About 14 years ago, a book titled, “Blue Ocean Strategy” was published by the Harvard Business Review Press. I recently re-read the book with new eyes, thinking about service and installation companies in our industry.
In other words, with a “blue ocean” strategy, contractors can differentiate themselves in their marketplace. They can provide products and services with little or no competition. This way contractors can charge enough to be very profitable, grow their businesses, and take good care of their employees.
Sound like a tall order? Let’s start by defining a blue ocean strategy. The book’s authors define a blue ocean as an “untapped market space,” awaiting “demand creation, with the opportunity for highly profitable growth.” In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.
A “Red Ocean,” on the other hand exists where “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 ocean bloody.”
Sound familiar? For decades, our industry’s red ocean has been the Low Price Swamp. Here dealers compete mostly on price, with virtually the same exact equipment.
The HVAC Industry’s Blue Ocean
So where is your blue ocean? You actually don’t need to look any farther than the HVAC systems you’re already servicing. The market for selling High-Performance services is virtually untapped.
Why have so few HVAC contractors figured out how to tap into this very profitable blue ocean of business? I believe there are several key reasons:
- Box swapping continues to be the KPI (Key Performance Indicator) for HVAC contractors — manufacturers, distributors, and most “consultants” still encourage this
- Lack of strategy – few leaders have taken the time to study and develop the right performance-based business model for their company and market area.
- Fear of the unknown – most people within organizations feel out of their comfort zone in the blue ocean of High-Performance contracting.
- Trouble marketing their newfound skills to homeowners – the strategy involves marketing a different level of service and maintenance. You generate leads and sales of system improvements through testing and diagnosing system performance issues.
- Lack of good systems and internal training to build High-Performance services into the company culture — success is dependent on everyone in your company being on the same page, including dispatch, field personnel, sales, operations – all starting with your leadership.
- Absence of a profound belief that once you understand and have learned the right way to install and service your customers’ systems using measured performance, you could never go back to box swapping and parts changing again.
So you could look at these six challenges as negatives and problematic, or you can look at overcoming them as your keys to starting your blue ocean strategy. Maybe you’ve already dipped your toes in these new waters.
Perhaps you’ve even paddled just past the shore, trying to get through the bloodied waters of typical HVAC contracting. Once you do, you’ll be able to reach the clear blue ocean, just on the horizon.
Wherever you are, the good news is, there are plenty of blue seas waiting for you to explore and charted.