Tesla, Netflix and Apple's Deep Ocean Diving

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⏱️ ~ 8 minutes 28 seconds to read

Kazaa, BitTorrent, Limewire, The Pirate Bay, IsoHunt.

If you’re under the age of 30, you’d be forgiven for thinking these are the names of some emerging soundcloud rappers.

If you’re over the age of 30 - you might still have some of these apps and websites gathering dust in your bookmarks folders.

These my friends, are THE big names of what was once the heaving underbelly of the internet piracy industry. 

You see once upon a time, music, movies and TV didn’t flow “freely” through the air like sweet entertainment pollen on the breeze of demand. It was locked away by greedy suits, cutting deals for the same content 53 different ways, all to ensure every possible dollar was squeezed out of its distribution.

Eventually the consumer got to enjoy it - but that was almost a final begrudging concession to be made.

What’s worse, you heard all about how amazing the show, movie or record was but; too-frickin-bad - It’s not coming out until September. Suck it up princess.

And that’s where the above names became legends - at least for a while. 

In a matter of a few short years, beginning in ‘99 with Napster (promptly killed by Metallica), through to the late 2000’s and early 2010’s, these giants of content piracy collectively held up a middle finger to the media industrial complex, and gave consumers what they were looking for. Content on demand.

The only problem was, consumers no longer had to pay for it. So, that can’t last forever can it?

The music and cinema industry was a bloody red ocean of competitors killing each other, and at the same time uniting to kill off anyone who dared to give consumers what they wanted. Wonder what happened to that KimDotCom guy anyway? 🐑 

That was until Netflix and Apple emerged with new and genuinely innovative models to solve the problem.

Innovation that fused technology with new business and pricing models. Innovation that completely changed the way value was created for both consumers and the media makers.

Value that was there all along, but totally unrealized. A brand new blue ocean.

Netflix as you know created the video on demand/ streaming category.

And Apple created the iTunes store to allow you to buy music directly, or upload your library, pay a nominal fee and have full rights to play it across all your devices.

This fundamentally solved the problem of distribution and access for consumers whilst also providing reliable revenue streams for media makers. Win Win. And extra big win for Apple and Netflix with their share of the middle-man action 🤝

Soon after, new players like Spotify came along and the rest is history - but these two are the blue ocean strategy OG’s with this move that fundamentally unf*cked the media landscape.

If you haven’t guessed it yet my friends, today we’re jumping into Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne.

You may not have read it - but you almost certainly have heard of it. It’s in most CEO and CMO’s bookcase for a reason.

In any case, I read it so you don’t have to. And no one will ever know 🤫 

Let’s dive into that cool blue water shall we?

RED OCEANS VS. BLUE OCEANS 🦈 

It’s a pretty simple idea to get your head around (the best ones usually are 🤫).

The book offers a framework for thinking about market competition and strategic choices.

Red Ocean Strategy refers to operating in existing market spaces, where businesses try to outperform their rivals to grab a greater share of existing demand. This environment is often characterised by fierce competition, where the market boundaries are defined and accepted, and the competitive rules of the game are known.

Blue Ocean Strategy, on the other hand, focuses on creating new market spaces (blue oceans) that are uncontested, making the competition irrelevant. It's about identifying, creating and capturing new demand, and offering unique value propositions.

So in the case of Apple and Netflix, they saw a bloody red ocean in the consumer media market and took a step back to consider the underlying consumer needs and market situation.

Instead of dreaming up another piracy protection protocol to prop up or extend the life of a rubbish consumer experience, they innovated to create an entirely new blue ocean market that was theirs to then dominate for decades to come.

Smart cookies huh?

DREAMIN’ UP SOME VALUE 🎁 

OK - create a Blue Ocean Troy, got it. But how the heck is that done?

Well this is where the authors actually spend most of their time in the book. Walking through a process they call ‘Value Innovation’. 

It involves two key steps, the second includes a specific model to guide you (the smooth-as-a-management-consultant named ‘ERRC’ model). 

Let’s take a look at it following the example of another Tech thoroughbred and pure innovation brand, Tesla. Yep, I know some of you might be Elon haters, cool, cool. But there’s lessons to be learned here people! 🤓 

Step 1 - Identifying the Target Audience

Instead of vying for the attention of existing customers in a crowded market, the strategy advocates for focusing on less obvious segments. These include potential customers on the periphery of your market and those in adjacent markets who are either currently overlooking existing offerings or are completely unaware of them.

Tesla, with extraordinary savvy targeted a niche yet highly valuable and growing group: luxury performance car lovers who are also tech enthusiasts. This strategic decision positioned Tesla not just as another electric vehicle manufacturer (EV’s were small, slow and thoroughly unsexy golf carts at the time), but as a pioneer at the intersection of high-performance luxury motoring and cutting-edge technology.

Step 2 - Reimagining the Business Model

With a clearly defined target audience, the next step is to critically assess and reimagine the existing business model within the market. 

This process is guided by four probing questions designed to challenge the status quo and pave the way for innovation:

1. What can we eliminate? How can businesses shed unnecessary aspects of their operations or product features that fail to add value for the new target audience. For Tesla, one example of this involved doing away with the traditional dealership model, opting instead for direct sales to maintain control over the customer experience and reduce overhead costs.

2. What can we reduce? What are the industry standards or product attributes that can be simplified, or pulled back upon without negatively impacting the overall customer experience for the new segment. Electric vehicles have significantly fewer moving parts than their internal combustion counterparts. Tesla capitalised on this, reducing the complexity in both vehicle design and manufacturing processes - which also simplified and improved the servicing needs for customers.

3. What can we raise? This question prompts companies to enhance specific elements of their product or service that are highly valued by the new audience. At the heart of the high-performance aspect of Tesla’s identity, is the break-neck acceleration of EV’s. This is next-level value for anyone who knows a Porche 911’s 0-60 numbers. Tesla came out of the gate raising the bar for 0-60 acceleration and immediately winning the admiration of motorheads.

4. What can we incorporate from adjacent industries to create a new experience? This step involves borrowing innovative elements from other sectors to offer a unique customer experience. Tesla vehicles are designed to receive over-the-air software updates, just like your iPhone or wifi router. This was a game-changing departure from the norm where updates and fixes would require a visit to a service centre. Even better is the fact that an over-the-air update means you can get into your Telsa the next morning and have entirely new features and capabilities there to enjoy.

By focusing on the niche market of luxury performance car enthusiasts who are equally passionate about technology, Tesla not only introduced a new category of vehicles but also established a blue ocean of uncontested market space. 

Not only did they create an entirely new market, birthing EV’s into the mainstream by making them a sexy luxury item - Tesla succeeded in becoming the most valuable automaker in the world, and also holds the status as one of the world's most valuable companies to this day.

So yeah - it’s a good strategy ✅ 

HOW TO TAKE THIS TO THE OFFICE 🏢 

Blue Ocean Strategy is an absolute must-read for anyone who runs a business or a brand. So kicking your bosses door in on Monday and slapping a copy down on the desk with “have I got a few ideas for you!” simply won’t do.

No, you’re much smarter than that.

Instead I’ve created a list of specific actions you can take immediately to bring to life within your organization some of the key aspects of this extraordinary book.

And when your boss finally catches on to what you’re basing these ideas on… oh yes, there will be a knowing nod 🙂

1. Workshop on Understanding the Target Audience Beyond the Core

   • Objective: To expand the team's understanding of potential customers beyond the current market focus.

   • Activities: Use customer data and market research to identify untapped segments. Conduct empathy mapping sessions to better understand the needs and motivations of these peripheral segments.

2. Cross-Functional Meeting to Challenge the Status Quo

   • Objective: To bring together diverse perspectives from across the company to question existing business models and practices.

   • Activities: Host a cross-functional brainstorming session where each department is asked to present one aspect of the current business model they believe could be eliminated, reduced, raised, or created to better serve the identified new target audience(s).

3. 'Eliminate and Reduce' Strategy Workshop

   • Objective: To identify aspects of the current operations, products, or services that do not add value to the newly identified target segments.

   • Activities: Facilitate a workshop using the "Eliminate-Reduce-Raise-Create (ERRC) Grid" from the Blue Ocean Strategy framework. Prioritize ideas for what can be eliminated or reduced in order to streamline operations or product features.

4. 'Raise and Create' Innovation Lab

   • Objective: To ideate on what aspects of the product or service can be enhanced or what new value can be created.

   • Activities: Organize an innovation lab session where teams can propose and prototype new features, services, or business models that could appeal to the new target segments. Encourage thinking from outside the industry to inspire creative solutions.

That will have you running out of whiteboard markers and the executive team frothing over some strategic pivots in no time.

BTW I’ve actually got another 6 super-practical actions that you can add to the above, but I didn’t want to smash the word count here. Simply hit reply to this email and let me know if you want them (they’re juicy AF). 

So there you have it.

Blue Ocean Strategy - I read it, so you don’t have to (and no one will ever know).

It’s a timeless business and marketing classic, that blends fundamentals from across business strategy, product development and sound marketing practice. And now it’s part of your arsenal 💪 

• Does this provide an interesting new way to think about competition and your target market?

• How might you attack the above list of actions?

• Read it before? Have you used any of the framework for strategy development in the past? How did that go?

I'm keen to hear your thoughts. Simply hit reply to this email (you can get those extra action items too).

If you enjoyed this edition, please forward it to a friend who’s looking to level-up their marketing game - they’ll love you for it (and I will too) ⏭️ 💌

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• Why jingles have always worked so damn well.

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• How to make ethical decisions around CX and do more ‘nudge’ and less ‘sludge’

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• 🎞️ YouTube is launching a Vision Pro app – after a maker made his own.

• 🎵 Spotify had a record year in 2023, rising to 236 million subscribers.

• 🤖 Google may be rolling out Gemini Ultra and renaming Bard this week.

• 🚙 Yay! After 15 years, Uber finally turned a profit.

• 🏢 Adam Neumann wants to buy WeWork out of bankruptcy. There’s another good movie in this story yet.

🙋 Got a question? I might just have some answers.

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Just hit 'reply' and let me know what's on your mind, and I'll share my answer with the community the very next week, including a special shout out (if you're into that, otherwise we can keep it anon) 🥸