In sales, differentiation is critically important to success. One of the most popular business differentiation strategies is called blue ocean, which is based on the work of Chan Kim and Renee Mauborgne, business strategy professors at INSEAD. Blue ocean strategy occurs when a company creates a product or service that has no real sales competition. One of the more popular examples is Cirque du Soleil, which offers a one-of-a-kind entertainment experience. Because blue ocean strategy makes the company or its products and services truly unique, it creates a sustainable competitive advantage.
SEE: The Ultimate Template for Enterprise Startups
Blue ocean strategy offers an escape from the red ocean, which refers to a market or industry where many competitors vie for clients and sales. Red ocean sales strategies are different than those used in the blue ocean. To survive and thrive in the red ocean, you must identify some meaningful differentiation to prevent loss of market share or price reductions.
The common examples of blue ocean companies include Uber, Starbucks, Amazon, Tesla, Zoom, and, to some extent, Apple. If you are reading this, you already recognize you live and sell in the red ocean.
We'll look at the two different strategies, and then we'll talk about their impact on your ability to win deals.
Maintaining a Sustainable Competitive Advantage
Every company on Earth wants to be able to use a blue ocean strategy. Most leaders believe finding their way to the blue ocean will create a sustainable competitive advantage and an uncontested market, which is true—to a point.
To explain how fleeting a blue ocean advantage is in a world of constant, accelerating, disruptive change, you might look at Uber now competing against Lyft, Starbucks facing Dutch Brothers, Tesla and every other car manufacturer, and Zoom and Microsoft Teams, to name a few. Netflix is facing off against Disney, Amazon Prime, and every other streaming service. Even Apple has Samsung. The blue ocean companies have name recognition and most were first movers or had perfect timing, but this is a difficult and expensive strategy to execute—and it’s nearly impossible to maintain long-term. For the record, Uber is $9 billion in debt, and Netflix has around $13 billion.
Those of us in the red ocean find ourselves in a cutthroat environment where there are too many companies competing for a large but finite number of prospective clients. In general, companies in the red ocean rely on using value-creation strategies as part of their sales approach. But they also continually innovate and constantly improve their products and services to create an advantage.
As a salesperson, you are better off learning to sell in a red ocean, where all the benefits of the blue ocean have been stripped away. As a sales leader, you must understand how to create the most sustainable competitive advantage for any sales organization. Here, we will compare what the blue and red oceans actually look like from the sales perspective.
Winning Deals in the Blue Ocean
Let's start with a look at the impact of winning deals in the blue ocean. As a salesperson, you will enjoy the ease of selling when there is no real competition. You have more marketing support than most companies and greater demand for your product or service.
Because you are not competing against other companies and other salespeople, you learn to rely on a set of sales crutches, techniques that do not create value for clients but give salespeople something to talk about. The sales cycles may be faster because you don't have the same level of competition. Winning is easier in the blue ocean, but it does little for your sales development.
It would be terrible to have your first sales job in a company be in the blue ocean, or even at a company with a significant competitive advantage in their products and services. Starting in the blue ocean will stunt your growth and make it more difficult for you to close deals. Once you face real competition, you'll discover what competitive sales feels like in your market space. You will not be prepared for competitive selling.
Winning Deals in the Red Ocean
The red ocean gets its name because the water is red with the blood of the companies losing their clients to their competitors. When you live in the red ocean, your company trains salespeople in a modern sales approach, one that provides them with value creation strategies and the soft skills to help prospects improve their results.
As a salesperson without demand and many competitors, you are likely to get the best B2B sales training. Without relying on a blue ocean, you will become competent in differentiating yourself in the sales conversation by using your business acumen to help your clients learn things that will have a meaningful impact on their results.
The more you sell, the greater your confidence. You also learn how to talk to your clients and create more value for them in your B2B sales process. Sales reps in organizations that engage in complex sales learn how to beat their competition in their existing market space.
In the red ocean, you learn to sell and improve your results much faster when confronted with competitors, and it brings additional benefits. One advantage of the red ocean is that companies already buy what you sell, and you can steal their customers and clients. You also have the advantage of competing against established competitors who have become complacent and no longer take care of their clients.
Sustainable, Scalable Competitive Advantage
What you need to succeed in red ocean sales is effectiveness that is greater than your competition’s. This is a sustainable, scalable competitive advantage that comes from a sales force with a sales effectiveness that permits them to beat the competition and win deals away from their competitors. For more on these strategies, pick up Eat Their Lunch: Winning Customers Away from Your Competition.
Comparing the red ocean and blue ocean offers two strategies for achieving success in a competitive market. Red ocean strategies focus on existing markets and existing demand, competing with other companies for a limited customer base. Blue ocean strategies look to create new markets and products, aiming to offer something that can be found nowhere else.
As the business landscape continues to shift and evolve, it is essential for businesses to remain competitive. One way to do this is to focus on creating value greater than what is offered by the competition.
To maximize the impact of red ocean strategy on the ability to win deals, it is important for businesses to provide ongoing coaching and training for their teams. This coaching should focus on how best to identify potential opportunities and create unique value propositions that will stand out from the competition. Additionally, coaches should help their teams understand how to effectively evaluate different options and develop strategies that will increase their chances of success.