Momentum Podcast: 287
Everyone Dies In A Red Ocean
by Alex Charfen
Being an entrepreneur in an over saturated market gets more and more difficult over time. How can an entrepreneur find a blue ocean?
Full Audio Transcript
I'm Alex Charfen, and this is the Momentum Podcast made for empire builders, game changers, trail blazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off, and don't know why anyone would want to.
We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution.
Sure we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny we define it. We don't understand defeat because you only lose if you stop and we don't know how.
While the rest of the world strives for average and clings desperately to that status quo, we're the minority, the few who are willing to hallucinate there could be a better future, and instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real.
We are the evolutionary hunters, clearly the most important people in the world because entrepreneurs are the only source of consistent, positive human evolution, and we always will be.
Everyone dies in a red ocean. The concept of a red ocean refers to going after a market or getting into a product category that is already really crowded, when there's a lot of blood in the water there is too much activity. So blood in the water means red ocean, and it's kind of maybe a little bit of a violent way of expressing the fact that we really shouldn't jump into markets where there's already massive competition.
And when you get into a red ocean where there's a lot of competition, you can really compete at two price points. You can be the most expensive, and the least expensive, and other than that there's no differentiation, and being in a read ocean is absolutely brutal. It will rip you apart and crush you, and I want you to stay out of red oceans because literally that is where companies go to die.
Let me share some examples with you from my career of what a red ocean is. So I have actually had a career of swimming in red oceans. I realized it when I was writing the outline for this program, or for this podcast. Because when I was in the computer and consumer electronics industry, what happened was red oceans would develop over and over and over and over again.
In fact, when you look at retail in general. Let's just go back to one of the reddest oceans that really you don't even see anymore today, but over the course of the past three decades we have watched the incredible red ocean of department stores. Remember Sears, JC Penney's, Macy's, Nordstrom's. I mean, there was a massive amount of department stores, and now today they're winding up and shutting down. Why?
Red ocean. Highly competitive market, very little differentiation, nobody was doing anything new or different or unique, and so every one of those department stores today is suffering. They're falling apart.
You look at my career, computer superstores. At one point I did business with all of them. Circuit City, Computer City, Best Buy, Fries, Micro Center, Micro Warehouse. I think I'm leaving off some of the big ones, but I could keep going. What happened? Well, computer superstores became a red ocean. In fact, there got to a point where you had a Computer City, Circuit City, and a Comp USA in the same shopping center, and there's just no way that that works.
So what happens? That ocean gets more and more red, it gets more and more complicated, it gets more and more crowded and congested, and then what happens is companies start dying off. Everyone dies in a red ocean, eventually the whole thing dies off.
In fact, one last category, office superstores. When I first started as a consultant 25 years ago, 24 years ago. When I was 21 years old, here's the office superstores we were calling on. We had Office Max, we had Office Depot, we had Bus Mart. I can't even remember them anymore, but we had seven office ... Staples. We had seven office superstores, and it was such a red ocean that we saw consolidation with one buying another, and another one buying another, and then consolidation again, and consolidation again to now, there's only one chain really left, it's Office Depot, and Staples, and Office Max, and all of them combined, and it is struggling like crazy because again, it was a red ocean, got overcrowded, no differentiation, no unique selling proposition, and so everyone in that ocean dies.
So how do you avoid red oceans and instead go to blue ocean? Now here's what a blue ocean strategy is. A blue ocean strategy is when you go and you say, "We're gonna do things in such a dramatically different way that no one's ever competed this way before. And we're going to do things so different, we've got a different, unique selling proposition, we're gonna go after a different avatar in a different way. We're gonna do things that nobody's ever done before."
In fact, one of the examples of this that I love is Tesla, and Elon Musk in the car industry. I am a car nut. I am a self professed car, a little bit car obsessed. In fact, when I was younger as a kid in the late 1970s and early 1980s I memorized the entire car almanac. I wanted to know every single model of cars that was on the road in when I was alive.
And I could name any car from the front or the back just by looking at the headlights or the tail lights, I got to that point of obsession with cars. And part of my obsession with that industry has always been just watching the industry and understanding who's where, and seeing the movement of people, and when [Lehi Ococo 00:05:47] went from Ford to Chrysler, and recently [Sylvio Marchioni 00:05:51] going to Fiat and GM, and passing away a couple of weeks ago and it's gonna send ripples through Ferrari, and Fiat, and that entire group of companies because one person passed away.
So the car industry has always fascinated me. And when Tesla came into the industry I remember thinking when I heard of the startup ideas of Tesla I remember thinking man, how do you go into a bright red ocean like automobiles and do anything different? I remember thinking, how is Tesla even gonna think about doing this?
And here's what they did. They did the opposite of what everybody expected. At the time everybody was talking about how electric cars had to be under $30000 for them to be practical. The only way that an electric car company was going to succeed is if they turned out really inexpensive cars like Toyota was with the Prius, and that was the focus. It was, how do you create a mass market low end electric car that everybody can buy?
And what Elon Musk said was wait a second, we need technology here, and so he stayed out of the red ocean of $30000 cars, and the first Tesla automobile was actually a Lotus car with batteries in it retrofitted to be an electric car, and it was an insanely fast little Roadster that cost over $100000 and required a $50000 deposit to even buy it.
But here's why it was a blue ocean. Elon Musk didn't sell a car, Elon Musk sold a concept. He went and told people that this was how we're gonna change the world. He went and told people that buying the Tesla was going to fund the technology that was going to get rid of fossil fuels. He went and told people in Souther California, important influential people that if they bought his car, that his investments would be in future technology, and he would do everything he could to improve the state of the world today.
And he sold a concept, and a car, and as a result a ton of people bought that Tesla Roadster, and a ton of influential people in Southern California bought that Tesla Roadster. Celebrities, and politicians, and people who wanted to be part of the movement bought the Tesla Roadster, and as a result, Musk has created an entire, what I would call a blue ocean because today there's a lot of cars that say they compete with the Tesla Model S. There's a lot of cars that say they compete with the Tesla Model X, but if you look at both the sedan and the SUV, it's hard to find a comparable car on the market today that has the same features and benefits, and that gives everything that a Tesla does.
In fact, it's crazy today that when Tesla releases a new model, site unseen people line up to buy it. In fact, one of my closest friends in the world, Price, the day that Elon Musk put out the announcement for the new Tesla Roadster, which is a six figure car and required again, another $50000 deposit, my closest friend in the world Price, sent a check immediately, or made a wire transfer the day he could because he wanted to be one of the first people to have the Roadster.
Why? Because it's blue ocean. It's a roadster that is going to reset performance standards on every car in the history of man. It's gonna be the fastest accelerating production car that there ever was. Those are the promises they've already made, and what has Tesla done so far? They did create the fastest production sedan in history, the fastest SUV in history. The videos on YouTube of Tesla's SUV minivan racing Lamborghinis down a quarter mile strip are crazy because a lot of times the Teslas are winning all of those races.
So what did Elon Musk do? He created a blue ocean by completely changing how he approached creating cars and making cars. And so you can do the same thing, and if your business has been stalled, or slowed, or you feel like it's plateaued, it might be because you're in a red ocean and all you have to do sometimes is adjust a little bit to get into a blue ocean.
Like I'll give you an example. Our client Molly Kaiser, who is brilliant. Molly Kaiser and Aaron [Silvinale 00:09:53], they're a couple that we work with that is growing a business called Booty Shorts. Booty Shots, sorry, and their company is all about helping boudoir photographers become better boudoir photographers. But what they're really doing is this, they're showing photographers a blue ocean of getting into boudoir photography. So anyone who's a photographer that does weddings, and parties, and everything else, Molly says, "Hey, you can make a few thousand dollars doing a wedding, but you can do two boudoir photography shoots and get the equivalent of a wedding twice a day." That is an entirely blue ocean. It's a new way of looking at things for photographers.
And so she teaches them how to move from the red ocean of weddings and parties into the blue ocean of boudoir photography where there's not a lot of specialists, and Molly conveys a certification, so when you go through her course you become the certified professional boudoir photographer, which means you know a lot more than the other people out there, and so she literally moves them into a blue ocean strategy not only in what she's selling, but also in how her clients now go out and sell.
So in order to move in a blue ocean, understand your avatar, understand what they need. Show them that you can show them a different way to go after stuff to make things happen. One of the things to make sure of when you're going into a blue ocean is that you understand your avatar.
In order to create a blue ocean, talk to 50 to 100 of the avatar that you have, and figure out what is going to make things different. I'll take an example from my own life. In 2007, 2008, Cadey and I introduced this certified distressed property expert to the real estate industry.
It was a course on how to work with homeowners who were in foreclosure, and here's how we made it a blue ocean course. Every other course in the market, there was 75 courses teaching people how to work with homeowners who are in foreclosure when we released ours. But I did a survey of the entire market and every other course was an anti-bank course. It was a, "Let's show them, let's stuff it to them. Let's take advantage of this situation," type course. And what we wrote was, the certified distressed property expert was how you partner with banks, how we work together, how we get people out of foreclosure, how we create momentum by doing the right things, not by taking advantage of the situation.
And that tweak of working with agents who wanted to do the right thing of announcing up front we weren't using any of the tactics that other companies were of writing position papers for the administration about fraud and challenges with foreclosures. And what we did, was we made ourselves a blue ocean, an entirely new opportunity by saying, "We don't do anything that the other guys are doing." And it was enough, it created massive differentiation. That, and everybody else was teaching a class, and we were teaching a designation. You became a certified distressed property expert. You didn't learn about foreclosures.
It made it a blue ocean because we gave people the label that they could use just like Molly Kaiser's doing, you probably understand now. I'm coaching Molly Kaiser, so we're following the same plan, the designation made it so that it was enough of a differentiation that it is a blue ocean strategy.
Now, there are some cautions. When you start looking at markets to go after, when you start looking at how do you make the product you have a blue ocean product, be careful because the one thing that you want to make sure of is that the avatar that you're going after knows they need help, because I hear about blue ocean strategies all the time.
I'll give you an example. I recently talked to a friend of mine who's in construction, and he said, "What I want to do, is I want to create a product for construction guys so that they'll understand how they're so checked out, and so overwhelmed, and they don't really know what they're doing, and I want them to check in more, and start doing yoga and mediation, and get more real about who they are."
And I said to him, "Well I mean, that sounds great, and it sounds interesting, but how many construction guys right now are walking around going, I want to learn yoga? Or I want to do meditation. The number is somewhere between zero and point five. That's just not a question that if you're in construction, you're going around asking, and if you are, you're the exception not the rule." But what are construction guys walking around asking? They're saying, how do I do more? How do I get more done? How do I feel less stressed? How do I feel less overwhelmed? How am I less triggered? How do I build this business?
Well, if you sell them that and you show them that the way to get there is through presence and awareness, then you can create a blue ocean. But you have to be careful because something that I see all the time is people avoiding the red ocean, but then going into an ocean that nobody's gonna swim in with them. It's such a blue ocean that nobody's going to care about it.
So when you go into a blue ocean strategy, what you're looking for is a market nobody's addressing, or a market that nobody's addressing in the way you're going to address it. You're looking for a market that knows they have an issue but has not found a solution, and you're looking for a market where everyone isn't selling the exact same thing.
If you look at a recent example of ours for me, for years we were having trouble selling products, and having trouble creating a consistent customer effect. If people would come to our events, their businesses would double and triple, it was insane. If people would take our products, things would change for them. The testimonials we got were amazing, but we weren't selling them, we were plateaued, we were stalled, we were stopped, and here's why.
What we were selling sounded very much like a red ocean. We were selling business improvement, and do better, and understand yourself better, and know things better. There was no differentiation, there was no unique selling proposition, and it sounded like we were in a red ocean like we were just like everybody else.
In fact, I used to have people come to my classes and they would say, "It's so weird because the marketing for this class was like everything else that I see, but this class delivers so much more. It's so much more significant, it's so much better than anything else out there." So we had to adjust our marketing to draw that out.
So we went out and we said, "We teach the only course in the market where you get three things as an entrepreneur. We will show you how to do strategic planning so that you have a forward looking plan, you can anticipate what's coming next. We will show you how to put a communications cadence into your business, so that you have better meetings, better communication, and everyone knows where you're going, and we'll show you how to build the infrastructure in your business so you hire the right people at the right time and build your team so that you can go fulfill the opportunity you've created." That is a blue ocean, nobody does what we do.
We've been doing it the whole time, we just didn't know how to explain it so that it was a blue ocean, and when I met Russel Brunson he showed me, Russel actually said, "Alex, you do things for entrepreneurs that nobody else does anywhere. You have solutions that every entrepreneur needs, but they don't have. You have to start talking about them in a way that they recognize that."
And so for you, the questions are if you're in a red ocean, how do you shift to blue? How do you go out and call on the people that will hear you, that will actually move forward with you? How do you show them a brand new opportunity? Because as I've shown you, and as you probably know if you've tried it, everyone dies in a red ocean. It's time for you to move into a blue ocean, understand your avatar better than anybody else, interview them for certainty, obsess over them, go back to my podcast called own your avatar, and you will create your blue ocean strategy where your only competition is, how fast can you scale and grow your business so you can make your greatest contribution?
If you're ready to start growing your business, if you're ready to grow your team, if you're ready to get to the next level as an entrepreneur, join me on my podcast next week. Go to BillionaireCode.com/Team, and register for our podcast, how to grow a game changing team without ever having to manage people. BillionairCode.com/Team. I look forward to seeing you there.