Several months ago, I was a guest at The Mirage Hotels and Casino in Las Vegas, while attending a business conference. The Mirage is home to several shows, the most popular of which is Cirque du Soleil's "The Beatles LOVE". Another popular show is "The Terry Fator show", which while not as popular as the Beatles Love, still attracts a good audience. I got to see the Beatles Love but unfortunately couldn't make time for the Terry Fator show, a fact I now regret, because Terry Fator's story is one of the most remarkable stories in entertainment, and perhaps the best example of how one man achieved success through utilizing the Blue Ocean Strategy.

I first learnt about Blue Ocean Strategy when I was a student in business school, and my team was studying a business case. The case focused on Cirque du Soleil, an entertainment group from Montreal, Quebec that redefined a declining circus industry and created a highly successful show simply by creating a product no other group had thought of. Today, Cirque du Soleil has become synonymous with Blue Ocean strategy, and many textbooks or articles are quick to use Cirque du Soleil as an example. On the contrary, Terry Fator's story has managed to stay under the radar. Not once has it been studied.
When I read about the partnership between Microsoft and Nokia, I couldn’t help but think about Lou Gerstner’s book “Who says elephants can’t dance”. In the book, which describes how Lou saved IBM from collapse in the 90s, Lou likened IBM to an elephant on the dance floor, whose size limited its dancing agility; and he likened IBM's competitors to nimble ants that danced extremely well and took over the dance floor. Putting this simply, the larger a company is, the slower it responds to changes and the harder it is to keep up with the industry and remain profitable. Thus, while product managers in big companies are still polishing their PowerPoint presentations, smaller and faster companies might be able to push out new products quickly in response to the market.

Nokia and Microsoft are two such elephants. Nokia is the giant in the mobile phone industry, Microsoft had the highest Smartphone software penetration. However, they both allowed faster competitors to take over their dance floor.  From reading Lou’s book, it is inferred that IBM’s major problem was all the policies and procedures that comes from being a big company – proposals took a long time getting through supervisors to top management and became obsolete by execution time. Executives wasted their time with trivial issues such as signing off on the color of an office carpet, while the important issues lay in a folder on their desk or in their email boxes for days. Nokia's CEO Steven Elop seems to think the same about Nokia. In his letter to employees, he says “We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally.” The key words are "deliver innovation fast". Nokia missed it for so long, and for the smartphone industry, if you're not fast, you're done!
I was at Subway a few days ago to get a sub for lunch. On my way out, I noticed a flyer outside the door advertising a new breakfast offering, which included everything from eggs and bacon sandwiches to steak and ham. "Interesting", I thought, "about time Subway took the battle to the competition." The major players in the breakfast-to-go market had already included lunch items in their menus, which would have cannibalized Subway's sales in some way. Now, Subway was doing likewise and was erasing expanding its market boundaries. As I walked out, I wondered if Subway would someday start selling donuts or even burgers.

Several years back, you had to go to different places for different things. Most businesses and corporations operated in their own unique space, and were mostly known for one type of product or product line. So if you wanted coffee, you would go to Starbucks, if you needed medicine, it was Walgreens, for books, you went to Barnes and Noble and for consumer electronics, you located Best Buy or Radioshack. These firms were all good at what they did and they made tidy profits. Ironically, these profits were probably the cause of the problems. As many economists and strategists know, profits attracts new entrants, and this continues until there is very little profit left in the industry. This has made firms expand their product and business offerings, crossing market boundaries and reducing each business's unique differences. The recent recession didn't help matters, as firms were forced to seek new ways to generate revenue. Walgreens and CVS which both started out as drug stores have effectively become grocery stores where you can get everything from Milk, electronics and cleaning supplies.
"Dad, all the other kids have iPods. They'll make fun of me if I show this in class!". Those were all the thanks Rick got from his 13-year old son for whom he had just purchased an MP3 Player as a birthday gift. It was 2003, and his son had wanted an iPod. Not knowing what an iPod meant, Rick had asked the guys at his local electronics store and had been told it was a portable music player. He had therefore bought the best MP3 player they had. Now he just couldn't understand what his son was talking about. Both devices play music and can fit into your pocket. What was so special about the iPod?

Two years earlier, the first iPods had hit the stores and Apple, a company which had recorded crippling financial losses and record-low stock prices for three years straight, had suddenly marked a turning point in its fortunes. The Washington Post reported, "Apple Gets It Right With Sleek, Smart iPod Music Player". Since then, the company is yet to get it wrong, and every time they got it right, they changed the market for those who hadn't got it right. In 2007, they did this again with the release of the iPhone, which together with the iPod touch has sold over 78 Million units as at Jan 2010. Today, barely a month after the company has released the iPad, they've sold more 500000 units. Not as impressive as the iPhone, but impressive enough.
Private label goods, also known as store brands, own brands or "generics" have recently become very popular. Zero advertising expenses, low packaging costs and low manufacturing costs have enabled private label merchants to keep prices significantly lower than name-brands. However, the general perception is that is that of low quality, which made them appeal mostly to price sensitive people, leaving the name-brands to high WTP, risk averse consumers who value high quality and tested brands.

The recession has since changed the picture. No longer do private labels appeal only to those who cannot afford the name-brands, consumers unsure of their next paycheck are now willing to try out the goods. Large retailers like Walmart quickly took advantage of this opportunity, increasing the visibility of its Great Value brand and re-branding from a dull blue/red combo to an attractive white. It also increased the number of products in its product line - from Granola bars and Ready-to-eat cereal, to body lotion and medicated shampoo - it stocked everything with a margin it could squeeze its products into.This brought about a new worry for food and cosmetics manufacturers. In the refrigerated foods industry, private label accounted for 30% of total sales. The retailers who were supposed to help them sell their goods were stealing their sales and were fast becoming a nightmare. Procter & Gamble responded to this threat by buying a retail chain to improve its contact with consumers. (Read more in this Reuters article)


Hi Guys,

Thank you for visiting and welcome to my blog. If you knew me about 2 years ago, you will know I used to blog about news and events. My old blog can still be viewed here. After I relocated to the US to study for an MBA, I stopped writing due to several reasons. Now I'm reawakening the writer within and have decided to start writing again.

Of course, now my articles will have a different theme. My education has introduced a new variable into the equation, which changes things significantly. Before my MBA, my interpretations of things were different. Now I see things happening in many businesses, and I know why. My aim is to share my thoughts with my readers and hopefully hear your thoughts on the same things.