Blue Ocean Strategy: Recessions help blue ocean companies?

Here's an article in the NY Times about Steve & Barry’s, a chain that sells clothing and accessories all for under $10. They're mobbed.

The overwhelming focus of this blog is on Blue Ocean Strategy for technology companies but I can't help being the first to shout out an obvious BOS star when I see it. There is no way to sell clothing, in Manhattan, at prices for less than Wal-Mart and not be a BOS company.

I don't understand the garment business enough to try to analyze the offering. I'm a stereotypical geek when it comes to clothing: I have one suit that fits me poorly and that finds its way to the cleaners more often because of dust than use. But rock-bottom prices and fanatically loyal customers virtually always means that somebody's found a Blue Ocean diamond.

This makes me wonder whether recessions actually help spur Blue Ocean Strategy innovation? When the economy if flush with money people seem content to engage in red ocean practices: spending countless dollars on non-valuable technology innovation, throwing money away on worthless focus groups, or rushing to commoditize their business by breaking their own cost structures.

But the lack of easy capital in recessionary times forces entrepreneurs to focus on cost, and that focus -- when applied wisely -- tends to force business to investigate what's really valuable. This fanatic focus on value seems to guide business owners, either on purpose of by accident, through Blue Ocean thinking.

Recessions are like forest fires. They're brutal and dangerous and lousy to be in the middle of. But they also clear out the underbrush and allow new trees to take root and spawn. Many great businesses gained traction during prior recessionary times, and the recessions helped them. Google's a good example. Google is a great company, but if they had to compete during dot-com madness with the dozens of other search engines I'm not sure the ride to the top would have been as easy.

It'll be interesting to see the market changes that the coming year or two shakes out.

Follow up: a couple years later Steve & Barry's is gone. Exactly what happened isn't entirely clear but it looks like they were using incentives and rent deferments from struggling mall owners to build out their stores, which attracted customers to smaller stores, to subsidize the business. Needless to say, this wasn't a long-term strategy since they eventually had to pay rent and ran out of malls willing to subsidize them. My initial reaction was to delete this post; one of the earliest value innovation case studies was Enron and that obviously didn't turn out well. But there really were parts of Enron that were radically different, and the mobs of people at Steve & Barry's were very real. Both companies blew it on factors that had more to do with the greed of harvesting the fish out of their blue oceans too fast, not unlike overfishing in real life. So I'm leaving the post despite that the company did fail not long after.