The Online CMO by Philip Hallenborg

The methods and teachings of Blue Ocean Strategy (BOS) are, next to Michael E Porter’s renowned frameworks, some of the most comprehensive tools you can use to fine tune your differentiated, low cost on-line strategy.

In my view, the beauty of BOS lies in the power of visualization and the creation of a strategy canvas (see below). In order to create the canvas you need to spend some time understanding what the present (and potential) competing factors are.

Competing factors have many names but easily expressed you need to understand what your present (and potential) customers’ present (and potential) needs are in your market space.

When Small & Medium customers (0-500 employees) are asked what they see as most important in purchasing a laptop computer, their answers give us some hints as to the present competing factors (according to Technology Business Research, Inc, “Corporate IT Buying Behavior & Customer Satisfaction Study: Notebooks”, Q407):

• hardware reliability,
• product design/features,
• technical support and
• customer services.

If you wish to sell this product in the online channel, you need to add some more channel specific online factors. In my view, these would be:

• ease of browse and order,
• delivery time (if applicable stock level) and
• effectiveness of payment methods.

Last you need to add Price & Promo attractivity.

Now this was a quick application of the BOS strategy canvas that serves the purpose of this discussion.  Let me now plot where I think a Blue Ocean is evolving in the On-line Computer Sales SMB market space.

The key takeaways are the following:

1. I believe the most successful on-line retailers should invest less in price and promo.Firstly, this is red ocean and with most of sourcing from Asia, a long term component cost advantage is difficult to sustain. Secondly, running promo activities is costly. You need creatives, extensive market communication and professionals to manage this which creates overhead. Finally, the computer/ PC market is already a low margin industry with low end lines selling at negative margins so you will hardly make any money doing it.
2. Hardware reliability and product differentiation is of course important. But most computers are exchanged within 3 years and the marginal cost for being the leader here doesn’t seem as attractive to me. Good is good enough.
3. Technical support and services services are two often outsourced or overlooked domains where I believe there is an open blue ocean. If you manage to maintain proximity to your customer and integrate tech support with up-sells, license renewals etc – you will leave your competition behind. Don’t mix up the cost effectiveness of the on-line channel with removing support functions. Invest and excel.
4. Three key areas in the on-line space that surprisingly many don’t handle well can be unique differentiators in your strategy:
   1. Make your site ridiculously simple to order from - this is the best recipe for conversion and cost effectiveness (fewer sites to keep track of and longer duration of your space station).
   2. Compete with fastest delivery. This is often forgotten as retailers have integrated supply chains with suppliers. Sure you save money, but you lose sales. Make sure you set the delivery (or stock) expectations up front.
   3. Many transactions will depend on the offered payment methods (credit in specific) but also your effectiveness of handling these processes. Invest in these processes and your business will grow.