In their book Blue Ocean Strategy, W. Chan Kaim and Renee Mauborgne’s metaphor outlining “red oceans” and “blue oceans” really struck me as it provides a powerful understanding of how "brand new" market possibilities emerge. 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 existing demand. The market space gets crowded, prospects for profit and growth are reduced. Products become commodities, and cut-throat competition turns the red ocean bloody. Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries. Unfortunately, countless manufacturers are caught within the ‘riptide’ of red ocean markets. As you might imagine, the Shepherd team was glad when RoMan Manufacturing, a Grand Rapids client of ours, told us their innovation (of a very standard electrical device technology) has an attractive ROI – AND is digitally connected, remotely controllable, data-rich, and performance-enhancing. This is awesome as it changes the conversations with customers and makes possible entirely new data-enhanced Industry 4.0 business models in the future. Their product integration of Industry 4.0 is a good move for two simple reasons:
1. Manufacturers are primarily focused these days on improving operations and keeping their customers happy. According to a 2021 Digital Transformation Assessment when manufacturing decision-makers were asked about their most significant business imperatives, nearly all chose to improve operational efficiencies, customer growth, and customer retention.
2. Manufacturers are aware that the Industry 4.0 wave is coming. A global survey of manufacturing executives conducted by The MPI Industry 4.0 Study reported that 83% of manufacturing executives said Industry 4.0 will be “extremely” or “very” important to their companies over the next five years.
For good reason, most Industry 4.0 focus right now is on internal operational improvements and external opportunities are simply overlooked. Yet, it’s the multitude of Industry 4.0 opportunities to provide new value and create new blue oceans that get me the most excited. RoMan Manufacturing’s Industry 4.0 move creates numerous new benefits. For starters, it improves customer operating efficiencies, helps their customers provide more value to their customers, and delivers customer data connectivity - which can be very valuable and “sticky”. More broadly, the company is pre-positioning itself to create new customer-centric value propositions, turn products into services and services into products, build new recurring revenue streams, and develop more sustainable competitive advantages. Simply put, it’s good strategically to start to synchronize now with the industry 4.0 demands of tomorrow. Does your firm have Industry 4.0 blue ocean opportunities? What is your Industry 4.0 growth game plan? It is not too late, but don't wait much longer. Like makers of slide rules and typewriter manufacturers during the ’50s or local newspapers during the '90s, you really cannot afford to let this next big wave catch you off guard. Surfs up!
If you want to explore ways your firm can ride the Industry 4.0 wave, click here. We'd love to chat about it.