Blue Ocean Strategy - Chapter 5 - Market for the Blue Ocean
This chapter is very similar to right customers for the product in disruptive innovation. Here again the idea is very similar - focus on customers at the outer periphery of the market or non customers. Outer periphery of the market would be the ones likely to drop off and are very cost sensitive and hence likely to be lowest margin.
This book talks of the markets in three circles. First circle is customers who are currently using your product but highly likely to drop off at the first instance of a cheaper product or improved performance on a feature important to them. An example I can think of is books. Customers who are buying books but don't necessarily see them as collector item are waiting to drop of the moment it is possible to read material without needing to possess the book. A library is an alternative. But library has disadvantages like not having the content available at one's convenience for future references, the logistics of needing to go to the library to borrow the book etc. But e-books provide most convenient alternate for such customers to drop off paper based books.
The second circle is customers who have tried the company's products in the past but have decided not to use as in the current form it did not satisfy their needs. Consider the same example of books again. Consider people who want only short pieces of content like short stories or short articles. They may refrain from buying magazines and books because they don't want all of the content for just one story or book. For such people even e-book is not a solution. Nor are subscriptions. But something like Kindle shorts where individual pieces are available to purchase and read easily is just the thing that makes them from non customer to customer.
The third circle are people who have not even considered using the company's products. Coming back to the same book example again, people who prefer computer games or movies. Now if through technology, we make a book that is animated, interactive and gamified, maybe we could attract these customers. We have seen products going along this direction. Kindle has created a product called books in motion that adds moving animations to books. We have had what were called game books even during the days of paper backs where reader makes choices and the story follows one of multiple pre set paths based on choices made by the reader. And certain online comics have accompanying background music. One or more of these could be combined to create a different book experience for non readers.
The book suggests often one product can address multiple of these new users and a new product should ideally try to have a broader catchment. The authors say typically companies try to narrow focus by trying to serve certain customers better and better. Instead it may be more profitable to consider something broader that captures multiple segments. Like say a book product could be designed addressing all of the above three customers. However I would say one can not generalize that it is bad to have narrow specialization and it is good to generalize always. I think the disruptive innovation concept of commoditization and de- commoditization cycles with focus on integrated architectures versus modular architectures makes greater sense.