When You Should Compete In Crowded Markets

When I was in b-school, I read Blue Ocean Strategy and its message resonated with me immediately like many ideas that feel intuitively true.

The framing is simple: mature markets are red oceans. They’re crowded, competitive, and as a result—unappealing. Red oceans should be avoided.

Blue oceans, on the other hand, are entirely new markets. They’re uncontested and unsaturated. Blue oceans should be pursued.

I mostly agree with this framing. But sometimes, there are good reasons to pursue an opportunity in a red ocean.

A recent LinkedIn post from Wes Bush explains one of the best reasons. Red oceans usually mean there’s money in the market, and a lot of it. Red ocean markets are competitive because the opportunity is large and real, regardless of whether you can extract value from it.

Wes’s post got me thinking about a few other reasons why red oceans can still be viable. Here are three.

1) Niches can survive in red oceans

Red ocean markets are extreme signals of product-market fit (e.g. lots of people willing to pay for a product). They become more viable if you plan to stay focused on a small niche.

Carving out a small corner of a red ocean is like finding a purple (or even blue) pocket in a sea of red. It’s hard, but not impossible.

2) You may have a contextually relevant advantage

It can also make sense to pursue red oceans if you have a competitive advantage that others don’t.

Resources, talent, distribution, and brand are all advantages that can help you outlast competitors in a red ocean. The caution here is just not to be overconfident about your perceived advantage.

Note: If you reflexively think “we’re different” or “that won’t happen to us,” be skeptical that you actually have a durable advantage.

3) Blue oceans that aren’t really blue

Blue oceans can be large, uncontested spaces for value creation. They can also be uncontested for a reason–there’s no value to capture.

The only thing worse than a red ocean competition is blue ocean apathy. Who cares if something is uncontested if no one wants it?

In these cases, a red ocean, while competitive, may still be your best opportunity.

So before you completely write off a market as a red ocean, ask yourself:

• Is the opportunity large enough to sustain more than one winner long term if I niche down?

• Do I have a real, durable advantage that others don’t?

• Is this market a blue ocean for a reason or a mirage?