All Oceans Are Purple

Conventional wisdom is that blockbuster innovations are most likely found in new product categories. Business celebrities like Steve Jobs, Bill Gates and Mark Zuckerberg—three college dropouts who made billions with stunning innovations that ignited whole new industries—reinforce this perception.

This conventional wisdom is even codified in business theory. The immensely popular “Blue Ocean Strategy” argues that “lasting success comes not from battling competitors but from creating ‘blue oceans’—untapped new market spaces ripe for growth.” Businesses are encouraged to avoid “bloody ‘red oceans’ of rivals fighting over a shrinking profit pool.”

One of the insights from an excellent new book by John Sviokla and Mitch Cohen is that the vast majority of today’s wealthiest persons made their billions by ignoring this notion. It also offers important guidance on how both entrepreneurs and established companies should innovate.

In The Self-made Billionaire Effect: How Extreme Producers Create Massive Value, Sviokla and Cohen found that 80 percent of the self-made billionaires that they studied made their fortunes in contested market spaces.

Their research sample consisted of 120 self-made billionaires (as opposed to those with inherited wealth) operating in relatively transparent and competitive markets.  These 120 were randomly selected from self-made billionaires on Forbes' Billionaire List, adjusted to mirror the larger list's geographic and industry distribution.

Sir James Dyson, for example, did not stop reimagining the vacuum cleaner just because Hoover got there first and the market was crowded. Instead, Dyson went through 5,127 iterations to develop a production-ready design of his dual cyclone vacuum.

If the term had existed, the board of Dyson’s company at that time might have labeled Dyson’s effort an ill-conceived “red ocean” strategy. It rejected his request for funding to productize the vacuum—even though Dyson owned a third of the company. Dyson was told:

If there really was a better type of vacuum cleaner then surely one of the big manufacturers would be making it.

Instead, Dyson had to set up a new company to manufacture the G-Force Dual Cyclone vacuum cleaner. It would go on to capture immense market share—as high as 50% in the UK—and generate billions in sales.

Svioka and Cohen offer numerous case studies of other self-made billionaires who succeeded in markets that “would by any measure be considered ‘red.’”

Here is a partial list from their thoroughly researched book.

Sviokla and Cohen are not, however, arguing for red oceans over blue ones. Their research shows that self-made billionaires ignore the distinction.

To them, all oceans are purple—a blending of available opportunity within established practice. The vast majority of self-made billionaires operate in markets “that are a blending of new approaches within old modes that reveal ways to re-create the space.”

This is an important lesson for both entrepreneurs and innovators in established companies. The opportunities are there—all the time—to create a blockbuster product within an existing market. No market is owned solely by a single product or idea. Those who can take advantage the constant change are the ones most likely to win.


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