Red Ocean Trap
These six assumptions, on which most companies hypnotically build their strategies, keep companies trapped competing in red oceans. Specifically, companies tend to do the following: - Define their industry similarly and focus on being the best within it - Look at their industries through the lens of generally accepted strategic groups (such as luxury automobiles, economy cars, and family vehicles), and strive to stand out in the strategic group they play in - Focus on the same buyer group, be it the purchaser (as in the office equipment industry), the user (as in the clothing industry), or the influencer (as in the pharmaceutical industry) - Define the scope of the products and services offered by their industry similarly - Accept their industry’s functional or emotional orientation - Focus on the same point in time—and often on current competitive threats—in formulating strategy
Hewlett-Packard, a cautionary tale
What happens when a company stops believing in secrets? The sad decline of Hewlett-Packard provides a cautionary tale. In 1990, the company was worth $9 billion. Then came a decade of invention. In 1991, HP released the DeskJet 500C, the world’s first affordable color printer. In 1993, it launched the OmniBook, one of the first “superportable” laptops. The next year, HP released the OfficeJet, the world’s first all-in-one printer/fax/copier. This relentless product expansion paid off: by mid-2000, HP was worth $135 billion. But starting in late 1999, when HP introduced a new branding campaign around the imperative to “invent,” it stopped inventing things. In 2001, the company launched HP Services, a glorified consulting and support shop. In 2002, HP merged with Compaq, presumably because it didn’t know what else to do. By 2005, the company’s market cap had plunged to $70 billion—roughly half of what it had been just five years earlier. HP’s board was a microcosm of the dysfunction: it split into two factions, only one of which cared about new technology. That faction was led by Tom Perkins, an engineer who first came to HP in 1963 to run the ...
Tolstoy opens Anna Karenina by observing: "All happy families are alike; each unhappy family is unhappy in its own way." Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.