Is Web 2.0 turning into a red ocean ?
A thought recently came to me: Is Web 2.0 turning into a red ocean ?
For those who are unfamiliar with the term, red ocean is a term used in W. Chan Kim and Renée Mauborgne’s hit book “Blue Ocean Strategy” to depict a highly contested market space. It is published and used in Harvard Business School as a reference textbook. Below is a quote description of a red ocean.
In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the red ocean bloody. Hence, the term red oceans.
The above term pretty much sums up what we see in the industry today, with all the competing products in the marketplace. The link is here.
A Blue Ocean is in contrast to Red Ocean. It represents a uncontested market space. It is untainted by competition, and hence demand is being created rather than fought over. There’s basically no competition as the rules of the games are to be set by the players.
When Web 2.0 was coined, no one really know what it is. Then you started hearing about Facebook, NING, Google Orkut, MySpace. Then you started seeing the social elements being brought out to consumer tools such as social bookmarking, social website discovery/sharing (StumbledUpon). Today, you can see major vendors started “Web-2.0-ing” their applications (Oracle CRM, IBM’s Web 2.0 Domino Suite, etc etc). There are tons of Web 2.0 startups that flow from Silicon Valley in the US and parts of the world, offering often very similar product sets with very little differentiation.
With the spike in the surge of Web 2.0 applications, it’s getting harder and harder to differentiate between products. Most importantly, where is the $$$$$ in a Web 2.0 startup? Will an over-investment/stimulation in mediocre startup create another bubble in the industry? Too much supply with no real demand can be problematic.
What are your thoughts?
Michael, I think you ask a really valuable question. Is web 2.0 creating leaps in value for customers while lowering costs for suppliers? Not by itself. Web 2.0 offers tools that can be used to create value. So, by itself, Web 2.0 is a tool just like CRM, robotic manufacturing or new polymers.
Whether Web 2.0 has a role in creating a blue ocean depends on how it is used, and how that application creates a shift in an industry’s assumptions and rules. As the use of Web 2.0 becomes more widespread, it’s “surprise” effect may lessen. If a firm uses Web 2.0 to change the conventional wisdom of its industry, it could indeed create blue oceans.
Hi Greg,
You made a good point. Web 2.0 in itself is invaluable, if not utilized within the right problem context. Within the sphere of the problem context lies opportunities for creative minds to venture and create value innovation.
As a Web 2.0 technologist and enthusiast myself, that’s where my focus is everyday