the AI opportunity
In our prior article, "Will AI Disrupt Your Industry?," we made the case that the artificial intelligence's rapid pace of development meant that industry upheaval was coming quickly, and innovation from this new technology could be either sustaining or disrupting. The two types of disruption that I discussed, Low-End Disruption and New-Market Disruption, are perceived by existing players as upheaval, but by new entrants as opportunity.
Today, we'll be exploring what that opportunity looks like. Specifically, we'll discuss how businesses can navigate AI's wave of change by using a framework called Blue Ocean Strategy.
what is blue ocean?
Blue Ocean Strategy, developed by professors W. Chan Kim and Renée Mauborgne and popularized in their book with the same name, challenges businesses to shift from competitive 'Red Oceans' to uncontested 'Blue Oceans.' This strategy is about creating new market spaces, rendering competition irrelevant through value innovation. It's not merely about battling competitors but about breaking away from competition entirely.
Kim and Mauborgne's concept gained acclaim for its counterintuitive approach to strategic success, urging leaders to create new demand and explore untapped market spaces rather than just chase operational efficiencies for incremental gains. Their framework has been celebrated for its effectiveness across diverse industries.
examples
Consider what Apple was able to do under Steve Jobs' leadership with the iPod. Before the iPod's launch, the music industry was a Red Ocean, crowded with numerous participants scrambling to find new sources of revenue in the wake of Napster ushering in the era of free (and illegal!) downloads. Apple responded by creating a new category, combining excellent UX with a vast library of downloadable music. They provided stylish and easy-to-use hardware that also made it easy to purchase songs legally. This fundamentally changed how we consume music.
Similarly, Panera Bread, under the leadership of Ron Shaich, defined an entirely dining category. Perceiving a gap between the highly competitive fast-food and table service sectors, Panera created the "fast-casual" dining category by offering healthy food and quick service in a comfortable setting. Instead of going head-to-head with McDonalds or Olive Garden, Shaich and team uncovered a previously unknown "job to be done" and their fast-casual concept resonated with a broad customer base.
navigating uncharted waters
Music and dining are just two of the industries where you can see Kim and Mauborgne's theory in real life. Most industries tend towards becoming Red Oceans over time. Even the tech industry isn't immune. In this author's opinion, today many tech sectors—including SaaS, social media, and web3—are brimming with competition, resembling Red Oceans after venture capital's decade-long bull market funded legions of startups.
But generative AI is in the process of unwrapping the opportunity for both existing incumbents and new entrants to swim in entirely new waters. AI's transformative potential opens doors to innovative applications and markets previously unimagined, offering potential Blue Oceans for both tech companies and tech-enabled companies alike.
anchors aweigh!
In the past 12 months since OpenAI's public launch of ChatGPT, it's become widely understood that generative AI stands to be a transformative technology that will have a wide impact across the economy. According to Deloitte's former vice chairman Paul Sallomi, this is already unfolding:
"AI appears on the brink of revolutionizing industries as diverse as health care, law, journalism, aerospace, and manufacturing... Executives need to put on their 'paranoia hat' and envision where AI has the potential to disrupt their business or even their entire industry. Now is the time to have this discussion."
It's easy to think of disruption as scary for a business, but disruption can also mean opportunity—provided you're the one doing the disrupting! With AI enabling many new products and services that were previously impossible, there are going to be Blue Ocean opportunities for innovative companies willing to adopt and learn this new technology.
Charting a course to a Blue Ocean calls for boldness, creativity, and a conviction that consumers have a "job to be done" that you can fulfill. Startups will obviously chase these opportunities, but existing businesses can pursue them as well. Doing so requires wartime executive leadership and a conviction that Blue Markets are superior to chasing efficiency gains in Red Markets.