A Look Back at “Red Oceans” and “Blue Oceans” in the Software Industry

The software development sector is rapidly expanding and has become highly competitive. Nevertheless, the IT industry has exhibited steady growth, despite increasing competition and the emergence of new businesses, which indicates that there is still considerable scope for innovation and inventive solutions.

So, how can we carve out our own niche in the vast and complex world of software development? We may find the answer by exploring two intriguing market and strategy metaphors: the Red Ocean and Blue Ocean.

Beware of the Crimson Waters

The Red Ocean model, coined by Chan Kim and Renee Mauborgne, pertains to well-established, fiercely competitive markets wherein prominent brands hold a significant market share. For instance, the brown cola market is an apt illustration of such a scenario, with Coca-Cola and Pepsi being the primary players who have reached their maximum market potential.

Thriving in a fiercely competitive market necessitates a company’s willingness to devote substantial resources towards gaining an edge over long-established competitors.

A prime example of this is creating a new social media app, such as Facebook, Instagram, or Twitter. Despite being able to develop a genuinely superior product, it may still struggle to gain any significant traction.

Developing a new social media app to compete with the likes of Facebook, Instagram, and Twitter is one example. It is theoretically possible to create something that is objectively better than these options, yet still fails to gain traction.

As a business model, social networks pose a multifaceted challenge. Besides competing with the technology and user experience offered by established organisations, newcomers must also contend with the loyal user base that has invested significant time and effort in forming relationships with other users on current platforms. Therefore, if shifting to a new platform requires embarking anew, it is highly likely that most individuals will be unwilling to make the move.

As a result of natural selection, the cloud computing sector operates within a definite hierarchy. Amazon Web Services, Microsoft Azure and Google Cloudare widely regarded as the key contenders, leaving little scope for other competitors to thrive. This intense competition has given rise to an atmosphere often described as “red with blood”, underscoring the ferocity of the rivalry.

Resources are fiercely contested in Red Ocean environments, making survival challenging for less established entities. Even if they manage to secure a semblance of safety, they may remain susceptible to attacks by apex predators. Once they attain a certain size, they become more conspicuous, thereby increasing their chances of being devoured by larger fish.

For instance, Snapchat was once a modest social network boasting of a distinctive concept (content would be available for a limited duration, thereby amplifying the fear of missing out) but gained massive traction within a few years. However, what took place subsequently? In 2016, Instagram Stories was introduced, featuring a similar concept, and soon achieved resounding success.

In tumultuous waters, entrepreneurs run the risk of having their innovations swiftly emulated by entities with copious resources, thereby negating any possible competitive edge.

It is undoubtedly feasible to excel in a fiercely contested market. Yet, seizing a market opportunity can prove quite difficult when other enterprises already provide similar services, especially in the digital arena where large companies could possess substantial influence.

Amidst the Azure Waters

Therefore, since “Red Oceans” denote fulfilling an extant requirement, what exactly are “Blue Oceans”? Let us now explore a few examples.

  • Instead of seeking out a brick-and-mortar bookshop and placing an order that would typically require an interval for the seller to deliver the book, one may envision setting up a company that streamlines online book orders and ships them directly to the customer’s address. This is the crux of Amazon’s business model.
  • Consider a platform that enables you to lease DVDs through the internet and send them back via mail instead of having to visit a physical store. You could even watch the film online, comparable to viewing a YouTube video, entirely eliminating any waiting period. This is what Netflix essentially provides.
  • It is fascinating to contemplate the creation of a software that can function on several platforms, allowing individuals across the globe to communicate and exchange content. This is akin to internet chat rooms and the erstwhile Blackberry Messenger, but designed for all mobile devices. Instances of such software include WhatsApp and Telegram.

The shared trait linking all these enterprises is their groundbreaking vision. They did not just fulfill prevailing demands, but rather harnessed fresh technologies to conceive distinctive solutions and establish entirely novel industries.

A “Blue Ocean” tactic endeavours to circumvent head-to-head competition with current market frameworks. It entails formulating a product that makes them redundant, even if only for a time, by introducing something that they are unable to replicate.

DuckDuckGo serves as a prime instance of how a company can attain a foothold in a market controlled by a bigger player, like Google. Despite the apparent peril in launching its own search engine, DuckDuckGo identified an opportunity to offer users the capacity to scour the internet while preserving their anonymity.

Google has become a substantial revenue generator by gathering data and would suffer significant financial damage if they halt this procedure. Therefore, they cannot aspire to compete with services that neither acquire nor preserve any user data.

You might be pondering, “Is a search engine a recent technology?” The response is negative. Nevertheless, DuckDuckGo proposes a distinctive element: anonymity.

It is apparent that even the mightiest corporations have constraints. While these leading players may excel in competitive fields, their bulk and system can inhibit them from subjugating all markets. This is similar to a shark that is unable to consume the smaller fish that reside in more cramped spaces.

Prevailing wisdom dictates conducting market investigations prior to embarking on any new venture or initiative. By discerning the current market and delivering solutions to two uncomplicated queries, one may identify and institute lucrative possibilities.

  • Is there anything that the current assortment of products and services fails to tackle?
  • Why are other channels not covering it?

If there is promise for triumph, but it’s untapped, it’s probable for established market leaders to contend in that arena in the coming years. As an alternative, akin to WhatsApp, a bigger rival may procure the enterprise.

If a product’s potential is still not fully exploited due to structural impediments, such as the inception of a privacy-oriented search engine, it could be contended that it is a product with long-term potential.

If one desires greater comprehension of the notion of ‘Red Seas and Blue Oceans’, I recommend perusing ‘Blue Strategy’ by W. Chan Kim. This book offers exceptional guidance that is priceless for both novices and veterans in the business realm.

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