 miles per charge

–        Never need to visit a gas station

–        No oil changes

–        No exhaust system work

–        No sales, luxury or use taxes

–        Commuter lane privileges

–        Free parking

–        Free battery charging

 

In blue ocean terminology, Tesla Motors races past the competition with a superior hyper-dimensionalized feature set, creating a new “green performance vehicle” market space.   Here is a sports car with high mileage capabilities (>220 miles per charge), high acceleration, high torque, high safety, excellent manuerverability, low emissions and low maintenance.  High cost components associated with a gas-engines and emissions systems are completely eliminated from the vehicle and pave the way for future vehicle cost reductions after economies of scale are reached.

The Tesla Roadster has a base price of US$109,000, prompting criticism in the media that the company is catering exclusively to affluent consumers  But Tesla purposely aimed its first production vehicle at “early adopters” so that the company could optimize the technology before cascading it down to mainstream consumers.  The company’s second car, the Model S sedan, is anticipated to begin production in late 2011 with a base price of around $45,000 after the U.S. tax credit.  This approach is common in the technology industry, where prices for cellular phones, laptop computers and flat-screen televisions drop dramatically every product cycle.  However, this approach has been rare in the auto industry, where the prevailing business model has been one of mass production in assembly plants optimized to build hundreds of thousands of vehicles per year with comparatively low sticker prices.

In June, Tesla Motors was award $465 million loan from the U.S. Energy Department to manufacture EVs as part of the $789 billion economic stimulus package the federal government passed in January.  The loan will be used to build a factory to product Tesla’s next generation vehicles.  In July, Tesla Motors announced Roadster financing programs available through Bank of America, which will make the vehicles more affordable for “average” consumers and vastly advance EV adoption.  So if you hadn’t heard of Tesla Motors before reading this blog, you will undoubtedly hear a lot more about them in the coming months and years as they continue to build out their new blue ocean market space.  Value Innovation, coupled with substantial commercial and consumer financial backing, are the key elements of a winning blue ocean strategy.

Google Chrome OS Vies for New Blue Ocean Space

Last week Google announced a new project – the Google Chrome Operating System (OS), which is scheduled to debut in 2010. 

Google Chrome

About nine months ago, Google launched the Google Chrome browser to compete with traditional browsers, such as Internet Explorer, Foxfire, Opera and Safari.  In a short period of time, Google has captured almost 2% of the global internet browser market share and has over 30 million people using the service regularly. 

 What was Google Chrome’s claim to fame?  Google Chrome aimed to improve speed, simplicity and security.  And now, Google Chrome OS is also designed to improve those same three factors. 

• Speed:  People want to get their email instantly, without wasting time waiting for their computers to boot and browers to start up.  They want their computer to always run as fast as when they first bought them.  They don’t want to deal with their computer crashing – and wiping out files along the way.
• Simplicity – People don’t want to worry about constant software updates, renewing software licenses, or spending time configuring their computers to work with every new piece of hardware.
• Security:  People don’t want to worry about losing their data.  They want the assurance of knowing that if they forgot to back up their files or they lost their laptop, that their data would still be there – securely.

Google Chrome OS (which will only work with Google Chrome, of course) works on the principle that your computer is nothing more than an internet browser – a digital window pane onto the Worldwide Web.  Forget the “old” model of buying a computer, loading productivity, communications and anti-virus software onto your computer, updating your software and renewing your licenses, backing up your files, and lugging your computer around with you through airports and hotels.  Instead, all of your software and data would exist virtually on the internet through what’s known as “cloud computing.”  With cloud computing, everything lives on the internet and your computer is simply a device that gets you there. 

The implications of “cloud computing” on the hardware end of the computing spectrum are that clunky, bulky, heavy computers would become a thing of the past.  Computers could simply be a Netbook or PDA (such as a Blackberry or iPhone) … all you need is a keypad, a wireless connection and a web browser.

Why is Google working on Chrome OS?  To make money, of course.  But Google doesn’t make money the way other computer software companies do.  Microsoft, for example, makes money by selling software.  In contrast, Google makes money by keeping people on the internet or, in other words, Google makes money by increasing the time people spend in front of their computers.  Google makes money by displaying ads on a small part of the display while people view internet content.  So Google is after your time, not your money (rather, advertisers money). 

Looking at Google Chrome OS from a Blue Ocean Strategy perspective, we see that Google has identified the factors of speed, simplicity and security as critical – and has hyper dimensionalized these factors to elevate their Value Curve high above their competition.  Traditional computing factors, such as booting speed, latest editions of software, virus-malware protection, and backing up data – are taken out of the equation altogether by the very definition of cloud computing.

Google’s move into cloud computing puts traditional computer software companies’ competition-based factors of booting speed, software updates, software upgrades, software licensing, etc. into a non-relevant category.  In other words, Google Chrome OS and cloud computing could make the competition irrelevant.  And sitting all alone in the new blue ocean space provides the opportunity for monopoly-like profits and explosive growth potential.

Whether this shift to cloud computing will work or not remains to be seen as the first Google Chrome OS-based machines will arrive in 2010.  However, this is certainly a good example of Blue Ocean Strategy and shifting into a new market space.  Would you expect anything less from Google?

Johnson Publishing Has Need for Blue Ocean Strategy

Johnson Publishing’s Need For Blue Ocean Strategy – And Its Decline’s Implications For Black and Mainstream Business Community

 

Johnson Publishing Company produces two of the leading Black-oriented magazines in Ebony and Jet, a variety of other Black media products, and a cosmetic line catering to Black women (Fashion Fair Cosmetics).  They are one of the largest African-American owned companies in America and possess iconic brands within the Black community.  Many mainstream companies have looked to Johnson media products as a way to reach a substantial portion of the Black consumer market.  The company is now in financial trouble and facing many challenges in maintaining its magazines’ circulation, re-growing its key franchises, and developing new media and consumer products.

 

Johnson Publishing’s flagship magazine, Ebony, has had ad revenue fall for three straight years according to Publishers Information Bureau.  This includes a 12% drop in Jet’s ad revenue of 19% last year.  This year, Ebony’s first quarter ad revenue was down 31% compared to the industry wide norm drop of 20%.  While the slump in publishing is significant, it is a “cold” compared to Johnson’s “flu.”  If this decline continues, the company and its publications will become a shell of its former self within a few years.  It’s a trend that’s underscored by the fact that cosmetics are likely to have made up more than half its recent sales.  Ebony and Jet only accounted for $80 million in sales last year.

 

Johnson’s decline is not only important to the Black Community, but it has important multi-cultural implications for the mainstream business community.  One of the major reasons why revenue is down for Johnson’s magazines is that advertisers are slashing budgets that were allocated to Black-targeted media.  This is a critical indicator of an under-estimation of the importance of the multicultural market space.  Instead of looking to leverage the traditionally brand-loyal space of African-American consumers, they trade them out when resource allocation becomes an issue.  Black consumers, even within this recession, continue to be a highly lucrative brand-oriented market space.  It is the slash of ad dollars to Johnson from mainstream companies that is a bigger woe than just the lower circulation numbers.  While lower circulation obviously affects the ad price that they charge in a given space within their publications, the revenue seems to have disproportionately dropped to a trickle of what they spend in these magazines previously.

 

Given this economic environment and a reluctance to spend at previous levels to market to the Black consumer, it is up to Johnson Publishing to prove its relevance to its readers and potential subscribers and the ability to deliver customers to its advertisers.  They must simply focus on revenue growth – not cutting costs.  As such, they need to develop Blue Ocean Spaces.  Given their strength in gathering information and citing trends within the Black community and the proliferation news/information outlets, they should position themselves as a content creator.  This is a flexible position that works with both offline and online outlets.

 

In the move to content creation orientation and mentality, let’s look to other content creators within the space.  Look at the Strategy Canvas (Diagram A) for Johnson’s publications compared with Oprah’s O Magazine, People, and online e-zine Black Planet.

 

 

 

 

Johnson Publishing’s Value Curve is lower than competitors on the following key factors:  content relevance, sex appeal, fun, informative, ad relevance, community advocacy, timeliness and mainstream appeal.  Before shifting to a content creator orientation, they need to increase content relevance and be much more informative – and either do one of two things:

• Seek to appeal more to a wider audience of more upwardly mobile and younger Blacks – like Black Enterprise magazine
• Provide laser-like deep focus on its core Boomer audience and try to grow within the younger Boomer category

 

Given these two options, they needed to increase the sex appeal of the topics covered similar to the prominent Black women-oriented magazine Essence.  This does not just mean topics about male-female relationships and liaisons – but overall sexier topics.  Along these lines, it needs to take a cue from the mainstream magazine People and be more fun – and not take itself so seriously.  The physicality of the magazines – mainly its cover, needs to bought into the new millennium.  Ebony and Jet cover design is the same as it was in the 70’s – it needs to be revamped.  Johnson is widely recognized as a strong community advocate – which a critical building stone for building up these areas around its authencity within the Black community.  That is its saving grace – and would still be preserved with appropriate tactics for these strategies.

 

 

Creating The Blue Ocean For Johnson Publishing

 

To create a Blue Ocean space for Johnson Publishing, it is important to start looking at non-customers.  This is an important element of Blue Ocean Strategy.  Let’s start with “first tier” non customers who are consumers looking for better alternatives.  For Johnson, this would be Black Gen Y’ers, specficially, young Black professionals looking for “hipper” and more relevant publications and media.  The other prominent group would be “third tier” non customers which are in other markets and are unexplored.  For Johnson, this would be mainstream customers and possibly Latinos and other ethnic classes.  For Johnson, this may sound heretical but having any of their media be so compelling that it attracts non-Black readership or viewership would be strong statement of its “pull.”  It wouldn’t a statement of “selling out”, but rather a key indicator of its authenticness drawing beyond its standard readership and market space into the tier three unexplored space.  Not to mention that Gen Y’ers do not perceive the world according to racial lines, so would be entirely relevant to that segment.

 

Johnson Publications must move expeditiously to create media products which are relevant to Gen Y’ers in their 20’s and, to a lesser degree, Gen X’ers.  An idea would be to “beef up” their online presence, and create a new online brand which is both sexy and relevant.  It should have two cornerstones:

• Highlight sexy but yet relevant and timely topics
• Feature young Black and Latin stars along with “cool” mature stars like Prince

 

The use of an alternate industry, the online space, is Path 1 of the way to reconstruct industry boundaries outlined by Blue Ocean Strategy.  To execute this effectively, Johnson needs to hire and/or develop social media capabilities.  In addition, their current limited partnership with Google’s “You Tube,” Johnson must actively seek to both pipe its content into powerful online players through some sort of strategic alliance or partnership – or develop new out channels itself focusing in the online world.  This would also have the corollary effect of driving traffic to its offline media which could be anything Ebony – concerts, Fashion Fair Cosmetics, Ebony and Jet magazines, etc.

 

Johnson Publishing is facing an unprecedented challenging period in its history.  But it can turn obstacles into opportunities to push it to change rapidly and grow toward macro-societal trends.  Every business has to evolve with time, Johnson must seek and find its Blue Oceans to survive – or it will not.  Finding the resources to allocate and diversify its media offerings to evolve with growth spaces in appropriate markets will be hard.  But the alternative, no more Ebony or Jet and a major Black Media giant gone is what’s at stake.  This is obviously important to Blacks, but should be alarming to mainstream companies looking at tapping into a highly, lucrative market through a single point in a significant way.  The fate of Johnson translates into reaching any major multicultural market space in American – the outlet needs to be relevant but yet still authentic.

 

What is Blue Ocean Strategy?

So you ask, “What is Blue Ocean Strategy?”  

Well, it all started in the late 1990’s when two INSEAD professors (W. Chan Kim and Renee Mauborgne) started talking about these concepts of blue oceans and red oceans and creating uncontested market spaces that rendered the competition irrelevant.  Eventually they wrote “Blue Ocean Strategy” in 2005, which was published by Harvard University Business School, and since then, it has sold over one million copies, is an international best seller and been translated into a record-breaking 41 different languages.

Based on a decade-long study of 150 successful market creating strategic moves, Professors Kim and Mauborgne argue that tomorrow’s leading companies will succeed NOT by battling existing competitors, but rather by creating new “blue oceans” of uncontested market space.  For example, rather than battling Barnum & Bailey and Ringling Brothers in the declining and unprofitable circus industry, Cirque de Soleil created a new “blue ocean” by reinventing the circus as artistic live entertainment.  Instead of targeting children, Cirque de Soleil targets adults.   Instead of rolling out a series of unrelated clown and animal acts, each Cirque de Soleil production has a theme and a storyline that features acrobats artistically performing to live music.  Instead of selling cheap tickets around the 3-ring circle, Cirque de Soleil sells high-end cushioned stadium seats (complete with seatside cocktail service) in a huge air-conditioned tent with a price tag to match.  You get the picture.  You don’t drop peanut shells on the Cirque de Soleil tent floor.

If you’re still reading, you must be interested in learning more.  So I will arm you with several key terms that you will need to know and understand to speak “Blue Ocean” speak.  First=Red Ocean=markets or industries where competition is competing for greater share of existing demand that is typically stagnant or declining (the bloody battle).  Second=Blue Ocean=markets or industries where there is no competition because it is an untapped market space.  The rules of the game are waiting to be written.  Third=Value Innovation=creating a blue ocean by creating a leap in value for buyers of your company’s products and/or services, thereby making the competition irrelevant.  Fourth=Strategy Canvas=an analytical framework or tool that helps you to determine Value Innovation by looking at the factors the industry current competes on and plotting your product/service against your key competitors.  Got all that?   Of course, there’s much more to know and learn, but you’ve got the basics.  Pretty cool, isn’t it?

Blue Oceans are opening up all around us all the time.  Consider these examples:  mutual funds, cell phones, express package delivery, minivans, Wii gaming.  Consider these companies:  Southwest Airlines, Starbucks, IKEA, Curves, CNN, Apple Computer, Research In Motion (Blackberry), Redbox.

 To learn more, read the book and read my blogs (all on Blue Ocean Strategy).  Soon you will start thinking the blue ocean way.

Did Michael Jackson Swim in a Blue Ocean?

As everyone all over the world knows, Michael Jackson – The King of Pop – died this week.  As a songwriter, singer, chorographer, and dancer, his entertainment presence was enormously fantastic and legendary, to say the least.  How did Michael achieve global stardom?  Did he create a Blue Ocean, i.e., a new market space that rendered the competition irrelevant?  Was Michael that much different from other musical superstars, such as Elvis Presley and John Lennon?  What was his ace in the hole?

Jackson Five

 

 

 

 

 

First, let’s look at some of Michael’s major professional accomplishments:

• First appeared on stage at age 11 as part of the “Jackson 5.”  From 1966 to 1976, the Jackson 5 were the first act in recorded history to have their first four major label singles reach the top of the American charts.
• (The Jackson 5) first black teen idol to appeal equally to white audiences.
• (The Jacksons Show) first network television variety show hosted by an African American family.
• Debuted the “Moonwalk” during “Billie Jean” on the ABC television Motown 25.
• (“Thriller” album) set all-time record for global sales, estimated at around 60 million albums sold.
• (“Thriller” album) won a record-breaking eight Grammy Awards in 1984 and featured in Guinness Book of World Records as the world’s best-selling album.  Seven of the nine-track songs became Top 10 singles hits.
• Broke down racial barriers on MTV through the promotional use of music video.
• First black performer to meet with the president (Ronald Reagan) at the White House
• Was a major force behind the 1985 “We Are the World” charity single.
• First black performer to meet with the president (Ronald Reagan) at the White House.
• Far surpassed the stardom of other black male performers, such as Prince, Ray Charles, Stevie Wonder, Little Richard, Chuck Barry, and Sammy Davis Jr.

Impressive dossier, absolutely, with many “first ever” accolades.  Now let’s take a brief look a Michael’s personal life:  Bubbles the Chimp, Obsession with Elephant Man Skeleton, Hair Fire Filming Pepsi Commercial, Creation of Neverland Ranch, Child Molestation Settlement, Dated Brooke Shields, Plastic Surgery, Married Lisa Marie Presley, More Child Molestation Charges (and showed up for hours late for  court in his PJ bottoms), More Plastic Surgery, Married Nurse Debbie Rowe, Dangled Own Child Over Balcony.  Hmmmmmmm.  Wacko Jacko indeed.

So let’s get to the question at hand.  Did Michael Jackson create a blue ocean?  In Blue Ocean Strategy, you need to identify the attributes that consumers (the public) find relevant and desirable to purchase, rank your competition on those attributes, rank yourself on those attributes, and see where it all lays out.  This is called the Strategy Canvas, which is a major analytical framework for Value Innovation.

The key attributes that we identified for the Strategy Canvas exercise included:

• Artistic evolution
• Artistic novelty
• Chorography talent
• Dancing talent
• Philanthropy
• Rise from humble beginnings (“underdog” effect)
• Sex appeal
• Singing talent
• Songwriter talent
• Strong leadership characteristics
• Strong policitical interests
• Strong religious beliefs
• Team building skills

Moonwalking

Based on our analysis, Michael’s key strengths were that he was an extraordinary singer, songwriter, chorographer and dancer, who demonstrated artistic novelty (child performer, moonwalk, the sparkle glove, Thriller) and artistic evolution (Motown R&B to pop).  Compared to Lennon and Presley, his sex appeal was lower (in fact, he was sometimes thought of as androgynous … which again, contributed to the novelty concept).  And compared to Lennon and Presley (Lennon in particular), his lack of political interests, other than philanthropy and charity interests, gave him an “air of innocence” and contributed to his childlike “Peter Pan” likeness (I do believe in fairies, I do believe in fairies).

Did Michael Jackson possess attributes that other performers do not possess?  Did he extend the Value Curve to create a new market space that rendered the competition irrelevant?  Michael did extend the Value Curve with an additional “off the wall/eccentric/weirdness” attributes; however, those are not relevant attributes to consumers in making a purchase decision and, therefore, do not constitute a blue ocean strategy.  As a performer, Michael’s differentiation was that his Value Curve was higher than Lennon and Presley’s Value Curves; he possessed a multitude of talents (glued together with what Quincy Jones called an “extraordinary work ethic) that set him apart because he did so much so well.

While we conclude that Michael Jackson as a performer was not blue ocean, it is worthwhile to mention that Michael’s use of video as a promotional tool was, indeed, blue ocean.  Michael transformed the medium of music video by using it as not only an art form featuring complex story lines, dance routines, special effects and cameo appearances of well-known personalities, but also as a short-film promotional tool, gaining access to MTV and other key venues previously “off limits” to African American artists.

Although as a performer, Michael Jackson was not a blue oceanist, he was a fantastically talented artist that broke down barriers and made music history by getting people all over the world to sing, dance, clap their hands, tap their feet, and try to moonwalk across the kitchen floor in their white socks.

Paul Mitchell Goes Blue Ocean Canine

Here’s a Blue Ocean blog with lots of soapy suds.  In the overcrowded and highly competitive “Red Ocean” personal hair-care grooming market, John Paul Mitchell Systems human hair care products enjoy revenues of over $1 billion.  It has the leading market share and vast distribution within its industry and market.  However, in recent years, global hair care product sales have been flat and competitors are battling over shrinking market shares – classic Red Ocean combat.  So CEO & Co-Founder John Paul Jones DeJoria asked himself “How can I grow Paul Mitchell revenues in a shrinking demand pool?”  John Paul observed a key U.S. trend and decided to create a new blue ocean – that of upscale, human-branded products for pets.

John Paul Jones DeJoria

John Paul Pet Products

 

This leverages the trend called “Pet as Family.”  The days are gone when dogs were primarily used for herding or field hunting and cats were used for catching mice in the barn.  With larger discretionary incomes and more free time, Americans are owning pets in ever-growing numbers … and pampering those pets, even in spite of the U.S. recession.  Americans treat pets like humans.  We buy them whatever they need and don’t need, up to and including birthday and Christmas presents.  We take them to the vet, the dentist, the ophthalmologist, the surgeon, and the animal psychologist.  We bring them wherever we go, like wardrobe accessories.  They are a reflection of us – they are today’s status symbol.  So we want them to look as sleek and well-groomed as we do, if not better!

According to the 2009 National Pet Owners Survey from the American Pet Products Association, 62% of U.S. households own a pet, which equates to 71.4 million homes.  There are 77.5 million dogs and 93.6 million cats contributing to $45.4 billion pet industry expenditures, that’s a lot of pet shampoo!

Capitalizing on the Blue Ocean Strategy components of value and occasion, John Paul Pet has transferred human grooming products into pet grooming products, offering a wide variety shampoos, conditioning rinses and conditioners, grooming sprays, detangling sprays, and wipes (full body, paw, ear and eye, tooth and mouth) that are “made with the highest quality ingredients and are specially formulated to the correct pH levels for your pets.”  And staying true to the Paul Mitchell brand image, John Paul Pet products are only available at human beauty salons (at least one of every two salon patrons is a pet owner). Furthermore, the animal rights advocates will be happy to know that John Paul Pet products are tested on HUMANS first! 

So what will be next and how will they grow this Blue Ocean space?  It will be interesting to see how they grow this Blue Ocean space.  It has already favorably impacted their overall company, and effectively leveraged their brand.  They are in an excellent position to really “own” this space.  This is a great and powerful paradigm of using Blue Ocean Strategy to create a space – and then dominate it.  They are building a “doggy fortress.”

Harley Davidson Can Shift Back Into Black

Harley Davidson Needs Out of Red Ocean Space

Harley Davidson, the iconic All-American motorcycle manufacturer founded over 100 years ago, is speeding downhill in the U.S. recession.  Their stock, trading at $48 per share just 12 months ago, has tumbled to $7 in recent times.  Their 2008 revenues of $5.73 billion slipped about $140 million from the previous year.  And, their CEO (Jim Ziemer) has “left the building” and resigned.  It’s like a Honda at a HOG rally – it’s not pretty.

“Experts” have identified Harley Davidson’s problems as:  assembly lines filled with high-priced union workers, riders unable to get bike financing, product quality issues, and good old fashioned tough economic times.  In fact, they face a situation similar to the Big Three automakers. Like these companies, Harley Davidson’s answer to the problem seems to be throw more money at the fire (i.e., Warren Buffet’s $300 million loan matched by Davis Selected Advisors’ $300 million loan) or ask for government assistance similar to Ronald Reagan’s 1983 motorcycle import tariff.

While these factors may all be contributing to Harley Davidson’s demise, we need to take a closer look at Harley Davidson’s marketspace and industry dynamics.  Harley Davidson is competing against Honda, Suzuki, Yamaha, Kawasaki and others for the same shrinking share of profits.  In Blue Ocean Strategy terms, Harley Davidson is swimming in a bloody red ocean of fighting rivals.  The overall market is shrinking, negatively impacting revenues, profits, and growth.  “Textbook” Blue Ocean Strategy suggests that Harley Davidson needs to move into a new blue ocean, whereby they are the only player and their profit potential is unlimited – thereby making their competition irrelevant. 

Harley’s Needs to Cruise to Blue Ocean’s Via Different Buyer Groups

Let’s look at Harley Davidson’s brand image.  Harley Davidson has come a long way from the “Hells Angels” and outlaw-biker image of the 1950s and 60s.  With the cult-like following of “Easy Rider” and the launch of the “Harley Owners Group (H.O.G.)” friendly, organized riding group, today’s Harley Davidson brand image is the iconic All-American heart-of-gold, tough-as-nails, free-spirited leather-clad rider.  It’s a sub-culture all its own.

 

But when you peel back the leather, you’ll most likely find a 50+ white male with an average HH income of $90K+.  In fact, according to Harley Davidson’s 2008 Annual Report, 88% of Harley purchasers are men.  We have a name for these folks – they are called male Baby Boomers.  And the Boomers are getting older and will, someday in the not too distant future, fade out of the ethnic and demographic majority.

How can Harley move into a new blue ocean?  The Harley Davidson brand needs to be “seriously” repositioned to appeal to a younger and ethnically diverse crowd.  They also would benefit from marketing to Latinos, Asians, and African Americans.  Next, they need to “woo” women to first ride motorcycles, and then buy Harley’s.  They also need to address the Gen X’ers who are now under 35 years old.  Initially, this would compliment the existing demographic and then maybe, someday, even replace it.  As these older Harley riders wane, the Gen X’ers, minorities, and women could become a major core customer group.

Why do I say “seriously” think repositioning?  Harley Davidson claims that they promote diversity, but I think it’s really just lip service.  However, they are taking a step in the right direction with campaigns such as their recent big PR splash promoting May as “Women Riders Month” and dabbling in women-oriented advertising.

 

The implications to Harley Davidson on making a strategic targeting shift into these Blue Oceans are broad reaching.  Through reaching into these new spaces of different buyer groups, they can develop Blue Ocean spaces that are untapped by other motorcycle manufacturers. They might also need to think of usage occasion and type.  Perhaps, Harley can focus product development efforts on more touring, custom and performance motorcycles, while maintaining their strength in the heavyweight market.  Harley Davidson could start by revamping their advertising, PR and promotional efforts.  Tactical items could include offering “Beginner Rider” courses targeted at non-riders, product information offered in Spanish, and advertising and promotions geared 🙂 to the college crowd.

Harley Davidson needs to shift gears away from its current red ocean and speed into the blue ocean of “non-traditional” Harley riders.If Harley Davidson can move into this blue ocean space filled with young, more ethnically diverse, and women buyer groups – they will find themselves “Back in the Black.”