In full frontal Blue Ocean Strategy mode, Starbucks is moving to unlock new demand with a second brand this week: Seattle’s Best.  At first blush, this may not seem particularly different.  But, if you read the company’s announcement on Tuesday, Blue Ocean thinking jumps off the page in the form of the much maligned coffee vending machine.

We know how bad these things can be from hospital visits, factory break rooms and car dealer waiting areas.  So, a key component of the “re-birth” of the brand is by creating a new kind of machine that will deliver a better coffee taste and experience.  Other potential Blue Oceans:  they will also be stocking convenience stores (where there is no major national brand across over 100,000 stores), kiosks and lunch trucks.   Additionally, Starbucks will be adding red ocean franchise stores to try to stall Dunkin Donuts rapid expansion.

Essentially, Starbucks, with only 4% of the domestic market for brewed coffee, sees huge possibilities for regular folks who just want better coffee.  Between Via (instant coffee), the rapid expansion into grocery and mass merchandisers and this new Seattle’s Best rollout, is there another consumer brand company as active as Starbucks right now?

When you look at this picture what do you see?  Or better, yet, what don’t you see?  While this young girl is apparently entranced with her hand-held video game, she isn’t looking out the window.  In fact, she has absolutely no idea where she is headed.  She must rely entirely on the driver to safely get her to the intended destination.  But, this post isn’t about being your kid’s chauffeur.  It’s about how important it is to look for insight when discovering a Blue Ocean Strategy.

On a recent drive with my newly licensed teenage son, we needed to go to a store that neither of us had been to before.  It was near a major intersection that we both had traveled through many times before.  The trail there was clear, the landmarks were apparent.  Unfortunately, when I told my son where to drive, he said he had no idea where this was.  I was a little puzzled by his response. I asked this otherwise intelligent and witty young man what he was talking about.  He responded with one if those little insightful observations that have the power to drive important market change:  ”Dad,  how would I know?  You were always driving.”  Yes, I replied, but you were in the back seat looking out the window.  Didn’t you pay attention to where we were going?  ”No”, he replied.  ”I was always playing with my Game Boy.”  This was the obvious response.  What should I have expected by providing him that Game Boy years before?

This is not really a story of how one technology (hand-held video games) replaces another.  As a teenager, my only diversion was low tech:  looking out the window.  Landmarks were emblazoned on my mind because that’s all I was seeing.   My sense of direction was good when I started to drive because I had spent so many hours observing where I was going, not staring at a tiny screen in the backseat.  In “Outliers”, Malcolm Gladwell shows us how successful people don’t come by it accidentally; they usually spend upwards of 10,000 hours in performing an activity before becoming excellent at something.  In my case, staring out the window for at least 5,000 hours had prepared me to have a good sense of direction.  My son?  Not so much.

This story is about our ability as business people to observe these kind of differences as we explore Blue Oceans.  In this case, what are the implications that an entire generation of kids getting their drivers license have no idea where they are going, even in their own home town?  If I was a GPS manufacturer, iPhone app developer or auto manufacturer, this is the kind of non-customer insight that can open an entirely new market space.   Successful Blue Ocean Strategy depends upon your ability to understand what non-customers are really seeing, or in this case, or not seeing.  Either way, can make a dramatic difference in your offering.

A prospective client recently asked me what I thought the simplest way to grow his business given the current economic conditions.  He said he didn’t have “time to waste on process, workshops and a bunch of consultant mumbo jumbo.”  I told him the answer was simple:  ”Just hire a genius”.  I explained that if he Googled the word “genius” he would quickly see links to Albert Einstein and Steve Jobs.  Since one was dead and the other was in the midst of creating the most valuable enterprise in the world, he might have to look elsewhere.  The simplest, and least costly way is to unlock the genius within.  But to do that requires preparation and mobilization.  Whether you use Blue Ocean or competitive strategy, there really are no simple answers.  You cannot make up for lost time and just have to pick a path and get after it.

As an entrepreneur, I have always zigged while others zagged.  That’s what has come naturally for me.  I personally prefer Blue Ocean Strategy.  In a commoditized world, I believe differentiation (with a reduced cost structure) beats following the crowd more times than not.  In fact, Professors Kim and Marbourgne  multi-year, multi-industry study clearly demonstrated that BOS enterprises are the most profitable.

So, hire the genius within.  That’s where the real value is for your company whatever size you are.  That’s the key to your simple success.

You are looking at Ingvar Kamprad, founder of IKEA, arguably the wealthiest person in the world.  In 1976, he spelled out his concept of frugality and enthusiasm in A Testament of a Furniture Dealer. As the company has spread around the globe it has offered the cornerstone of Blue Ocean Strategy in their products, services and customer experience:  increased value at a lower cost.  A trip to IKEA is always a wonderful experience and my recent stop in the Austin, Texas store was no exception.  Their fresh merchandising and marketing approach always surprises as well.  Here is a example of a promotion in the Paris Metro underground this spring, giving passengers a reason to “wait with IKEA”.

This got me to wondering about how to create a new Blue Ocean in the industry and I believe I have found it.  A French company called My Fab myfab.com is revolutionizing the supply chain by eliminating middle men from the equation, crowdsourcing demand and drastically reducing price points.  They bill themselves as the first direct from the factory internet platform with real time product tracking.

Now available for California buyers, Myfab will be expanding its U.S. presence soon.  If you are interested in business model innovation and unlocking new demand, this is a company and business model worth studying.

In their revamped recovery strategy, Starbucks is moving their Via instant coffee product out of their stores and onto the shelves of a mass merchant near you.  The WSJ reports that creating a “very significant consumer packaged goods business” is a “centerpiece of their new growth strategy.

Starbucks as the “third place” was a dramatically successful Blue Ocean Strategy. We reported that the Via launch also qualified. It was much more than a brand extension because it opened a new front for instant coffee, an old, boring category known for its bitter taste. Research indicated that a majority of adults under the age of 40 had never tried instant coffee. Starbucks reinvented this category by discovering that non-customers who could not afford a $4 latte, did not have time to stand in line or did not enjoy the Starbucks “conversation” experience would consider drinking an easy to brew Starbucks product in their office, home or on the road.

But Starbucks will face new challenges as they attempt to capture a Blue Ocean grocery market, specifically distribution. It’s a different game than they are used to playing.  For now, they are going solo, chasing the upside of more profits.  Don’t bet against a rejuvenated (recaffeinated?) Howard Schultz as he understands the power of creating Blue Oceans to make the competition irrelevant.

Penguin Books have stayed on the leading edge of publishing for years with Blue Ocean thinking including leather-bound pulp novels and classics.  Now, they are seizing the day with the iPad.

Via paidcontent.org “The iPad represents the first real opportunity to create a paid distribution model that will be attractive to consumers,” CEO John Makinson told FT’s Digital Media & Broadcasting Conference. “The psychology of payment on tablets is different to the psychology on a PC.”

But Penguin’s thinking bigger than just the one device. Makinson said he sees ebooks hitting 10 percent of book sales next year (it’s currently four percent in the U.S. and Penguin’s ebook sales)…

“We will be embedding audio, video and streaming in to everything we do. The .epub format, which is the standard for ebooks at the present, is designed to support traditional narrative text, but not this cool stuff that we’re now talking about.

“So for the time being at least we’ll be creating a lot of our content as applications, for sale on app stores and HTML, rather than in ebooks. The definition of the book itself is up for grabs.

“We don’t know whether a video introduction will be valuable to a consumer. We will only find answers to these questions by trial and error.”

Contrary to a traditionalist view of business strategy, you do not have to choose between raising value or slashing costs when developing new products, services or experiences.   Value Innovation is the cornerstone of Blue Ocean Strategy. Value innovation is the simultaneous pursuit of differentiation and low cost. Value innovation focuses on making the competition irrelevant by creating a leap of value for buyers and for the company, thereby opening up new and uncontested market space. Because value to buyers comes from the offering’s utility minus its price, and because value to the company is generated from the offering’s price minus its cost, value innovation is achieved only when the whole system of utility, price and cost is aligned. In the Blue Ocean Strategy methodology, the Four Actions Framework and ERRC grid assist managers in breaking the value-cost tradeoff.

If you think about it, most of those police cars you’ve been pulled over by (or not) are really just family sedans, retrofitted with lights and computers.  In fact, over 90% of the 450,000 police cars on the road today are Ford Crown Victorias. That’s an old platform to be running a modern, fuel efficient police department on.

Carbon Motors wants to turn the police car on its head.  They first came to our attention over a year ago and we have been studying the company ever since.  From a Blue Ocean Strategy point of view, they are creating a vehicle that will completely transform the way police agencies go to the streets. By burning 40% less fuel, building state-of-the-art technology directly into the car and eliminating dealers, Carbon is almost ready to create a fantastic Blue Ocean.  Production starts in 2012 and they already have orders for over 12,000 units.  Here’s a closer look at the E7 by Carbon Motors.

As with our prior post about Kia, it is a fair question to ask if Blue Ocean Strategy applies to storytelling. In our workshops, the question often comes up if BOS applies to marketing campaigns.  Normally, the answer would be no.  When we think of Blue Oceans, they normally apply to organizations, products, services and experiences.

But, a new television campaign has just broken in the UK that is so incredibly powerful in it’s emotional appeal that it is likely to have a positive impact on a market far larger than originally intended.  The “blue ocean”, in this case becomes everyone in the world.  Called “Embrace Life”, this spot launched on January 20th.  See more about it at sussexsaferroads.gov.uk.  It has already gone viral and positive responses are flooding their site and facebook page.

Kia is a great example of a Blue Ocean Strategy.  And this spot is a wonderful example of Blue Ocean storytelling.  It captures sheer joy and wonder on film.  Even in these cynical times, stories can still be told in fresh and innovative ways.  Enjoy.