The Real Digital Divide: Blue Ocean Strategy for Techies & Marketers

There's a lot written about the "digital divide" -- the separation of those who have access to technology and the Internet, and those who don't. While there are many examples throughout the world it's tough to imagine that even the very poorest of people don't have any access to the Internet. At least in the US, virtually every public library has public Internet access at no cost. Other countries seem to be comparable.

However, the authors of VIRE: Value Innovation in the REquirements Gathering Process raise a more substantive, real, and divisive digital divide. Specifically, the authors focus on the divide between "business people" -- marketers, finance types, and C-level executives -- and the engineers, product developers, and creative tech support teams.

Putting it succinctly I remember a conversation with a traditional MBA. We discussed the fact that if felt like the engineering groups were speaking English and the marketing groups Mandarin Chinese. She disagreed only to the extent that she knew both English and Mandarin, and thought the vocabulary differences are easier to negotiate and less disruptive than the gap between marketing and engineering.

The whole conundrum reminds me of an urban myth. Apparently, during the development of the Macintosh, each morning Steve Jobs would have team leaders sit together for a status meeting. Jobs would sit in the middle of a table with engineers on his right, marketers on on his left, and every else -- supply-chain, sales, finance, etc... -- on the other side. He made it clear: he was the Nexus between engineering and marketing, and everybody else was "on the other side."

Back to VIRE, I asked the authors why they didn't use the six-path framework of Blue Ocean Strategy/Value Innovation to guide in the development of the requirements. VIRE lays out a great framework for the use of the Four Actions Framework, but barely mentions how the requirements to be ERRC'd (Eliminated, Reduced, Raised, & Created) are gathered. Their answer: coming up with the core requirements is the job of marketing, not the engineers the IEEE-published VIRE was focused on.

Depending upon one's definitions, the modern software business is about 30 years old. It's time for a long overdue introduction...

Engineers, meet marketers. Marketers, engineers. Neither of you is better than one another; neither more specialized, smarter, or more vital to the success of your company. Work together, and great things can happen. Erect barriers and great things may happen anyway, but getting there will require unnecessary angst. Ignore one another's annoying habits -- dressing up or down, a disposition towards or against politics (both IRL and in the office), and respective tastes in things. Work together, try to grok one another, ignore the weird quirks: everybody will be happier and you'll be more likely to unleash blue oceans.

To find blue oceans requires brilliant marketers and brilliant engineers, working closely together. If you don't understand something, ask. If somebody asks, answer. If a manager sees either side making disparaging comments about the others inability to "get it," make them patiently explain or throw them off the team.

Let's use Blue Ocean Strategy to bridge the digital divide between marketing and techies, unleashing then navigating blue oceans the world over.

Second Life: Into the Wild Blue

"It is the brilliantly lit boulevard that can be seen, miniaturized and backward, reflected in the lenses of his goggles. It does not really exist. But right now, millions of people are walking up and down it." - Neal Stephenson, Snow Crash.

A friend and colleague recommended that I write about Second Life, the virtual world "game" from Linden Labs. It's a great suggestion and an appropriate subject for the first game, other than the Wii, I've written about.

Second Life is a Blue game. Unlike most other games there's no real competition: users live in a virtual world, buying, selling, and interacting with one another and their surroundings. Users -- called residents -- trade goods and services using a currency called Linden Dollars. Millions of residents build and maintain their virtual world, then hang out in it. The game draws inspiration from Neal Stephenson's book Snow Crash, a classic for the geek crowd.

Like most other great BOS offerings Second Life took a giant gamble on their Eliminate, Reduce, and Create elements of the Four Actions Framework. Most other game developers were focused on tech innovation: raising key elements, at great cost, that held little consumer value. Linden's careful avoidance of this trap allowed them to focus. Despite that Second Life was released about the same time as many other virtual world systems -- including the Sims, which had a great brand name -- Linden's Second Life went on to render the competition irrelevant.

The key elements of Second Life seem obvious:

"Like any place in Reality, the Street is subject to development. Developers can build their own small streets feeding off of the main one. They can build buildings, parks, signs, as well as things that do not exist in Reality..." Neal Stephenson, Snow Crash.

Eliminate control. Residents of Second Life create their own world: Linden exercises a light touch. Unless a resident has become hopelessly obnoxious they have residents work out their own differences. This has resulted in plenty of "content" -- there's no lack of places for people to traipse around about in Second Life. If individual residents find a place distasteful or dull, they just go somewhere else. Linden's policies have encouraged the market to create better content, and at far less cost, than an army of editors.

Reduce traditional game competition. There basically is none. Users can try to become rich, and there's even a method to convert Linden dollars into real money, and vice versa. But for the most part users work together to build a better world rather than trying to destroy a worse one.

Raise community. Community and camaraderie permeate everything in Second Life.

Create Linden dollars: a virtual economy. The Second Life economy is more than just the virtual money. Linden has created artificial scarcity. By doing so, Linden has created an emotion-fueled, vibrant, and apparently sustainable economy. People have tried to create artificial scarcity before, and they keep trying (look at the virtual gifts on Facebook and similar sites), but nobody has come anywhere close to the level that Linden has. Like all successful Create elements Linden used technology and ideas already in existence: e-commerce was alive and well when Second Life launched. But the technology was catalytic, not the centerpiece, used to unleash an entirely new way of doing things in Linden's virtual world.

Blue Ocean Strategy In Real Life

IRL = In Real Life. Answering a question I've been asked a few times: Yes, I've used Blue Ocean Strategy to create products. Some went on to do great; others not so great. Whatever the eventual outcome, I believe in the process and wouldn't spawn a new business without going through it.

Here are the steps, in order, I personally recommend to create a BOS business. Remember, everybody seems to have a different answer to this question. Like everything else here, this is solely my personal opinion.

1. Create a Pioneer-Migrator-Settler Chart. Be honest: many companies are big red blobs that may not shrink in total revenue, but will shrink dramatically in gross profit, over time.


2. Do a comprehensive six-path study in this order:
   1) time/trends, 2) chain of buyers, 3) strategic groups, 4) alternative industries, 5) complementary products & services, then 6) functional/emotional appeal. Why that order? I'll explain in a later post. Officially, the order doesn't matter, but I came up with this after a lot of thought and having been through the process a few times. It's important to study these for both current buyers and, more importantly, non-customers.


3. In parallel, send some engineers to figure out possible things that can be used in the "Create" portion of the Four Actions Framework, coming up later. I've developed these rules for a successful Create element: 1) there's an overwhelming chance the element will involve technology, 2) the technology will be catalytic: the end-user won't notice it directly, 3) the technology must exist and is usually mature, 4) you're looking for a new use of the technology, and 5) the technology is usually, though not always, from a different industry. They should be spending more time at Disneyworld and CES, and less in the lab. You might need to attach a marketer to them to keep them focused. If you do, find a creative geek (shameless plug: or just hire me to work with your engineers).


4. Abstract key elements from the above and plot your As-Is Value Curve: allow no more than 10 key elements; the fewer the better. Don't allow participants to guess in advance which should be eliminated, reduced, raised, and created (ERRC'd).


5. Complete your Strategy Canvas by plotting substitute offerings.


6. Figure out which key elements to eliminate and reduce. Eliminate and reduce substantive key elements: if there aren't a few people who swear you'll ruin the company by eliminating and reducing these -- and who show how important the elements are by pointing out how much competitors are working on these -- the elements aren't important enough.


7. Given what's left, raise it -- high. This is fun: it's the easiest part of the process. Make sure you don't slip into technical innovation, innovation for the sake of innovation, when doing this work.


8. Make the engineers/marketers from the Create study come back and show their nifty things: see which complement the key elements you've raised and add real consumer value.


9. Map a TO-BE curve out of all this.


10. Now ... iteratively go back and forth over the prior steps until you find a set of key elements that allow you to draw a TO-BE curve that matters. When you think you're there, use the Buyer Utility Map to see if it adds adequate value. If not, back to the Strategy Canvas.

All this should take a substantive amount of time and cause mental anguish. If everybody is giddy, happy, and/or relaxed you've missed something.

Finally, take your new curve and transform it into a business model that makes billions of dollars.

PS: About those flops... I attribute those more to managerial failure than to any issues with Blue Ocean Strategy. Using BOS honestly and accurately will churn out great businesses, but talented teams and managers are still needed to execute the models. For help with this, read the last third of the book.

MSFT hunting YHOO for "breakthrough engineering"?!

In this interview Bill Gates says that Microsoft is pursuing Yahoo for "brilliant engineers."

Huh?

Seriously ... Unlike most who comment about Blue Ocean Strategy, I'm an engineer, not a strategic consultant. As an engineer first, I understand engineers. I can say with certainty, Bill, if you want "brilliant engineers" the way to get them is to look at those tiers of non-customers, not to buy the basket-case of Silicon Valley.

Look in a mirror. Bill, you're a college dropout. Steve Jobs is a college dropout. Larry Ellison dropped out. Sergey, Larry, Jerry, and David all dropped out of grad school. Wozniak dropped out, though later went on to finish. Paul Allen's a dropout. Ballmer finished his undergrad degree, but he's a B-School dropout. Given this list I wish I would have dropped out of school.

Now, let's look at the "brilliant" people you're ready to pony up $44B for. There's people like Toby Lenk, founder of eToys, with his Harvard MBA. Ken Lay and his PhD in economics: he was generally thought to be brilliant, until he wasn't. Like Lenk, Skilling also shared an MBA from HBS: during his interview he apparently told them "I'm fucking smart" making me wonder what he said during his prison-intake interview. Bernie Ebbers has an undergraduate degree.

One of the tenants of Blue Ocean Strategy is to redefine markets. In the case of Microsoft, maybe you should think about redefining HR practices. Think about your well-known support for the H1B program, and the message that sends to potential engineers. US-engineers see its primary purpose to depress wages; Indian's on the program feel like they're indentured servants. Few of the people you'd actually want working for you is thrilled with the program.

More importantly, ask whether Jobs, Ellison, or you could get an interview, much less a job, at Microsoft. Ask whether a different approach to defining talent might have made Vista turn out better.

Bill, you don't need to spend $44 billion on Yahoo to get brilliant people. You need to redefine the meaning of what "brilliant" means, then realize there are plenty of people out there. You need to make sure that once you rope those brilliant people in that you apply Fair Process to make sure they remain productive and don't stray.

$44 billion isn't going to change the Microsoft culture, and brilliant engineers aren't going to "save" the company. Remember DOS? You apparently purchased it for $50K. Windows? Grabbed the basic ideas from Apple, who did the same from Xerox. Power Point was a purchase, and Excel a knock-off. The gist is that Microsoft's great people -- You, Bill -- don't have traditional backgrounds and Microsoft's greatest assets -- Windows and Office -- aren't the result of "brilliant engineering."

Take a look at this picture. Ask how many of these people, if any of them, Microsoft would hire. Then remember that they built one of the greatest companies in the world.

NPI: Making sure good ideas die an early death

NPI is the six-sigma term for New Product Introductions. Most companies that refer to the metric use it as the end measure of an oftentimes elaborate process to create new products. The measure is usually an integer representing the raw number of new products pushed into the market, entirely without regard to quality or consumer value.

NPI epitomizes red ocean thinking. The measure itself entirely fails to measure the quality of the "new" product, or the value to the consumer. If a red ocean marketer can get their "NPI point" by renaming the ADXL330 accelerometer the ADXL331 accelerometer they'll do just that. A Blue Ocean Innovator, on the other hand, will bundle the thing into a handheld gaming controller and sell it as a key element -- a magic wand -- in the Wii.

NPI's and six-sigma are all about the containment of risk. The processes serve partly as the antibodies of an organization, making sure that all new cells "fit" and attacking any that don't. The problem, of course, is that Blue Ideas usually don't fit at first. Blue Ocean Strategy requires you to redefine your market boundaries. Doing that, by definition, often results in products and services -- businesses -- that the rest of the organization will see as disruptive and dangerous.

The irony, of course, is that remaining with the status quo -- being stuck in a Red Ocean of product line extensions, price cutting, and the never-ending battle with suppliers, customers, etc.. -- is the real danger to the business. Much like an auto-immune disease kills its host by tricking an organisms defensive mechanisms into the mistaken belief that "good" cells are harmful, so to do "bad" business processes (and people) make a company believe necessary change is dangerous, disruptive, or reckless.

This is one business problem I don't have a suggested cure for other than to watch your people and processes, and make sure the conservative Red's aren't over-running the Blue's. B-school professors and corporate managers disagree about the extent that these people should be separated. Some believe large companies are hopeless: that they'll never adequately encourage innovation. Others believe a combination of the right policies, processes, and incentives will allow innovation to thrive.

Whatever your belief -- whether a giant company really can push out organic innovation -- (hello, Apple) or whether it's hopeless (hiya, Microsoft) -- it's important to be cognizant of the challenges and to constantly adjust your policies.

Bloogle: Making "Portals" Irrelevant

Get it: Google + Blue Ocean Strategy = Bloogle? OK -- it's Sunday. I get to make a bad joke that'll probably bring about a letter from Google's trademark lawyers.

Many people don't think Google is a Blue company because the Googlers seem to be so into technical innovation: making things for no apparent purpose other than to invent. I spent over an hour on the phone with a prominent consultant who argued passionately that Google's pure Red Ocean (he got angry when I wouldn't budge and now won't return email). Normally that'd be deadly -- the red ocean, not the consultant -- except, in the case of Google, they know that their experiments are ... experimental. They're not betting the farm on Google Docs any more than they are on corporate jets or top-notch cafeterias.

There's a big difference between Microsoft building Vista then not being able to articulate a why, and Google creating GMail because somebody thought that during the process they might stumble upon something interesting. The entire time Google's run off buying Blogger and web-based word processors and a Brazilian social networking site they've kept a laser focus on maintaining the quality of their core search and advertising business.

Why is Google Blue? Type in www.google.com and notice a) they eliminated configuration options for regular users, b) they've dramatically reduced the clutter: both the visual clutter of other "portals" and the not-so-valuable stuff it represents, c) they've dramatically raised ease of use, and d) they created Page Rank: the magic algorithm that seems to read your mind and return relevant results.

Most people would say Google breaks my "Create" rule that technology isn't the centerpiece of a Create key element. They're wrong. The center of Page Rank is links, and links existed long before Page Rank. Similarly, Page Rank wouldn't exist without links but links aren't an overt part of Page Rank: links aren't entirely hidden but they're also not something Google would list as a key element.

Net-net: when Google launched they had many competitors. They didn't beat the competition: they made it irrelevant. The appropriately named Yahoo, whom I can't say enough bad things about, is still charging $300+ to be listed in their directory that fewer people seem to use every day while Bloogle's single-handedly changed the entire face of the advertising industry.

Wii Fit: The Blue way to weight loss

With the release of the Wii, Nintendo roped in the first tier of noncustomers: those that would have soon left to red ocean competitors Sony or Microsoft. There seems to be broad consensus in the gaming community that Nintendo will be a solid #1 in "next-gen" consoles installed base at the end of 2008, despite Microsoft's one-year lead in getting a product to market and Sony's prior dominance of the field.

The second tier of noncustomers are those who consciously choose against the market, and the latest gadget out of Kyoto is aimed squarely at this group. The Wii Fit is an advanced exercise pad that tracks your weight and movement, and turns the Wii into a digital personal trainer intended just for you.

The Fit shipped December 1, 2007, in Japan and Nintendo has already sold 1 million units. We in the US are scheduled for a Q2 release. I'll be waiting in line to buy one.

The second tier of noncustomers, in this case, are those that have no interest in videogames. Despite my geek credentials I fit into this group. I think the Wii's great because I like technology and business. I appreciate the brilliance behind the blending of technology and business, but video games just don't have much appeal.

I'll be all over the Wii Fit though, pardon the pun. The alternative to the Fit isn't other videogame systems (except maybe the great one hit wonder "Dance Dance Revolution") but, rather, gyms and trainers and that all time fitness favorite ... nothing.

I'm not sure what Nintendo will do to to capture the third tier of noncustomers, those in markets entirely distant (Wii telephony?, Wii-link to order food?, Wii pets?). But as I wait to find out I'll be spending less time on the treadmill and more time on the Fit; a skinnier person soon after the Fit finally ships.

Eliminate

Eliminate is one of the Four Actions Framework. In earlier posts I've explored Create; we'll get to cousins Reduce and Raise in another post. But for now it's Eliminate's turn.

Eliminate means just what the word says: get rid of something entirely. The "something" must be a key element, which means that it must be something substantive that consumers will notice. Something that your red ocean peers are clobbering one another over the head to include; something that's taking lots of competitor's bandwidth and getting lots of their red ocean marketing money.

Nintendo, as usual, is a great example. The Wii doesn't play movies. It's not that they decided to wait out the Blu-Ray (Sony)/HD-DVD (Microsoft) slug-fest; Nintendo skipped all movie capabilities, even DVD's.

I'm sure some engineer or marketer argued that it probably would've been relatively inexpensive to put a DVD player in a Wii, then kids can watch movies in their room on their Wii. See the catch? To market the capability they would have had to define the benefit to their new market, and by doing so limit the market. Nintendo would have had to spend more technical budget, and added complexity, to add a feature that boxed in their core message and made it more difficult to message the key value proposition to their larger base of customers and non-customers alike.

So Nintendo eliminated movie playing entirely. Not for technical reasons, and probably not solely for cost reasons. Rather, they didn't want to waste money, time, and focus to box in their new, blue market.

Take that key element, remembering that if the element isn't one at least a few people absolutely love and swear is necessary it isn't a key element, and get rid of it completely. Figure out what the right 1-2 elements are and vanquish them from your offering. Don't try to disguise the key element as something that's really just cost savings ("we'll eliminate employee health benefits!"). Key elements matter to consumers: if the buyer doesn't notice, you're not eliminating anything.

Eliminate is probably the toughest of the Four Actions Framework. It isn't easy. It's substantially more difficult than Raising and Creating, but is vital if you're hoping to create a blue ocean rather than a slightly less red one.

My Toyota Scion: A Blue Car

I have two cars. One is a 2007 BMW X5, with the big engine and lots of contraptions. It's huge: my wife loves it, and I love her, so I smile and try not to grimace at the gas pump.

My car, used mainly by my eleven year-old and myself, is a Toyota Scion xB. It's the bluest thing I've ever seen. Not literally: mine's silver. But, as far as cars go, it's tough to believe Blue Ocean Strategy wasn't involved with my car and the entire Scion product line.

Toyota clearly took their inspiration by looking at the six paths -- specifically at Strategic Groups, Functional/Emotional Appeal, and the Chain of Buyers -- and saw an opportunity. They built a car that is simultaneously the champ of being both a first "new" car and the ultimate second car. I'm going to guess Toyota's key elements, and their application of the Four Actions Framework, is something like this:

Eliminate factory options: I don't think there are any. Dealers can install many options but, as far as I can see, the factory always cranks out the same car. In this regard, the xB is a contemporary cousin to the Model T.

Reduce performance driving metrics. The Scion xB, or "box car" as my kid calls it, drives well. I don't know what a professional driver thinks about it, and I don't think it matters. It starts, it stops, it moves at a reasonable pace between starting and stopping, and doesn't use much fuel. The whole emotional factor of how a car "feels" is dramatically reduced.

Raise the level of confidence by lowering the level of risk of buyers remorse. The flat-fee pricing goes a long way to making those first-time buyers not worry they're being taken advantage of when negotiating a car price. Scion dealers don't negotiate, unless one takes into account things like "dealer fees" that nobody should ever pay anyway.

Create an awesome iPod integrated radio as standard equipment. Until you've tried this thing you don't know how fun it is. Like all BOS "Create" key elements this one leveraged existing technology, used it in a different way, and it makes for a more valuable offering.

Finally, a digression. I bought my car from Earl Stewart Toyota, which is the best car dealer I've encountered in my life. This is a shameless, entirely unsolicited, and entirely deserved plug. Earl -- you can call him from phone's scattered around the shop-floor and he answers email -- is a long-time car dealer who had a change of heart after reading Customers for Life, by Carl Sewell. CFL is apparently a sales strategy, whereas Blue Ocean Strategy focuses on strategic planning, but whatever effect the book had on Earl it worked; I purchased my Scion over six months ago and still remember what a great experience I had.

Happy Birthday, Mr. Edison

Happy Birthday, Feb. 11th, to the world's greatest inventor, Thomas Edison.

One interesting factoid: Edison's first patent, a vote counting machine, was a flop.

"...if there is any invention on earth that we don't want down here," said a committee chairman in 1869, "that is it." Edison's vote recorder was never used. (Source: Edison Papers).

So, the notion that people shouldn't invent solely for the sake of inventing isn't exactly new. People needed electric lights, and needed (ok -- maybe wanted) movies, and recordings. As a Florida resident I can personally attest that accurate vote counting is something plenty of politicians still don't want to this day. Our motto: let's remember to make sure our inventions add value while reducing cost.

Strategic Groups: Drawing the Line at Lines

The NY Times has a good article about Disney's plan to improve their California Adventure Theme Park: Will Disney Keep Us Amused?.

Disney Park's are a tough sell. I lived in southern California for awhile and bought a season pass to both parks. By the end of our year-long pass my then five five year-old, when asked whether he'd rather go to the community pool or to a Disney Park, always chose the pool. Disney's problem? To this day -- six years later -- he still says he'd prefer the pool than to a Disney Park, or the Wii to either.

Disney's issue is that they unleashed an entirely new category decades ago in the Theme Park industry, and now they're at the top of the pack of their Strategic Group. That is, when people choose whether to trade up or down they see Disney as the Platinum standard. Never mind that other parks cost less, offer less, but are more fun: take Nickelodeon's Nick Hotel in Orlando, for example. Nick-land, as they call it, is a hoot: my kid's always up for that. The rooms cost less than almost any Disney hotel and there's no admission fee for the activities.

Despite, that Disney's decided their answer lay in technology, which is how this analysis ended up in this blog. Let's look at Disney's original park curve: they Eliminated the filthy and dangerous element of an amusement park, Reduced wild rides, Increased magic and safety, and Created media tie-in. It worked.

Their new ride is in 3D; you ride through and play games that mimic the games people play at traditional traveling amusement parks, though there aren't prizes. Somehow it involves Toy Story. Disney: the ride sounds cool -- I'll eventually be on it -- but I don't get how it's transformative. An experience where you wait in line (ouch), ride through playing 3D carnival games (not bad but not breathtaking), then leave. I haven't seen it but it feels like red-ocean competition.

My guess is Disney should have thought about why people trade up to their parks, looked at the Chain of Buyers who decides to go to the Park's, and tried a gutsier move. For example, Disney knows modern people intensely dislike lines so why not focus on a strategy that gets rid of them?

Take the "ride" apart and put each 3D game into a series of mini-sections: make enough so none has an unmanageable line. If the lines get long, add more (and be glad at the expense: it exists only because of higher demand). Better yet, tie the game-playing experience into an online or console-based game that's somehow tied together. Kids practice on the Internet and Wii version, then show up at the park to kick-butt on the giant 3D one. That'll get kids to nag their parents to go to Disneyland, rather than the other way around.

Disney built a blue ocean by redefining the meaning of a Theme Park way back when. It's time to do it again; look to the non-customers, realize they're boxed-in at the top of their Strategic Group, confront the Chain of Buyers problem head-on, and think differently, like Walt did.

Putting people inside a video game sounds fun, but it also sounds a lot like an upscale version of the same thing people already have in their living rooms. If I find myself at California Adventure I'll try it, but I'll bet my kid would still prefer to hang at the pool or the beach. The experience there is also 3D, and amazingly realistic.

Microsoft: The Vista of the Red Sea

Across Time

I've written kind words about Microsoft of way-back-when, so it's time to explain how they ended up listed as both a Blue and Red Ocean company. I use Windows Vista. I'm not saying that to try to gain sympathy, but rather because it's relevant to this blog. As every other tech commentator in the world has pointed out, Vista has ... issues.

Vista is the poster child for technical innovation: engineering for engineering’s sake, which doesn’t add value consumers care about.

The late, great, Harry Chapin in a live recording of his song “30,000 Pounds of Bananas” summed up the basic problem when discussing why his brothers weren't impressed with his latest work. "Harry," his brother Steve famously opined. "It sucks."

Bill, Steve, Ray, or whoever is running the show at Microsoft: Vista sucks. It's not just that it's buggy and slow and has too few features to justify its price. All those things are true, but if they were done to give us greater value we’d forgive: the Wii is slower than its competitors but we don’t care. The issue is there’s no Raise or Create here, and you don’t seem to have eliminated anything. It’s a giant collection of pieces: billions of dollars of digital stuff, for no apparent purpose.

When creating Vista, Microsoft wandered, like the ancient Egyptian army, into the middle of a parted Red Sea. They were chasing down Linux and Mac-OS like Pharaoh was chasing down the ancient Israelite's. To those Egyptian soldiers, things must've seemed just fine for awhile. They were standing in the middle of the Red Sea and bearing down on their slave workforce. They thought they were making progress when the walls came crashing down.

Microsoft, Windows is the cornerstone of your might – the business equivalent to the army of ancient Egypt -- and it's standing in the middle of a temporarily suspended Red Sea. Get out of there: learn from the six-paths; figure out what to eliminate and reduce, what to raise and create.

The ugliest of the six-paths is Across Time because it’s inviolable: you’re not going to escape it. Marketers see it simply as trends. It's that, but more. To matter, in BOS terms, a trend must be 1) decisive to your business, 2) irreversible, and 3) having a clear trajectory.

We aren't going to be running software off local computers forever. We're not sure when that will go away, but it won't be long. Microsoft; you know that. You knew that when Vista was being built. You ignored the trend, like the ancient Egyptian army ignored the strange state of the parted Red Sea. It's only a matter of time -- and not that much time -- until those red waves come crashing in. Go Blue before then.

Blue Ocean Strategy: Define Your Competition Into Irrelevance

One of the core principles in Blue Ocean Strategy is to not accept market boundaries as they are. This idea is simple in theory but many either don't understand it or can't embrace it.

Let's use a metaphor all geeks understand: the Kobayashi Maru strategy. Summarizing for any of the well-groomed MBA types sneaking in here: Captain Kirk was in training at Star Fleet Academy. He was in the simulator and received a distress call from the ship Kobayashi Maru. Kirk goes to rescue the ship and is ambushed.

Before Kirk nobody had won the Kobayashi Maru simulation. Why? Because it was programmed to be unwinnable. It was a training exercise to show that some situations must be avoided, or that defeat is sometimes unavoidable. Kirk wins though, rescuing the ship and escaping the ambush. How? Having done his research and realizing what he would be up against he snuck in the night before and reprogrammed the simulator.

Blue Ocean Strategy, at its core, is about reprogramming the simulator; rewriting the rules to suit you. That's what Being Blue is all about.

I'm happy to discuss the steps to reprogram the simulator, to show you how to sneak in, and even to slip you the simulator API's. But, in the end, you have to remember that it's up to you -- the business/product developer -- to take the first steps and a) realize the Kobayashi Maru exercise is rigged, b) decide that "traditional" red ocean means of competition will never work, and finally to c) sneak in and reprogram the simulator before the exercise begins.

Redefine the market boundaries then build a business within these new boundaries. Be Kirk, or be clobbered.

740,000 drops of red water in AOL's red ocean

They had everything. AOL created and swam in one of the bluest of blue oceans ever created in the tech field. AOL could, and should, have been Google; breathing down Microsoft's neck with their biggest worry being how to manage antitrust regulators around the world.

Instead AOL just announced they lost 740,000 subscribers and they're splitting the company in two. One part will work with internet access subscriptions and the other with Internet content.

AOL's original key elements: they eliminated tech jargon, reduced configuration options (this seems to be a common element in many BOS offerings), raised community, and created one-click logins. It worked: the growth was legendary.

Then, for some reason nobody seems to understand, AOL decided to start competing in the red. They fought hard for those dial-up subscriptions even as consumers left in droves -- and continue leaving -- for similar offerings from their local phone and cable carriers. They continually added more stuff: I'm not even sure what all the stuff was, or is, but it seemed like they cranked it out in an endless stream. Consumers responded the way they do when a company goes red; they left.

AOL: you were once great. Look to the six-paths through the lens of customers and non-customers. Do the hard work and find the right key elements. Have the courage to eliminate and reduce some of those, realizing this is tough. Raise another one or two sky high, and create something new (subject to the constraints articulated in the Create post). Live again, AOL. It's sad to see what feels like an old friend going through tough times; hop out of that red ocean you've been living in.

Remember, we thought Nintendo was dead too and look where they are now. Red oceans may be viable for awhile as you adjust your strategy to make sure you're continually reinventing yourself (look to the Pioneer-Migrator-Settler Chart for this) but, long-term, only healthy fish live in the blue.

Blue pizzas?

Some innovations that look at lot of like tech for the sake of technology begin to take on a strong tinge of blue when we dig a little deeper. One of these appears at first glance to be a contender of innovation for innovation's sake: the almighty Domino's Pizza Tracker. On its face, this feature sounds -- most generously -- dumb. But after thinking more about it, and seeing Pizza Tracker in action, it begins like a rejuvenation of Domino's former Create key element: 30-minute delivery.

Here's how the system works: you order a pizza online; a Flash application pops up and you can watch as your pizza is assembled, cooked, boxed, then delivered. Dell pioneered the concept with computers, except you eat the finished product and the whole process takes just minutes from beginning to end. After, you're prompted to rate your pizza maker and delivery person, who are referred to by name.

I suspect Domino's is trying to show us how fast they cooked a pizza. What they've done instead -- as demonstrated by my son's fascination with Pizza Tracker -- is made it more fun to order a pizza and involved the consumer in the manufacturing process. They've done that, whether on purpose or by accident, by looking across industries at tracking applications, and also switching the functional/emotional experience of pizza ordering.

We'll see if Pizza Tracker replaces Domino's famous 30-minutes or free key element to recapture the blue ocean the company unleashed so long ago. They can't guarantee delivery in 30-minutes, but they can deliver the same emotional experience by showing you where your pizza is and about when it will arrive, which is close enough.

Even if Pizza Tracker isn't able to replace the key element in its entirety, the realization that key element of the business could be swapped on the functional/emotion axis to satisfy customer demand is brilliant. I have no idea how much technology is behind Pizza Tracker, and don't watch enough mass-media to see if there's any traditional red-ocean marketing. But given the chance to decide where the family pizza will come from, my family's willing to trade-off those key element's that were likely eliminated or reduced (fresh ingredients, local-based business, a large menu) to track our pizza being produced in real-time.

The only question now: when will they add GPS integration so you can see it your 'za being driven from the oven to your door, or maybe a high-heat webcam in the oven to see it cooking?

Microsoft + Yahoo?

My unsolicited opinion: two red oceans combined make one, larger, red ocean. But Google seems concerned, so maybe there's a threat there that isn't apparent to the rest of us.

Wii: the Blue Ocean Knockout

No blog about Blue Ocean Strategy and technology would be complete without at least one post about the BOS superstar, Nintendo's Wii. Those in techville seldom seem to understand the BOS aspect of what happened.

First, a well-known recap. Nintendo was founded in 1889: that's not a typo. They've always made games, and were an early adopter of video games. At different points through history their game consoles have been at the top and on the bottom among the various competitors.

Their prior system was the Game Cube. My son, who is eleven, loved it. His male friends loved it. Unfortunately for Nintendo, nobody but my son, his friends, and a small number of college students who either had drunk too much or needed to grow up, showed much enthusiasm. The competitors were Sony, with the awesome PS2, and Microsoft, with the XBox. The latter played Halo and had a great online community, the former played everything else and DVD's too. Most people purchased one or the other.

Gearing up for their next generation systems Sony and Microsoft announced they were building supercomputers. They'd have breathtaking graphics, physics chips that mimicked real-life, they'd play high resolution DVD's and do biomolecular engineering in its spare time. They'd be controlled the same way the former systems were because consumers already knew how to use the existing game controllers. When you're the market leaders, why change anything, right?

Nintendo must've thought about following this strategy but decided instead to bet the farm on Blue Ocean Strategy. They made gutsy, insightful decisions clearly derived from the six-path framework. Nintendo's never published their Eliminate-Reduce-Raise-Create (ERRC) or the Strategy Canvas that followed but we can probably reverse engineer it:

Eliminate. Movie playing. Want high-def movies, or even DVD's? Go buy a player for them. Pop one of these disks into Nintendo's Wii and it'll pop right back out.

Reduce well below the others. High resolution graphics and the physics chips. The graphics aren't awful: they're good enough for games. When playing a Wii you know you're not watching a movie being rendered in real-time, and Nintendo realized that'd be just fine with people. Same with the physics: balls bounce in a realistic and predictible manner, but the wind rustling through the leaves on the tree is probably pre-rendered. Or maybe the leaves don't move. Nintendo realized buyers don't care what the leaves are doing if the game is...

Raise well above the others. FUN. Everything about the Wii is about fun. Nintendo clearly popped the functional requirements from their competitors and spun them around into the emotional key element that, ultimately, drives buying decisions. In BOS speak they flipped the functional and emotional appeal of a key element as per the six-path framework. Playing a Wii is fun. Making a Mii is fun. Having your friend's Mii's in the audience as you compete with your friends is fun. It's less expensive to program fun than it is ultra high-definition graphics and perfect physics, making Wii games more appealing to game programmers than PS3 or XBox 360 games. Despite being easier and less expensive to program, playing the games -- having fun -- is a lot more satisfying for end-users.

Create. The Wiimote. The magic wand that I've written an entirely separate post on below. This one speaks for itself.

One more thing: the name. The well-known codename of the console was the Nintendo Revolution. My son thinks that's a great name. He and his friends still say Nintendo should change the name. The traditional gaming community -- especially those writing the magazines -- agree. But looking at the three tiers of non-customers there's one group the cutesy-sounding name appeals to: girls. Girls seem to love the Wii as much as boys. Geriatrics love the Wii: it's a hit in nursing homes. Parents love the Wii: it makes their kids move and more than a few parents admit to hitting the On button after the kids are in bed.

The end result is that everybody loves the Wii: traditional demographic customers of gaming systems and non-customers alike. They love the Wii so much there are piles of PS3's and XBox 360's as tall as I am sitting on the floor of electronic showrooms. But the Wii hasn't been in stock since it shipped, well over a year ago. At the same time Nintendo sells the Wii for $250 and makes money on every single machine; Sony and Microsoft have significantly higher price points but lose money on every unit sold (the hope is to make it up selling games).

The well-known end of the story: Nintendo came from a distant third to a solid first thanks to BOS. Nintendo's strategy didn't just win; it made the competition irrelevant.

VIRE: Value Innovation REquirements

VIRE is an article about using Blue Ocean Strategy for the requirements gathering process, published in IEEE Software, Jan/Feb 2008 edition.

The authors propose systematizing the process used between gathering key elements and creating a new strategy canvas (value curve). They describe a hybrid approach where user requirements are iteratively gathered in much the same way they are now, except for an emphasis on requirements gathering from non-customers. Next, a matrix is created that prioritizes and weighs requirements, again much like is done in traditional requirements gathering. Costs are assigned to each element. Finally the key elements are mapped on a 2D axis of importance and cost to decide which elements to eliminate, reduce, raise, and create (ERRC) which is then mapped to a new strategy canvas.

The notion of using a math-based methodology to systematically decide which key elements to ERRC appeals to me as a software engineer: math-based decision support for BOS. However, I think the authors miss the point to some extent by not using the six-path framework to help identify those key elements in the first place. I'm not sure if they intentionally rejected the six-path framework for some reason that isn't articulated, or didn't think it's applicable for requirements gathering. In any event, most traditional BOS practitioner's believe the six-path framework is a cornerstone of BOS: I'll write to the VIRE authors and ask why it's not part of their methodology.

Another element from traditional BOS is the use of the Buyer Utility Map (BUM) as a validation tool that assures the proposed new offering adds adequate value to the buyer. Since the BUM would fit nicely into their proposed new methodology I'm not sure why it's missing and wouldn't be surprised to see it emerge in a future publication.

Here's a link to the VIRE article, published in IEEE Software Journal: VIRE: Sailing a Blue Ocean with Value-Innovation Requirements, IEEE Software, Jan/Feb 2008, written by S. Kim, H. In, J. Baik, R. Kazman, and K. Han.

Create: != (Not Equal) to Tech Innovation.

I've seen enough strategy canvases/value curves to know that it's common to use Blue Ocean Strategy (BOS) as a smoke-screen for traditional technical innovation. Let's revisit the difference: tech innovation is innovation for the sake of innovation. People will say that isn't true -- that they're adding value -- but the truth is they're usually just knocking out digital or physical widgets with no particular purpose.

The most honest tech innovators will tell you, when asked, that they think something is "cool" and they hope somebody will come along and buy it. Sometimes that does happen, but it's a high-risk hit-or-miss proposition that has a lot of unnecessary business risk, and a healthy dose of heartache when the widget lays dormant.

Create is one of the four-actions framework. It's one of the easiest for those in the tech field to understand, because it superficially sounds a lot like what we've done for a long time. Create is more fun than it's two difficult to deal with cousins, Eliminate & Reduce, and a trap for it's half-sister Raise.

Since Create is so misunderstood I'll share a few of my personal observations. While everything on this blog is my own personal opinion, these observations especially pop out of my own mind: they're not from the book.

First, the good news. Key elements that constitute Create are virtually always rooted in technology. Now, the bad news. The technology is virtualy always transparent: you can't see it and non-technologists don't even know it's there. Let's look at the key components of successful Create elements that I've noticed in other BOS businesses.

1. The created element is always expressed in consumer terms.
2. The element virtually always relies upon technology.
3. The technology is catalytic; that is, the technology allows the product or business developer to build a key element that adds great value to the consumer even though the consumer may not even realize technology is being used.
4. The technology is always mature: nothing new here.
5. The technology is usually being used in a different way than you'll be using it to achieve your killer key element, and often in a different industry.

That's a lot of rules, so let's look at them using some case studies...

The Wiimote. Anybody reading this blog knows the Wiimote is the magic wand of the Wii; the coolest controller ever invented. Like most Create key elements it obviously relies upon technology; specifically the ADXL330 accelerometer. "But of course," you say... "Nintendo's value curve clearly called for an ADXL330 accelerometer." Yeah... Cutting back, the Wiimote is essentially driven by an air-bag controller. The same sensor that figures out whether you've hit a speed-bump or a concrete wall, that tracks the movement of your car, is also used to track your hand as you wave it around controlling Mario and his cohorts. As auto-makers added more and more airbags the price of the technology dropped low enough that Nintendo realized it'd make a great game controller. But our accelerometer is entirely catalytic: it's vital, yet invisible, to the finished product. It existed long before the Wii, but was used in different industries.

Other BOS companies Create elements share similar underlying technology, that's never expressed in tech terms to the consumer. For example, Australian farmers know how to use agri-tech to make sure Yellowtail wine is Yellowtail wine: there's no "plant and guess" going on there. Cirque de Solail, when portable, requires inexpensive power generation and stage management technology. When in Vegas their tech needs are legendary. Yet I've never seen a Cirque de Solail advertisement that trumpets the technology: they'll talk about it on geeky tech videos but that's about it. Think it's a coincidence that there's usually a Starbuck's between you and your office, or that the coffee tastes the same everywhere in the world? It's not; there's incredibly complex geo-mapping technology that goes into that but for those of us strung out on caffeine we don't care about the mapping systems, only that Starbuck's is always "nearby."

And so it goes, over and over again. The technology on those "Create" pegs is vital, but if we ask our innovators to look at the technology they become hypnotized like a teenager gazing into a mirror. Always think about Create from the value it brings about, but -- conversely -- never forget the reality that some seriously unsexy technology can become a great key element of a blue ocean offering.

Repeating: when deciding on a Create key element make it a "Magic Wand" like Nintendo did, but keep in mind it's impossible to actually produce the wand without technology like the ADXL330 accelerometer. Conversely, even my 11 year-old gadget loving son doesn't show much enthusiasm for an accelerometer, but he loves his Wiimote.

Microsoft: Blue way back when

Way back when Bill Gates out-blued Big Blue, and used those tricky Eliminate and Reduce key elements on Steve Jobs, to own the desktop operating system market.

Let's consider the key elements of what made the company what it is through a Blue Ocean Strategy lens. When Microsoft cooked up their DOS deal with IBM, and released Windows, they unleashed a blue company that's been nearly impossible to kill. Let's look at what they changed from the AS-IS curve, in a nutshell.

Microsoft of way back when:

Eliminated the tie-in between operating systems and computers. This seems obvious now but, back then, it would've been as weird to buy a box without an OS as it would be to buy a car without a motor today. Eliminating the box-business was a gutsy, insightful, and brilliant risk.

Greatly reduced what I call the "Mac experience." Buying a Windows box wasn't an elegant, graceful, and emotional experience. It swapped the emotional PC buying experience of the time for a purely functional experience. They gave consumers what they needed to make their business, and not a lot more.

Greatly increased the ease of programming their new machines. I remember calling Apple way back when -- sometime in the early Mac days -- to ask about buying a compiler and getting manuals. I don't remember the exact price but it was something ridiculous. Microsoft, by comparison, went and purchased Visual Basic; they did everything they could to make people write software for their new computers. The software wasn't as elegant or beautiful as that one the Mac, but it was functional and that's what businesses needed.

Created the de-coupled operating system/computer market. I'll admit it; I've basically used this one twice, but in two entirely different contexts. Microsoft created two industries: operating systems and machines. The machines relatively quickly reduced to a commodity but desktop operating systems, with the training required for end-users to use them and the mass consumer preference for consistency, have taken a much longer time.

Microsoft today is a different story, saved for a different post, except to say the product -- that has consumers seeing red -- is about as fine an example of tech innovation (innovation for innovation's sake at great cost and little value) as any.