value to their customer base for mass adoption, and that value was based entirely on innovation. “Innovative” means doing something that is new, original, and important enough to shake up a market. As W. Chan Kim and Renée Mauborgne describe in Blue Ocean Strategy 8 , value innovation is “the simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and the company.” This is accomplished by looking for ways that a company can reduce, raise, lower and eliminate factors that determine the cost and quality of a product. When we transpose this theory to the world of digital products, the value proposition manifests itself as unique feature set. Features are product characteristics that deliver benefits to the user. In most cases, less features equals more value. Value can be created by consolidating features from relevant existing solutions (i.e. Meetup and Evite) and solving a problem for users in a more intuitive way (i.e. EventBrite). Value can be created by transcending the value propositions from existing platforms (i.e. Google Maps + Crowdsourcing = Waze). Sometimes it’s consolidated from formerly disparate user experiences into one single solution (1-stop shop for a user task), i.e. sharing a video you made with your phone on YouTube, into one elegant simple solution (i.e. Vine and Instagram). We will deconstruct these complex techniques in Chapter 7 Storyboarding Value Innovation for Digital Products. But for now, let’s discuss the most important reason that we want to be unique and disruptive with both our products and our business models. There are bigger opportunities in unknown market spaces. We like to call these unknown market spaces “blue oceans.” This term comes from the book Blue Ocean Strategy that I mentioned two paragraphs ago. The authors discuss their studies of 150 strategic moves spanning more than a hundred years and thirty industries. They explain how the companies behind the Ford Model T, Cirque du Soleil and the iPod chose unconventional strategies rather than fighting head-to-head with direct competitors in an existing industry. The sea of other competitors with similar products is known as a “red ocean.” Red oceans are full of sharks that compete for the same customer by offering lower prices and eventually turning a product into a commodity. Figure 2-4. Photograph of an unappetizing hamburger In the corporate world, the impulse to compete by destroying your rivals is rooted in military strategy. In war, the fight typically plays out over a specific terrain. The battle gets bloody when one side wants what the other side has - whether it be oil, land, shelf space or eyeballs. In a blue ocean, the opportunity is not constrained by traditional boundaries. It’s about breaking a few rules that aren’t quite rules yet or even inventing your own game that creates an uncontested new marketplace and space for users to roam. A perfect example of a company with a digital product that did this is Airbnb. Airbnb is a “community marketplace” for people to list, discover and book sublets of practically anything from a tree house in Los Angeles to a castle in France. What’s amazing about this is that their value proposition has completely disrupted the travel industry. It’s affecting the profit margins of hotels so much that Airbnb was banned in
8 W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy. Harvard Business School Press, 2005