CHAPTER 9
Discovering an Ocean of Noncustomers
FOR THE PAST 25 years, the business mantra has been “customer first.” The blue ocean strategist’s mantra is “noncustomers first.” The aim of making a blue ocean shift, remember, is not to compete for existing customers but to create new demand and grow your industry. That’s done by unlocking new utility for your noncustomers. Yet, few organizations have a sound grasp of who their noncustomers are or why they continue to remain just that—noncustomers.
This brings us to the next task: understanding precisely who your noncustomers are and why they don’t patronize your industry. The buyer utility map gave the team initial insight into the pain points and blocks to utility the industry imposes on its existing customers that may potentially also turn noncustomers away. Now you will begin to widen the lens so the team can see the total demand landscape. Doing this offers insight into two of the questions executives raise most often: “Is the concept of noncustomers relevant to our industry?” And “With a compelling blue ocean offering, how much new demand could we unlock?” After working through this step, no executive ever looks at demand in the same way.
Think of Square versus Visa, MasterCard, and American Express. All three rank among the world’s top 100 brands. Yet despite their global reach, strong brand recognition, and deep pockets, all three compete head-to-head, essentially striving to win a greater share of the wallets of the same group of customers: established merchants and their customers. This is particularly true in America, which accounts for the greatest share of all three companies’ card circulation, and where nearly 75 percent of all adult Americans already have more than one credit card.
The way the industry saw it, the US credit card market was saturated, with scant room for profitable growth, especially given the tighter regulations on interest rates and fees that followed the 2008 global financial crisis. But was it? That wasn’t the way Square saw it. To the contrary, Square, founded in 2009 by Jack Dorsey, who also cofounded Twitter, and Jim McKelvey, saw an ocean of noncustomers.
Yes, most Americans have a credit card, and almost all medium-sized and large merchants accept them. But could Americans use their credit cards to pay the pizza delivery person, the gardener, the electrician who visits their home, the piano teacher, or the ice cream truck at the beach? Could they use credit cards or debit cards to pay the babysitter or the housekeeper, or to pay back the friend they borrowed $50 from? No. Every person who wanted to make a person-to-person payment was a noncustomer of the credit and debit card industry, and so were many new businesses and microbusinesses, like farmers’ market vendors, food trucks, and pop-up shops.
Of America’s 27 million small businesses, roughly 55 percent don’t accept credit cards. Yet research shows that more than 55 percent of customers wish they did. Moreover, other studies show that when people are given payment options in addition to cash, they are likely to spend more per purchase, which helps small businesses grow. In other words, there were lots of entrepreneurs, small business owners, and newly started businesses that didn’t offer customers the option of credit or debit card payment, but would benefit handsomely if they did. And there were lots of person-to-person transactions, typically handled by cash or check, that people would be thrilled to use credit or debit cards for. This is the ocean of noncustomers Square saw in 2009 and has been rapidly capturing with its mobile payment system, which allows individuals, small businesses, and even large organizations to accept credit or debit card payments on their iPhones, Androids, or iPads, simply by attaching a free Square reader, a small plastic device that’s literally a snap to use. Today many other followers have joined in and, like Square, are unlocking this ocean of noncustomers, which continues to grow, while the industry itself is constantly evolving.
As Square, Comic Relief, Salesforce.com, and many others understood, the universe of noncustomers not only exists, but provides expanding growth opportunities. Yet most organizations are so focused on their industries’ existing customers that they cannot see beyond this narrow frame. To be fair, it is always easier to talk with existing customers, the ones who have already crossed your threshold. And, of course, their opinions matter. But, to grow, you have to bring new people into the industry.
The Three Tiers of Noncustomers
To help organizations broaden their vision, we developed a framework that defines and identifies three tiers of noncustomers, as the graphic in figure 9-1 shows. The three tiers provide successively wider lenses with which teams can view the ocean of noncustomers they could tap into to unlock new demand. We have found that without such an organizing framework, the notion of noncustomers, though seductive, becomes too broad a catchall to use to systematically analyze and understand—and hence capture—potential demand. In this context, we present two formulas that are key to making a blue ocean shift and, we would argue, are increasingly tied to your organization’s ability to grow.
Figure 9-1
The Three Tiers of Noncustomers
First, contrary to common practice,
Total demand potential ≠ function (existing industry customers)
Rather,
Total demand potential = function (existing industry customers + first-tier noncustomers + second-tier noncustomers + third-tier noncustomers)
Let’s consider the definitions of the three tiers, how they differ, and why they are often closer to an industry than most organizations imagine.
First-tier noncustomers are all the soon-to-be noncustomers of your industry. These buyers patronize your industry not because they want to, but because they have to. They use current market offerings minimally, to get by, as they search for or simply wait for something better. Upon discovering a superior alternative, they will eagerly jump ship. In this sense, they sit on the edge of your market. Go back to the US credit card industry. Of the small and midsize merchants who accept credit card payments and debit transactions, many do so reluctantly. They have tolerated the cost of installing point-of-sale technology, the fees for processing transactions, and the often hidden costs they may be charged (especially those that don’t have the bargaining power to negotiate fees), because they knew customers expected to be able to pay with their cards. But these noncustomers would willingly make a switch if an easier, less cumbersome, and less expensive alternative to the current system existed.
Just think for a moment about how many industries you patronize only because you have to, not because you want to, are proud to, or enjoy the experience. And think about how you might love to jump ship if a compelling alternative came along. If you are like most people, you will quickly realize how many industries and organizations you are a first-tier noncustomer of. First-tier noncustomers are not only highly vulnerable to being poached, but if an alternative could eliminate their pain points, it’s likely the rate and frequency of their use would multiply. Do you know who your industry’s first-tier noncustomers are?
Second-tier noncustomers are refusing noncustomers—people or organizations that have consciously thought about using your industry’s offering, but then rejected it, either because another industry’s offering better meets their needs or because yours is beyond their means, in which case their needs are either dealt with by another industry or ignored. For the credit and debit card industry, second-tier noncustomers are all the new businesses, microbusinesses, and self-employed individuals who thought about offering credit and debit card payment but in the end chose against it. Even though they knew customers would probably appreciate it, their small annual sales, the fragility of their new enterprise, or the perceived complication of setting up and paying for the point-of-sale system made them reject the industry. Cash and checks tend to be the standard payment options for this broad swath of organizations.
Think about how often you or your organization has been a second-tier noncustomer. For example, did you recently choose to paint your living room after contemplating the pros and cons of using wallpaper instead? If yes, you were a second-tier noncustomer of the wallpaper industry. Or did your management decide to use stone flooring in the new head office after contemplating wood as an alternative? If yes, your organization was a second-tier noncustomer of the wood-flooring industry. You see, being a second-tier noncustomer is as easy as that, and happens far more frequently than most people or organizations ever assume, imagine, or give much systematic thought to. And yet, think of how close second-tier noncustomers actually are to patronizing the industry they chose against. The simple fact that they contemplated and weighed the pros and cons tells you that the industry they rejected is still far closer to capturing their wallets than most of its players ever realize. Do you know who the second-tier noncustomers of your industry are? And why, after considering your offering, they dismissed it?
Third-tier noncustomers are the furthest away from an industry’s existing customers. Commonly, these unexplored noncustomers have never been thought of as potential customers, nor targeted by any of the industry’s players, because their needs and the business opportunities associated with them have always been assumed to belong to other industries. Go back to credit cards. Before Square, the industry always assumed that a merchant was half of the transaction equation. All the transactions that occur between individuals were left off the table and unexplored, because they were assumed to belong to another industry—cash and checks. After all, who would install a point-of-sale credit/debit card system at home? Yet, we would wager that most of us have opened our wallets to pay someone, only to discover that we’ve run out of cash and wished we could use a credit card instead. But since we can’t, what do we do? We reluctantly but hastily go to the nearest ATM. Those are the third-tier noncustomers that Square set out to unlock through its simple, easy-to-use, easy-to-carry, pay-only-when-you-use-it Square reader.
Do you, like Square, know who the third-tier noncustomers of your industry are? Have you or your organization ever given much thought to this tier? You should, because this can be the largest catchment of noncustomers an organization can unlock. Quick caution, though: Do not be tricked into thinking third-tier noncustomers are “everyone else.” They are not. They are people or organizations that would ideally like to use, or who could benefit from, what your industry fundamentally offers, but who have never seriously considered doing so because your industry has made this somehow unfeasible, unattractive, or unimaginable.
Identifying the Three Tiers of Noncustomers in Your Industry
When teams are introduced to the three-tiers framework, a natural first reaction from some members is to question whether the concept of noncustomers applies to their industry. The concept is typically easy for executives to grasp when their organization operates in or intends to enter a nascent industry. In those circumstances, most teams get the applicability right away, even if they struggle initially to identify who the dominant noncustomer categories in each tier are. Take, for example, the MP3 player. As Apple was designing the first iPod, the number of noncustomers of MP3 players was huge and far overshadowed existing industry customers.
Noncustomers abound in every industry, however, not just new ones. Think for a moment about orchestras or museums. Significant noncustomers? Absolutely. How about credit cards? Square highlighted just how many noncustomers there were. CRM software? Think of Salesforce.com. Flying? Think about US aviation pre–Southwest Airlines. Coffee drinking? You bet—Starbucks grew that industry. And the list goes on and on.
The purpose of this exercise—and what you should aim for—is to move the discussion of the three tiers from a theoretical concept to a pragmatic reality. Identifying the three tiers of noncustomers in your own industry allows you to make this happen.
Begin with the basic concept
Start by laying out the definitions of the three tiers of noncustomers using the descriptions and graphic from the previous section. To deepen the team’s understanding, and to show how the tiers apply in various industries, walk the team through several examples from outside their own field. Table 9-1 shows the three tiers of several red ocean industries: the credit/debit card industry discussed above, the UK charity fund-raising industry examined before, the language translation industry, and the orchestra industry. Ask the team questions like these: “If these red ocean industries all had oceans of noncustomers could the same be true in our industry?” And “If we were to zoom out, and apply a wider-angle lens, would we see our own noncustomers?” You should pose these questions to the team explicitly to ensure they are seeing the connection between the noncustomer insights of these industries and your own industry setting. As your team discusses these examples and answers these questions, the meaning and relevance of the three tiers will begin to sink in. This is typically a sit-up-in-your-chair moment for team members, when their emotions start to shift from denial—“Nah, this doesn’t really apply to our industry”—to wonder—“Could it be in our industry, too? It might just be.”
Table 9-1 Noncustomers in Various Industries
The Credit Card/Debit Card Industry
First Tier of Noncustomers: Small and midsize merchants that reluctantly accept credit and debit cards for payment
Second Tier of Noncustomers: New business, microbusinesses, and self-employed individuals who do not accept credit or debit cards
Third Tier of Noncustomers: Individuals needing to make payments to other individuals
The UK Charity Fund-raising Industry
First Tier of Noncustomers: Older wealthy individuals who feel frustrated with year-round solicitations for funds
Second Tier of Noncustomers: Young professionals who choose not to donate, due to the lack of transparency in percentage of funds that go to the cause
Third Tier of Noncustomers: Children and low-income individuals who never thought of donating
The Language Translation Industry
First Tier of Noncustomers: Large corporations frustrated by the time, expense, and fractured nature of securing language translation of business materials, including website copy, brochures, product documentation, etc.
Second Tier of Noncustomers: Midsize organizations that don’t use translation services for the vast majority of languages, even though, with the Internet, people from virtually every country can be their potential customers
Third Tier of Noncustomers: Individuals with blogs and small organizations, who never thought of using language translation, even though it could open a far wider global audience and customer base for them
The Orchestra Industry
First Tier of Noncustomers: Individuals who attend concerts once a season or every few years, as it’s seen more as something they should do than something they want to do
Second Tier of Noncustomers: Individuals who can afford to attend but choose not to, as they find the experience boring, outdated, or too pretentious
Third Tier of Noncustomers: Individuals who never considered going to the orchestra, as they have no real knowledge of classical music and feel the orchestra experience is essentially for the educated elite, not ordinary people
Shift to your industry and offering
Realizing that noncustomers probably abound in their industry doesn’t always make it immediately obvious who those noncustomers are. So rather than ask your team to identify them now, start by discussing who typically buys and uses the industry’s current offering. Everyone working on the team (and in the organization) should have a good feel for this information already. It’s also information that’s generally available in considerable detail, so it provides a good reference point for the team as they start thinking about the total demand landscape. The objective, however, is not to engage in a deep analysis of fine-grained demographic differences within the existing market, as marketers often do. Rather, it is to see whether a major variable, such as age, sex, income, family structure, or, for a B2B business, organization size is a reasonable predictor of who the industry’s existing customers are. For video games pre–Nintendo’s Wii, for example, the dominant customer demographic was young males between the ages of 14 and 26. Likewise, higher-income, older, educated individuals were the predominant donor group for the UK charity fund-raising industry pre–Comic Relief. As for CRM software, before Salesforce.com entered the scene, the dominant customer group was Fortune 500 and 1,000 firms.
Throughout this discussion, it’s important for you to keep the team focused on the big picture, and not to let people get bogged down or lost in minute details, like what proportion of young male video game users are black, white, and Hispanic. Such a discussion and analysis may be the path to refining an offering, but it will prevent the team from seeing the major defining contours of the industry’s current customers. In our experience, too many organizations that have analyzed their customers in granular detail fail to see the big picture and the commonalities that unite the largest group of them.
If team members identify several groups of existing customers, challenge them to see whether they can identify a broader category that would encompass most, if not all, of them. The point here is not to duplicate what marketing departments are generally good at doing, which is developing a refined understanding of the differences across existing customer segments. Rather, the purpose is to seek a higher-level understanding of the macro contours and commonalities that cut across and unite existing customers so you’ll be able to see the forest for the trees.
Identify the three tiers of noncustomers in your industry
Now we turn from current customers to noncustomers. Using the three-tiers graphic, shown in figure 9-1, as a guide, ask each of the team members to think through and write down their thoughts about who might be in each tier. To help you perform this task effectively, relevant materials and templates are provided for your free download and use at www.blueoceanshift.com/ExerciseTemplates. Here are the questions you want to ask:
1. Who sits on the edge of our industry and uses its offering reluctantly and/or minimally?
2. Who considers our industry and then consciously rejects it, satisfying their needs through another industry’s offering or not at all?
3. Who could strongly benefit from the utility our industry offers, but doesn’t even consider it, because the way it is currently being delivered makes the industry seem irrelevant or out of their financial reach?
For many people, this will be the first time they’ve ever been asked to systematically think through the issue of noncustomers. As we have witnessed, if an organization has given thought to noncustomers, it’s usually in terms of their competitors’ customers, not the noncustomers of their overall industry. They ask, “Who are our competitors’ customers, and how can we win a greater share of those who patronize other players?” But this is not the meaning of noncustomers in blue ocean terms. What is key at this stage is getting team members thinking deeply about noncustomers and, critically, letting them discover for themselves how little they may know or have thought about the wider opportunity landscape that exists beyond the current industry’s horizon.
Organizations often become comfortable commissioning and outsourcing large, formal market studies. Hence, it is not surprising that, at this juncture, we’ve often been asked, “Don’t we need to be supported by formal market research so we will know, concretely, who the three tiers of noncustomers are?” In response, remind them that the blue ocean shift process is built on firsthand discovery that will be done when the team goes out in the field. The purpose here is to maximize the team’s firsthand learning and confidence in what they see for themselves in the field. With firsthand discovery, the resulting strategy is likely to be executed strongly, as the confidence that emanates from the team reverberates throughout the larger organization.
Much to their surprise, team members generally find that, by struggling through this exercise independently, they flesh out a rich list of noncustomer groups and are really pushed to broaden their thinking. Equally important, they see how tightly focused on existing customers their strategic lens has been. When people are spoon-fed answers by having reports commissioned up front, they seldom realize what they don’t know, and too often easily conclude that they “got it, knew it, no big deal,” when, in fact, they didn’t have or know it, and it is a big deal. People seldom realize what they don’t know or appreciate the value of what they’ve learned if they haven’t struggled to obtain it themselves. Making people discover firsthand that what they know—and don’t know—is key to getting them to internalize and value what they learn.
After each of the team members has compiled their list of noncustomers, ask them to share their thoughts about whom they put where and why. The objective now is for the team to identify and select the people or organizations they collectively see as the dominant noncustomer group or groups in each tier. Note that team members may continue to feel a bit uneasy, because they’re being asked not only to move away from what they know, but also to share their thoughts in front of their colleagues. Some unease is good, however, because it means that team members are being pushed to broaden their current understanding. As each of the team members contributes their thoughts on each of the three tiers, you should record and post them in front of the group. This allows everyone to see the whole team’s thoughts, which in itself is eye-opening, as they get to appreciate the differences and similarities in how each of them views the same market reality.
As people share and debate their selections and the thought processes behind them, team members’ understanding of who potentially belongs in each tier starts to deepen. So does their confidence that opportunity exists in the untapped demand that lies beyond the boundaries of their industry as it’s currently defined. Typically, as members discuss the validity of one another’s reasoning, a number of customer groups are crossed off, and different sets of customers get grouped together, producing fairly solid agreement among team members as to whom they see as the main noncustomer groups in each tier. With this, a good understanding of the industry’s total demand landscape starts to come into focus.
Determine the rough size of the new demand landscape
In this age of Google, where search is simple and easy, and a significant amount of industry information is available online, the team can now proceed to get a good sense of the new demand that a reconstructed offering could potentially unlock. Break the team into subteams, and ask them to Google basic statistics on the rough size of each of the noncustomer groups. What are the relative proportions of the groups? Just how big is their respective potential demand, based on their per-capita or, for B2B players, per-organization spending? Have each team do this for all three tiers.
The objective here is not to nail down specific numbers for each tier, but to get a rough sense of how potentially important each tier could be to the organization, if it were unlocked. For example, if a noncustomer group is currently small and only growing in single digits, it’s likely this tier will remain small for the foreseeable future. On the other hand, if a noncustomer group is growing at a fairly consistent clip of, say, 30 percent a year, the team can reasonably surmise that even if the group is relatively small today, this tier has the potential to become a significant source of noncustomers within a meaningful time frame.
By the end of this step, teams have usually surprised themselves by how much they agree on who the key groups of noncustomers in each tier are and the relative demand potential for each. In the next stage of the process, these answers may be revised: The relative proportions of potential demand across the three tiers may shift, for example, or a new group of noncustomers may be identified. Nonetheless, these insights allow the team to see both that there is clear scope for creating new demand and how limited their understanding of the unlocked demand beyond their industry’s conventional boundaries has been. The power of this step lies not only in the insights and confidence gained, but also in the speed with which team members achieved and internalized these insights. This can usually be accomplished in a half- or full-day off-site meeting.
To see how the three-tier exercise can transform a team’s understanding of the potential demand for their offering, let’s listen to a group of educators discover their noncustomers.
Discovering an Ocean of Potential Undergraduates
A private, four-year, US university that we’ll call CU faced a mounting challenge. With a student body composed primarily of first-generation, college-bound youth from families in the bottom 25 percent of the country’s income distribution, CU had a vital mission. But the school’s retention rates were falling and operational costs were rising. The president of CU not only wanted to turn this situation around, he wanted to grow CU and make it a model urban university for youth.
The CU blue ocean initiative team, comprising faculty and administrators, had just completed the buyer utility map exercise. As the team leader summed it up, “There are a lot of pain points in our industry, based on outdated, misguided, or wrong assumptions.” “Exactly!” said a team member. “We believe we provide a quality education because our hearts are in it, we work long hours, and we charge a premium. But none of that really matters. Quality is what students get out of school and what they can afford. And the competition is getting tougher.”
“The question is,” the team leader continued, “Will surveying our current students give us the answers we need to create a blue ocean and break away from the pack?” Team members quickly agreed that existing students were likely to request the same things their peers at other schools did: better dormitories, a more lively campus, better teachers, greater course selection, better school food. “What we’re saying,” the team leader concluded, “is that if we start looking for solutions by asking our students what they want, at best, we’ll achieve incremental gains at an even higher cost. And we won’t grow. To do that we’ll have to look outside our market, at our noncustomers. We know who our customers are, but who are our noncustomers? Maybe we can discover some answers by focusing first on what our ultimate purpose really is.”
After some spirited discussion, the team reached a unanimous conclusion about what constituted their purpose: providing a step change in the lives of young people in terms of their economic prospects, self-confidence, and ability to thrive in the world. “If that is really the case,” said the team leader, “and we all heartily believe it is, then let’s use that to be more specific about who the dominant noncustomer groups in our three tiers are.”
“First tier are bright students who enrolled in CU but now are insufficiently challenged by their classes and classmates,” one professor observed. “They are increasingly tempted to transfer to other schools for a greater intellectual challenge.”
“An even bigger group are students who attend with the help of financial aid, parent PLUS loans, and Pell grants,” added another. “But as soon as those supplemental funds run out, typically in the third year or so, they depart. And neither we nor our peers have strong work-study programs to help them close that gap, nor have we challenged ourselves on how we could dramatically bring costs down to make our education more affordable. Essentially, we try to offer and match everything your standard four-year private college offers with a small fraction of the resources. So, our costs are high while quality is compromised. It’s not even clear that what these students need from CU to make a step change in their lives is what your standard college offers.” Silence.
Once the discussion on the first tier wound down, and everyone felt heard, the team leader shifted to the second tier. “Who are the refusing noncustomers of private four-year universites?”
“This tier is huge,” noted one team member. “It’s all the students who choose to go to state universities, over private colleges like ours.” Heads nodded. The noncustomer demand landscape was growing.
The conversation did not stop here, however. “What about all the students who choose to go to junior colleges?” a faculty member asked. “That’s another large group of second-tier noncustomers. Those are students who may want a four-year school but ultimately choose a junior college—maybe because it’s more practical, given their professional aspirations and personal lives, or because they have more confidence that they can succeed in that environment, or maybe they just don’t have the funds. Whatever the reason, it’s still a big catchment of second-tier noncustomers.” Without any analysis or debate, everyone in the room agreed that second-tier noncustomers represented a larger tier of potential demand than the existing market.
The team leader then shifted the discussion to the third tier, the noncustomers who could benefit from higher education’s ultimate purpose, but who never thought about the industry’s offerings as an option. “What are your ideas on who this would be?” asked the team leader. After a little while, a sober answer came back: These noncustomers are the peers of our students who chose another route entirely. Many of CU’s undergraduates come from poor public school districts where K-12 education itself is weak. Students in economically impoverished districts typically are discouraged from considering higher education, and those who do seldom receive the kind of counseling they need and that is routinely provided for their peers in better-off districts. And yet for these young people, higher education could be the most powerful path out of poverty.
Where could these noncustomers be found? The team members were full of ideas: “The military.” “Blue-collar work.” “Missionaries.” “Store personnel.” “Maybe entrepreneurs?” This tier, the team agreed, was the largest of all. “Look at our competition locally,” said the team leader. “Are they trying to understand these three tiers of noncustomers?” “No! Not at all,” responded team members. “That’s why all colleges look the same.” The eagerness in the room to look beyond their usual customer base was palpable, as was the team members’ impatience to get started.
Understanding the Strategic Implications of Your Three Tiers
Before beginning to discuss the overall implications of this exercise, have team members again collect their thoughts individually and write down the takeaways that jump out at them. Then, as with all the steps in the blue ocean shift process, ask each of the team members to share the insights they recorded to ensure that all points are put on the table and to create collective ownership of the discussion. This precludes the most articulate from drowning out the opinions of members who may be more reserved but no less perceptive. More than that, the simple act of having each member record and voice their key takeaways ensures a deeper level of internalized learning, even before you start to calibrate the points the team has made.
In our work with teams, we find they tend to get the most out of this discussion when you structure the group discussion via a set of systematic questions:
• What did we learn? Who are the first-tier, second-tier, and third-tier noncustomers of our industry or target industry?
• What is the approximate magnitude of each tier of noncustomers, relative to the industry’s existing customer base?
• Is each of the three tiers small, suggesting scant room to create a blue ocean? Or are one, two, or all three of the tiers noteworthy in terms of the magnitude of their potential demand?
• Which tier, if any, has the largest group of noncustomers that could potentially be unlocked with a reconstructed offering?
• Do we see a link between the blocks to utility revealed in the buyer utility map and any of the three tiers?
• Might these blocks to utility be causing the noncustomer groups to patronize another industry to fulfill their ultimate purpose?
• If yes, do we imagine that this tier of noncustomers might be unlocked by systematically exploring what it would take to convert them into customers?
As team members review what they have discovered, they may become eager to probe deeper into the hurdles or attitudes that are keeping the industry’s noncustomers noncustomers: “What’s missing from the industry’s offerings, which, if we included it, would start to unlock new demand?” they may ask. This is a sign that they’re intellectually engaged and eager to take their learning to the next step. You should let them know that in the next step of the process they will do precisely that. That said, if the energy generated by this topic is high, allow the team to hypothesize about what could be different, while at the same time reminding them that, right now, the points being made are just that: hypotheses. This allows people to feel heard, while also signaling that developing blue ocean offerings demands grounded live field research and a structured method, not simply brainstorming in a conference room. Team members usually respect this reminder tremendously.
As they discuss the broad context of the industry and the available demand opportunity, the team’s understanding of the relative proportions of the market for existing buyers and users and the three types of noncustomers will start to crystallize. As it does, their perception of potential demand will shift from existing industry customers to the far larger total demand landscape.
End Strong
At the end of this step, to ensure that everyone is on the same page, and to create another opportunity for team members to internalize key lessons, you should recap the steps the team has taken to date. Specifically, you want to remind the team that, as they applied the as-is strategy canvas tool, they became clear on the current state of play in the industry, the factors the industry competes on, and the degree of convergence between their organization’s current strategic profile and that of its competitors—convergence that has likely thrown the organization into the red ocean. The subsequent step, where they applied the buyer utility map, revealed both the subset of utility spaces in which the industry currently competes and, at the same time, the pain points and points of intimidation imposed by the industry that potentially limit usage by existing customers and turn noncustomers away. By doing so, the team has already been able to benefit by identifying low-hanging fruit that the organization could act on and fix, even if it decided not to go any further. Last, by applying the three-tiers framework, the team gained a good grasp of the potential new demand that could be unlocked with a reconstructed offering. Noncustomers who were once invisible to the team and to the industry have now been made visible.
At this juncture, the team’s confidence and competence are usually another notch higher. Team members start to think, “Yes, there is a way out of the red ocean, and just maybe there are real opportunities that we could unlock to create a blue ocean.” The team dynamic will also have started to shift quite noticeably, as team members now begin to push to get on to the next step, rather than wait for the team leader or top management to push them to move forward. This is the emotional state you want to achieve, and it brings us to the next step where the process shifts from broadening perspectives and imagining what could be, to generating practical, real-world, blue ocean options. Here the team will meet the market and explore the six systematic ways to reconstruct market boundaries to unlock new demand and create new market space. Let’s get started.