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.