One of my passions is helping insurance agencies be successful and profitable. As I mentioned in my editorial last month, the current economic conditions have some agency owners questioning their ability, at least over the short term, to be both profitable and successful. In today’s economy, it’s extremely important for you to distinguish yourself by selling your value.
Sometimes value is how an agency utilizes technology to improve internal operations and provide better customer service. Sometimes value is how an agency positions itself in the marketplace and how it competes with other agencies.
Recently, I came across another strategy for selling your value. A friend of mine (not in the insurance business) recently recommended that I read Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne. The subtitle of the book is: How to create uncontested market space and make the competition irrelevant.
Red vs. blue oceans
The authors use the oceans as a metaphor for the marketplace where all businesses compete. There are two types of oceans: red and blue. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all industries not in existence today. This is the unknown market space.
In red oceans, industries and competition are well defined and well accepted. Companies compete by trying to outperform their rivals so they can grab a greater share of the existing marketplace. The competition can get bloody (hence, a red ocean).
Blue oceans, on the other hand, represent new, untapped marketplaces where there is currently little or no competition. The authors argue that most new blue ocean opportunities are created from within red oceans by expanding existing industry boundaries. In blue oceans, competition is irrelevant because the rules of the game have been changed.
The authors use several well known companies as examples of how strategies were created that completely redefined the industry. One of these companies is Cirque du Soleil, created in 1984 by a group of street performers. If you have attended one of their productions, you can easily understand blue ocean strategies. Cirque du Soleil took the best of Ringling Bros. and Barnum & Bailey Circus (red ocean) and completely redefined the circus experience and made it into a new industry (blue ocean).
As I read the book I kept wondering how an insurance agency could take these concepts and apply them to their organizations. Can an insurance agency make the competition irrelevant by changing the rules of the game? Ringling Bros. Circus had been around for over 100 years. Cirque du Soleil created a new way to experience the joy and wonder of a circus and millions of people now come to see their performances.
Once the concept of blue oceans is established, the authors describe a systematic process that any organization can use as a blueprint to look for (or create) blue ocean opportunities within their existing marketplace.
The concept of making your competition irrelevant is very intriguing. Most agencies fight for clients in a red ocean. That competition can be brutal and very unprofitable. How would your agency completely redefine your marketplace and make competition irrelevant? As you complete your planning for 2009 this book may help you think about the possibility of redefining a new marketplace without competition.
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December 24, 2008 at 8:56 am
That was an amazing post. People were pounding us with “blue ocean” strategies this year. We could sell mortgages, sell prepaid-legal, financial planning etc… The problem with these strategies are they were actually “red ocean” strategies we know nothing about. People out there obviously feel insurance agents are open to new revenue streams and are capitalizing on it. We just dont like to dilute our branding. I figure you can either be known as the insurance guy or you can be known as the walmart…. either is fine I guess. Perhaps like Cirque du Soleil we can do what we love in a different arena ?? hmmmm.