Wings create their own blue ocean

I recently started reading a book entitled Blue Ocean Strategy, which is a book that discusses and explains the importance of competing in blue oceans instead of red oceans in the business world. Before I relate to how this got me thinking about the Red Wings, let me first explain the differences between red and blue oceans.

“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. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.” [p. 4]

Essentially, red oceans are industries that already have rules and constraining factors. You have to compete with others in the industry to gain greater market share whether it’s by lowering the price or increasing the quality. However, you can offer a product at a low price with high quality by creating a new market space, which is called a blue ocean. By creating a blue ocean, you are no longer competing with other companies in a specific industry. Instead, you have defined the rules and have something so different that it’s in its own market. According to this book’s authors, you can do this through value innovation.

“Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.” [p. 12]

The first example provided in the book was Cirque du Soleil. Before that, people could attend the circus or a theatre performance (ex. Broadway show). The creators of Cirque du Soleil took elements that they admired from both of those entertainment options and sold it at an attractive price. They created their own blue ocean to compete in and have reaped the benefits from doing so.

So how does this relate to the Detroit Red Wings? If you view the NHL as a red ocean with teams competing using the same rules and competitive strategies (whether it’s on or off the ice), I am going to argue that the Wings have been so successful over the past 17 years in part because of their ability to create their own blue ocean giving them an advantage over the opponents. Now as another blogger at MarketingProfs points out, this strategy of creating a blue ocean essentially gives the company (or team) a head start. Soon competitors will catch on and try to jump into the ocean eventually turning it red, but giving the original company an unfair advantage.

Since you always take sales away from someone (whether a direct or an indirect competitor), and being that you will always be surrounded by businesses striving to increase sales, once your Blue Ocean Strategy works, sooner or later someone will copy or even improve your already-successful model.

One must credit the writers that they are not blind to this fact. In an interview with W. Chan Kim posted on www.businessinnovationinsider.com on October 2005, he said very openly: “After a while the first copycats will arise, competing on the very same value points as you. That’s completely normal; however it forces the entrepreneur to find a new strategy every several years.”

In other words, the most brilliant BOS will grant you with no more than a limited, relatively peaceful, period of time. Does this mellow promise of the BOS express maximal possible achievement? Naturally, you can guess that my answer is no. Introducing the Unfair Advantage.

Back in the 1980s, the Wings were competing in the red ocean and failing. They were doing so bad that the team became known as the “Dead Wings” and owner Mike Ilitch would give cars away at games and still struggle to sell out the arena. In comes Jimmy Devellano. I believe that his strategy of drafting top talent and making solid acquisitions over the years (including the signing of Scotty Bowman as head coach) is what turned this team around. If you look at their drafting, the team has stayed on the cutting edge competing in their own blue ocean.

First, they targeted Russian/Soviet Union players before it became common or even popular. In 1989, the Wings drafted Sergei Fedorov and Vladimir Konstantinov who would become key components of the Russian Five unit. The unit, which also consisted of Slava Fetisov, Igor Larionov, and Slava Kozlov, defined the Wings style of puck possession play and played a large role in their success in winning the 1997 Stanley Cup after a 42 year drought. The Wings were not the first team to draft a Russian hockey player, but they took considerable risk since there was no agreement in place to ensure that their drafted Russian athletes could actually come to the US. In fact, Fedorov got to the US only after defecting from the CKSA Moscow Team before the 1990 Goodwill Games. Detroit drafted two of the only fourteen Russian players drafted that year out of 252 selections.

After others realized their success, the Wings continued to scout in Russia but also turned their attention to Sweden where they found Nicklas Lidstrom (1989), Tomas Holmstrom (1994), Henrik Zetterberg (1999), Niklas Kronwall (2000), and Johan Franzen (2004). They also brought in fellow Swedes like Mikael Samuelsson and Andreas Lilja to round out the Swedish Seven, who won the 2008 Stanley Cup.

Despite getting low round draft picks, the Wings have used successful scouting to get top talent by looking in places that other teams hadn’t previously gone to or been willing to risk a draft pick on.

Since the Wings have been able to successfully draft top players despite low round draft picks, the organization has a solid foundation and then can add in the missing pieces via free agency like Brian Rafalski and Dallas Drake last season. By having confidence in their home-grown players, the organization can take risks on cheaper journeymen. In a ten-year span, forward Dan Cleary played for four teams including Detroit. Because of Detroit’s success, they didn’t need Cleary to come in and immediately start producing high numbers. Instead, Cleary was able to improve without a ton of pressure on him and he blossomed resulting in a five-year deal with the Wings. Similarly, Brad Stuart was traded to the Wings this year, his fifth team in less than a decade. He just re-signed with the Wings this off-season for another four years after winning the Stanley Cup. Forward Mikael Samuelsson joined Detroit’s roster after spending the past five seasons playing for four other NHL teams. Thanks to their blue ocean strategy, the Wings have been able to sign on risky journeymen-type players who then flourish under the Wings system.

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3 Responses to “Wings create their own blue ocean”

  1. Ryan says:

    So the obvious question is, where’s the next blue ocean? It’s not exactly a secret any more that Russia and Sweden can produce quality NHL’ers. So where do the Wings plan to get their next Unfair Advantage from? Player development? Coaching? The much-discussed (over-hyped) “Red Wings discount”?

    Or is that streak over? Are the Red Wings just competing in a red ocean now?

  2. That definitely is the question I had when thinking about the Wings and the blue ocean strategy. It would seem like the Wings are hanging on to their advantage from tapping the Russian and Swedish players in the draft, but it’s no longer just them out there. I think that while competing in a blue ocean, they were able to get others to buy into the Red Wings system and thus convince the likes of Marian Hossa to get paid only $7.45 million this season. The Wings have gotten some added benefits by competing in their own blue ocean.

    I think you could argue that their originally blue ocean is starting to get a bit bloody and it’s a matter of the Wings holding on to their advantage for as long as they can. I bet in ten years the Wings aren’t the superstars of the league. Still competitive, but not a possible Cup winner each season.

    And like you said, where’s the next blue ocean? I have no idea.

  3. Garth says:

    Thing is, there’s no red ocean yet. People know what the Wings are doing, but it doesn’t mean they’re duplicating it yet. Until at least one team shows that they can do what the Wings are doing, and do it well, the Wings are still swimming in a nice blue ocean.

    People may have started to catch on (ie. the Fabien Brunnstrom “sweepstakes”), but until they show that they can implement the Wings’ strategy effectively, there’s still no red ocean.

    Look at how many teams didn’t know what to do with a Stuart, Cleary or Sammy, etc. Or look at the way Detroit looks around, doesn’t see what they want, so they pick Joey Kocur out of a beer league, or pull Darren McCarty out of the welfare line and have them contribute. During the whole sweepstakes, Dallas “won” and Detroit went out and picked up Leino. Who have you heard more from? Ok, that might not be fair, since I’m a Wings fan and pay attention to it more, but still!

    Believe me, there’s still no red ocean, as far as I’m concerned. It might be turning slightly…SLIGHTLY pink, but it sure isn’t read.

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