Amazon is far and away the leader in the E-C0mmerce space. Their growth continues at an exceptional pace. And they continue to expand their products, services, and capabilities. In short they continue to press their advantage and make it difficult for anyone else to compete with them.
But if you are in the E-Commerce space that is your reality. Amazon is the biggest shark in the room. So how do you compete in the face of such an overwhelming adversary?
One technique is to consider creating your own Blue Ocean Strategy! If you can define dramatically different space in which to do business you may be able to keep this shark, and others, at bay (at least for a period of time).
The Amazon Flywheel Strategy
Amazon deploys their Flywheel strategy to great success. The initial concept was that lower prices would enable a better customer experience. This would drive more traffic which in turn would result in lower costs. And this would allow for even lower prices, and on and on and on in a virtuous cycle. Affecting any of these factors drivers further acceleration around the flywheel.
Amazon uses this approach in everything that they do. Every product set that they add, every service that they offer, and every capability that they provide increases the velocity of the flywheel.
This is incredibly important to understand. This competitor continues to get bigger, stronger, faster, and continues to create highly differentiated value.
All of this makes it ever more difficult to compete in the same space against Amazon. And even if you are able to compete today, you need to work to keep your advantage because they are right behind you looking to pass you by.
Red Oceans vs. Blue Oceans
Amazon is so dominating that you can not compete head to head (certainly not for very long). Most every company will never have the size and scale and advanced capabilities that Amazon has. At best you may be able to replicate some of what they have and what they offer.
So how do you compete?
You need to define dramatically different space to compete and a different basis for selling in the E-Commerce channel. And you need to avoid competing head to head in every possible way. In short you need to create your own Blue Ocean Strategy.
In 2005 W.Chan Kim and Renee Maubourgne published a book, "Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant".
The metaphor defined in the book is that many companies compete with their rivals in bloody red oceans. These companies have similar products or services without substantial enough differentiation to separate themselves from the pack. As a result these products and services are often commoditized and competitors compete based on lower prices for instance. All of the sharks are fighting in the same blood red ocean.
The fundamental premise of the Blue Ocean strategy is that as opposed to continuing to compete in the red ocean, you should try to find new space in which to sell your goods and services. In a Blue Ocean because of the uniqueness of your offering you are able to service your customers in uncontested (at least for now) space. That is, you are swimming in a Blue Ocean, largely devoid of the competitors fighting in the commoditized red ocean space.
Elements of a Blue Ocean Strategy
Amazon continually looks to create and implement Blue Ocean Strategies. Strategies such as their Kindle E-Reading solution, Drone Delivery, Cloud Based Computing, Amazon Prime, or One Hour Delivery are all examples of Amazon creating uncontested space (ie. Blue Oceans) in which to compete far away from anything their competitors can do.
So if you are in the E-Commerce space how do you get create your own Blue Ocean Strategy?
First of all you need to recognize that Amazon does not own all of the ideas and winning strategies. Every day there are new companies and new services appearing with approaches that were unheard of previously.
Second it is necessary to understand that in E-Commerce there are many elements that are now clearly red ocean competitive factors. You must provide a great customer experience. There must be a simple, fast online ordering and checkout process. You must have fast delivery. And you must allow for hassle-free returns. You need to have these factors in place but they are not a source of competitive differentiation. These are red ocean realities.
Your Blue Ocean strategy must result in unique products or assortment which a customer can not get anywhere else. And your Blue Ocean strategy must provide unique services and capabilities.
This may include products you have designed, unique functionality, leveraging online and physical store footprints in some fashion, leveraging the Internet of Things (IoT), or having some creative systems capability. Or maybe your strategy involves disintermediation of the supply chain.
Whatever your Blue Ocean Strategy is it is important to recognize that time is your enemy. Your competitors will eventually invade this space and turn it into another red ocean. You have to constantly reinvent yourself and your company to continue to swim in the Blue Ocean.
Creating a Blue Ocean Strategy
Many years ago I deployed the Blue Ocean Strategy concepts to launch a new business offering within a company. It was very powerful and very exciting. We knew that we wanted to create a highly unique new service offering but we had no idea heading into the initiative what this new offering would be.
We created a team including the very best and brightest minds in the company. Nothing was off limits. There was no preconceived idea of what was or was not possible. And there was no notion of what the solution had to be.
We were also given fantastic Executive Sponsorship and access to all of the resources that we could possibly need. The great foresight here was that we had the opportunity to create something that could redefine the future of the company.
I engaged a Blue Ocean trained facilitator to lead us through the process. I highly recommend this approach. It may seem simple to read the book and then think that you can just start using the techniques therein. But I believe you will find that a strong facilitator will accelerate your progress and strengthen your strategy.
Further you must also ensure you also have clear Executive Sponsorship and buy-in. If the company has come to the self-realization that a new strategy is needed then you are well on your way there.
The first step is to recognize that you are in a red ocean. The E-Commerce space is a vicious, stressful, highly contested and congested channel. And there is a very dominant, all-consuming shark in that red ocean with you.
If you can create a Blue Ocean Strategy of your own in the E-Commerce space you will dramatically increase your chances of success. What is it about your business or elements of your business that you can leverage or reinvent to create your Blue Ocean?
Avoid commoditization. Recognize that the Blue Ocean of tomorrow is next week's red ocean. You need to keep moving and keep innovating.
Send us your comments and let us know if you have any red ocean or Blue Ocean stories you would like to share!
Check out our other blog posts at http://supplychaingamechanger.com.
Selected as one of the Top 75 Supply Chain blogs on the Internet.