No one wants to live in the Red Ocean, but if you believe the Blue Ocean is somehow better, look at the short time Netflix had an advantage before Amazon, Paramount+, Disney, Hulu, and a dozen more companies decided to compete and stain the water red. Not all of these companies are going to survive and some will merge.
Every morning on CNBC, I hear an advertisement for NetSuite, explaining why business people should switch from Quickbooks. They are directly and aggressively naming their competition as an attempt to steal their clients. There is no hiding their intention and Netsuite's ads are not marked by their subtlety.
Over time, as more companies enter an industry, growth requires competing for prospective clients who are already buying from your competitor. Here is a list of rules for the Red Ocean.
- Build a Firewall Around Your Existing Clients: The first rule for living, surviving, and thriving in the Red Ocean is to ensure that you can retain your clients. In the Red Ocean, there is always someone trying to steal your clients away from you. You want your team to have the best and deepest relationships with your clients as a starting point, but you must always continue to create new value by helping your clients deal with their systemic problems.
- Target Your Competitor's Clients: Know that your competitors are targeting your clients and you should return in kind by targeting their biggest and best clients. Given a long enough timeline, you will lose clients, and you will also take clients from your competitors. You need to win more takeaways than your competitors win, something that isn't possible if you are not pursuing them. Even though it takes time, you want to be known and top of mind.
- Focus on Addressing Your Prospective Client's Systemic Challenges: There are a number of issues that might cause your competitor's clients to leave them. Things like complacency, apathy, poor communication, unaddressed problems, a sense of entitlement, or your competitor's team resenting their client. In the Red Ocean, you cannot wait for your competitor's client to become unhappy and decide to change. The one area where your competitor is vulnerable is the systemic challenges their client is experiencing. You can create an opportunity to displace your competitor by addressing the more difficult challenges, especially when it comes to the problems your competitor ignores.
- Identify Stakeholders Willing to Engage with You: You may have been taught to pursue senior leaders or decision-makers, an approach that was right in another time. Because you are trying to build an insurgency, you need to identify contacts that are willing to engage with you. Insurgencies are rarely top-down, as they mostly bubble up from the bottom. A person who is open to a meeting is worth your time. You can work on finding the other stakeholders you'll need to create an opportunity to steal the client away.
- Capture Mindshare by Explaining Why the Client Must Change: Much of the time, there is a general unawareness of the systemic challenges and the forces that harm the company's results. You can capture mindshare by providing your contacts with an explanation as to why they are no longer able to produce the results they need. You build mindshare and move people to act by explaining why they must change. You are playing a game of narrative warfare, creating value by teaching your prospective clients why they should change.
- Feed the Insurgency: The Red Ocean requires you to feed the insurgency, providing them with the ammunition they need to teach others why change is necessary and how they would be better served by a different approach. Without the ability to communicate internally, your insurgency may starve, making it more difficult to remove your client. This is the starting point of building consensus inside your competitor's client.
- Exploit Your Competitor's Model: Whenever it is possible, you want to attack your competitor's model, criticizing the decisions they have made and explaining how it makes it impossible for the model to address the systemic challenges you have helped your contacts to recognize. There is never a reason to say a bad word about a competitor, but there is a good reason to attack their model. Your prospective clients with relationships may protect their existing supplier, but they won't protect the client's model, and they don't really know how to if they wanted to.
- When Possible, Propose Champion-Challenger: There is a strategy called "champion-challenger." This strategy requires you to ask for some part of the client's business, making you the challenger and your competitor the champion. In some industries, this is easy to accomplish, as the champion often has trouble meeting their client's needs. You may prefer a clean takeaway, but once you are in the building with a signed contract, it's difficult to remove you. When you have a contract and contacts, you have access that gives you the presence that allows you to take over.
- Persist in Your Pursuit: Competitive displacements take time. You are going to need to persist. The time it takes to displace a competitor is worth the effort, even if it takes months, or quarters, or years. It's how you win the big deals that create the equally large results you need. The way you speed up this process is by starting sooner and persisting even when you feel like you are not getting anywhere. The reason you cannot give up is that you have to start over from scratch.