Blue Ocean Strategy is a phrase coined and trademarked by authors W. Chan Kim and Renee Mauborgne to describe an innovation method in which companies combine or strip off various business approaches to create a “blue ocean” – a new and uncontested market space – to replace a “red ocean” in which competition is fierce and bloody.Blue ocean successes are many and legendary – the entire iPod/iTunes/iPhone phenomenon being the best example – but they’re often a result of much research, strategizing and planning. Less known, or heralded, is accidental innovation, in which some event or conversation triggers a line of thinking that results in an entirely new business model: a blue ocean.
Some five years ago, B.C.-based private merchant bank Pender Financial Group Corp. invested in Victoria’s then 20-year-old Municipal Solutions Group, a supplier of software to local governments. But growth was slow and the investment wasn’t paying off. So Pender’s chief investment officer, David Roberts, had to change the company to set it on a growth path in the modern age.
Roberts poked around without much success, until an epiphany arrived. Pender was approached three years ago by Salesforce.com, the online customer-relationship management company. It was then morphing into Force.com, a platform for developers of web-based software, also known as software as a service (SAAS) or more recently as “cloud computing” (because the software resides “in the cloud,” or on several servers). Municipal governments fit Salesforce.com’s target market: outfits looking to offload much of their software costs and management tasks. It wondered if Municipal Solutions Group wanted to give SAAS a try.
Roberts and Pender decided to experiment with it, but soon Pender realized that, for a large segment of the marketplace, the time for in-house software was ending and the future lay in cloud computing. Specifically, this market was composed of smaller municipalities that didn’t have the money or the capability to buy and manage in-house software or proprietary IT structures. Quickly, Municipal Solutions sold off its traditional software line, changed the company name to CloudBench Applications Inc. and ramped up its cloud-based software into a product called BasicGov, which helps small municipalities with record keeping in the areas of permits and inspections, code enforcement, and planning.
Roberts, a veteran Vancouver entrepreneur and investor, became the company’s CEO and has never looked back. BasicGov became virally popular in a niche market of small U.S. municipalities. One town in the southeast U.S. – hurricane territory – liked the safety factor inherent in cloud computing, liked the low price even more and signed on, and soon the word spread through the network of small municipalities. CloudBench now has several dozen municipalities signed up, and last year revenues tripled to $300,000.
CloudBench expects rapid growth in the future because it’s implementing a true blue ocean rollout. It’s planning to market BasicGov extensively through the Force.com network and then climb the ladder to serving larger municipalities.
• Trash traditional thinking. Re-examine old business models completely to see if they are still relevant.
• Look to the future. Find (or create) an upcoming market. As Wayne Gretzky is known to have said, you have to pass the puck to where your linemates are going to be, not where they are.
• Find your focus. CloudBench stripped away its multiple services and focused exclusively on the sometimes prosaic problems that vex its specific market. n
