Why Analysts Excel At Navigating Red Oceans

Professors W. Chan Kim and Renee Mauborgne of INSEAD, a well-known business school in Fontainebleau, France, whose book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant by Harvard Business School Press, 2005 has become required reading in many international business courses, delivers useful market constructs to align analyst expectations by. The authors have an article that summarizes their key findings in the October 2004 edition of Harvard Business Review in an article titled Blue Ocean Strategy.

They define red oceans as all industries in existence today, where industry boundaries are defined and competitive rules are well understood. Companies attempt to outperform their rivals in order to grab ever greater share often using pricing as the only differentiator five or six product generations into a product category. The water gets increasingly red from price wars and the lack of true innovation. Blue ocean strategies are made from strategic decisions that re-align a company’s resources and create entirely new demand, unpolluted by competition. The chart shown here provides a summary of the differences between red and blue ocean strategies.
Now consider the value of analysts in guiding your firm through the red versus blue oceans:

· Blue ocean strategies make for entirely new advisory service areas first. Blue ocean strategies get packed up quickly by firms and knowledge of them are sold as services. Don’t expect analysts or advisory firms to deliver blue ocean strategies unique to your company; the advisory firms are looking for “the new new thing” just as much as you are, and once found, it becomes their differentiator.

· Red ocean product development decisions require greater and greater rationalization. For the largest vendors who have the engineering departments large enough to handle sustaining existing applications and building new ones, the voice of an outside authority makes it that much easier to rationalize spending on mature products.

· Red oceans are ripe with the work analysts do best. Competitive analysis, positioning advice, pricing analysis, ROI assessments, exit strategies, M&A advice and match-making, predictions of consolidation in specific sectors are just a few of the tasks vendors require from analysts when faced with red oceans.

· Red oceans are like red-tag sales for IT buyers with triple the risk. James Governor in his blog MonkChips has said, buyers aren’t looking for guidance, they are looking for moral support.

· User references are beacons of credibility in red oceans. Don’t think of analysts as a lead generation source, think of them as a clearinghouse for your credibilty as a vendor. For IT buyers the true value of any analyst is being the interpreter of what’s real or not from vendors and if other users’ successes and failures will make a difference in your results.

In summary, use analysts as red ocean navigators and clearinghouses of credibility. As for blue ocean strategies the best work on these, as Professors Kim and Mauborgne’s research shows, comes from within.

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