What Isn't Blue Ocean Strategy? Niche.

Yet another business magazine contributor gets it wrong...

Sometimes the Forbes contributor program is interesting but oftentimes it runs off the rails. The first time I realized the Forbes blog posts weren’t Forbes staffers is when I came across a travel book writer explaining how to violate COVID restrictions and sneak into France illegally. To the credit of Forbes, both the article and the digital coyote were quickly bounced from the platform. Still, there remains plenty of incorrect information.

One recent article in Entrepreneur, which has a similar program (the branding even looks the same), is “How Niching Down Gives You the Power to Dominate Your Market” incorrectly equates blue ocean strategy with niche marketing. “A concept made popular by two Harvard professors, called the Blue Ocean Strategy, explains the value of niching down. Where you're in a saturated market, you're in a cut-throat space fighting for the same customers, creating a bloody red ocean. For example, in a sea of hundreds of online electric bike stores, you have to do something that sets you apart from the rest. You could slash prices, but once one store does it, it’s a race to bottom where nobody wins… On the other hand, if you can find a corner of the market that isn't served, you can take that market all for yourself and have your very own blue ocean,” writes the author John Murphy.

Ignoring that the authors of the book are INSEAD professors published by Harvard, this is entirely wrong. Blue ocean strategy isn’t about niche markets: it’s about redefining market boundaries to create a space for customers and noncustomers where you’re not competing, where competition is irrelevant.

Let’s check out a few real-world examples.

Nintendo couldn’t afford and didn’t want to compete with console game makers Sony and Microsoft. Sony created a multi-billion chip that could guide cruise missiles for their then new PS3 gaming system. Microsoft was selling every console at about a $600 per unit loss. Nintendo couldn’t afford to lose anything per console.

Rather than compete, Nintendo looked to noncustomers. They didn’t focus on the traditional gamers who looked at chips or expected high-resolution graphics, sound, and violent games. Instead, they looked at everybody else, the people who didn’t play games, the noncustomers. Their Wii wasn’t aimed at a niche of gamers; it was aimed at a mass of non-gamers and also happened to appeal to gamers. The result? Nintendo spent far less and outsold Sony and Microsoft twice over, combined, for two consecutive years. That’s blue ocean strategy, not niche marketing.

Was the Wii a fluke? Nope. Yellowtail didn’t market to a niche of wine drinkers: they created wine for the mass of non-wine drinkers — people who wanted wine to be as consistent, predictable, and drinkable as soda or beer. The result? A megahit: the best-selling wine in the US year after year.

Marvel didn’t aim for a segment of superhero enthusiasts. Rather, they created movies for the mass of people who like fun films. Movies with strong scripts, characters, and acting. And, oh yeah, those also happened to appeal to the traditional superhero-loving crowd. The result? They built the most profitable movie franchise in history.

Wawa didn’t aim for a niche of people who visited convenience stores: they looked to the mass of people who wanted nothing to do with convenience store food. The result? A multi-billion-dollar increase in high-margin growth. Wawa’s sell more food at higher margins than any restaurant.

I could go on and on… None of these are niche markets. Exactly the opposite: by aiming for noncustomers they created a far larger market than segmentation or targeting a sliver of existing customers.

The author is apparently an eBike consultant. His original advice is to target a segment within the eBike segment. “Think of who uses electric bikes. You could target adventurers going off road for action packed rides, retirees looking to stay active, people looking to reduce their carbon footprint or simply commuters that don’t have an hour to sit in traffic in the morning… Let’s say you go with retirees. Now you can give a clear message with laser-focused marketing,” he wrote.

I have a better idea; don’t. Skip thinking about eBike customers. Don’t worry about them. Instead, think about noncustomers who do not use eBikes. A focus on retirees isn’t a bad idea, assuming most don’t use eBikes. If not, what do they use?

Check out The Villages in Florida where seniors ride around in golf carts instead of cars? What’s the appeal of golf carts? Florida retirees are probably a Tier 3 noncustomer for eBikes: those in a distant market probably not especially interested in climbing onto a bicycle. But their preferences can lead to insights for Tier 1 and Tier 2 customers, those who don’t like current solutions or reject them. Much like studying retirement home residents led Nintendo to create casual games, studying retirees can lead an eBike maker to a new idea or opportunity, a new blue ocean opportunity.

There’s nothing blue ocean about niche marketing. Segmentation of a niche, focusing on a small group of as-is customers, is the opposite of blue ocean strategy. Blue ocean strategists redefine market boundaries and search for market opportunities outside a niche but beyond the entire as-is market.