Farmville: Growing a farm in a blue ocean

Farmville. The silly game by Zynga where players create virtual farms, advancing through levels of play like my son moves through the levels of Halo.

I told my 13 year-old Tier 1 traditional game playing son that someday I'll reach Level 70 and he rolled his eyes: "Great .. I'll tell my friends my dad's a Level 70 prestige." "In Modern Warfare?" he went on, guessing their question. "Nope..." he said ... smiling and anticipating his answer: "Farmville. Then I'll hide."

Farmville, and the company behind it, Zynga Games, have unleashed an enormously popular Blue Ocean Strategy mega-hit.

Farmville makes money by offering users the option to purchase virtual goods, like fuel to farm faster and buildings and trees. There's lots of commentary about how ridiculous it is that people pay real money for things that aren't real. But, of course, we buy intangible goods for fun all the time and always have. Nobody questions purchasing a ticket to a ballgame or movie but you walk away with nothing but nice memories (unless your home team is the Florida Marlins and you actually care who wins, but that's for another post on a different blog)...

Zynga has many games but none are as popular as Farmville; they've clearly opened up a Blue Ocean with their silly, friendly farming community. Let's look at what the key elements of Farmville likely are in the context of the Four Actions Framework:

Eliminated
* Game consoles - I don't even think you can play Farmville on a traditional game console.
* Violence - You can't even eat your chickens; everybody's a vegetarian. Points are gained from cooperation - competition doesn't exist in Farmville.

Reduced
* Graphics - This is a recurring favorite in BOS games; masses of buyers just don't seem to care about stunning graphics.
* Barriers to entry - It's easy and free to get started; there's actually no need to ever pay Zynga anything, though people voluntarily do. There's no magic key combination's, no disk, no strange terminology to learn; just a virtual person with simple farming tools.

Raised
* Community - Sharing is at the heart of Farmville; there are a lot of prizes that can only be obtained by helping neighboring farmers.
* Creativity. Lots of players use land that could be raising virtual coins or experience for highly decorated villas that raise no coins or experience.
* Education - Deciding on which crops to buy while balancing time, size, and cost constraints is the core of many business operations; a whole batch of manufacturing COO's is being secretly trained.

Created
* Advancement by asynchronous cooperation. Like every Blue Ocean Strategy creation it existed before but being able to help one another, without the need to help in real-time, encourages cooperation while acknowledging real world time constraints. You can play with your friends without coordinating times.

Like all BOS offerings there will be lots of copycats. They'll likely focus on technological innovation; faster game play, better graphics .. whatever their engineers decide their Tier I buyers want. They'll predictably bring in a stash of venture capital and just as predictably fail; we know from history that it's nearly impossible to "beat" a Blue Ocean Strategy businesses, even those where managers trained in traditional marketing do their best to throw away their BOS benefits.

For anybody who wants to be my Farmville neighbor my email address is olenick@valueinnovation.net; on Facebook I'm at http://www.facebook.com/olenick. See ya' on the farm.

What is Value? Blue Ocean Strategy & Online Dating; iDate 2010 Conference Presentation

Last week I had the opportunity to talk about Blue Ocean Strategy at the 2010 iDate conference; the largest conference for the online dating world.

Click here to view the presentation.

Early analysis revealed the field is mired in the red ocean of competition and technical innovation. Given how little the industry has changed I expected maybe three people might be interested in applying Blue Ocean Strategy for their websites. I couldn't have been proven more wrong.

The room was packed and the audience completely engaged. This was especially surprising given that it was a morning presentation and the conference was in Miami's South Beach District, not exactly a venue to inspire people to wake up early for discussions about business strategy in dark rooms. Figuring out how to lift oneself out of the daily dreariness of red ocean competition trumps the siren song of the very real blue ocean outside.

Because of time constraints we didn't have time to review all the components of Blue Ocean Strategy so focused on value innovation, and even then tried to dig into the often misunderstood concepts of non-buyers, buyer value, and the six path framework.

One great example of buyer value came from the popular dating website Plenty of Fish. The enormously popular websites online chat system went down months ago. All their users noticed but none apparently cared. Their metrics don't appear to have been affected, users quickly found alternative methods of communication; it was clear that users of the site found little if any value in the on-site chat system despite that maintaining it presumably required both capital and time that could have been better spent on factors that added real utility.

Along the same lines we tried to focus on a perennially misunderstood concept: key factors that should be reduced or eliminated. It's not uncommon to see companies try to re-characterize these by defining them in the inverse. For example somebody may write "Reduce user frustration" ... presumably by adding lots of features a project champion wants. This couldn't be more wrong: factors we eliminate or reduce are factors buyers and non-buyers find valuable but where the value does not align with the cost. In the example above we're actually raising ease of use. When we phrase the key factor like that we're forced to examine the importance of Ease of Use to buyers and non-buyers, and -- almost more importantly -- we need to find other factors to eliminate and reduce to pay for our increased ease of use. Remember that it is substantially harder to eliminate and reduce factors than it is to raise and create them.

My hope is that over the next months or years somebody comes along with a better way of matching people online, and maybe even retains those previously first-tier non-buyers, helping them build a foundation for their budding relationships. If all works out well we'll see offerings that focus on the larger interests affecting singles, looping in the second-tier non-buyers. Finally, we may even learn something from the third tier non-buyers -- parents in happy relationships looking for playgroups for their kids, couples looking for other couples to hang out with, job hunters looking for work opportunities -- that can be applied to transform the red ocean of the online dating industry into the blue ocean outside our conference center.

One thing I learned about myself is that talking about Blue Ocean Strategy is fun! I've been working with the framework for ten years now. I'm not sure I'd want to stray far from the tech or web industries but if people want to learn more about BOS, or apply it within their own businesses, please don't hesitate to contact me at olenick @ valueinnovation.net.

Blue Ocean Strategy: Honesty

Blue Ocean Strategy doesn't directly deal with the issue of honesty, but it comes close enough at least one blog post seems appropriate.

In the world of new product development and new business development fraud runs rampant. That not a generalization: it's a simple fact, supported by overwhelming evidence. I myself have seen egregious behavior.

Normally the victims of the bad behavior are embarrassed so nothing happens, or they settle their disputes quietly. I remember one case where a business broker sold a company a useless piece of technology for $16 million: not only was it bad technology but one vital component directly infringed on the license of another company who wouldn't budge, rendering the software entirely useless. Their solution was to pay another small startup $50K for a functional piece of the same software, then message senior management that the less expensive one was in fact the $16MM useless application. A director or two were quietly fired but the money never recovered. Every genuine technology entrepreneur can tell similar stories; many would be happy to keep their losses to $16MM.

With that in mind, I came across an article in this morning's New York Times ("Doctors Start to Say ‘I’m Sorry’...") about a radical new business process in the medical field that eliminates two-thirds of of the cost and 80-percent of the time spent on malpractice claims. Doctors who make a mistake are required to own up to the mistake, apologize to the patient for hurting them, honestly explain what happened, and work with the hospital to ensure fair compensation. Amazingly, when the patients feel like their doctor did their best but made a mistake -- admitted the mistake and is working to fix it -- they're much less likely to sue.

Honesty is one theme I notice consistently running through successful technology companies. Steve Jobs makes it clear that Apple is always focused on giving consumers items he and his staff believe brings genuine utility. Blue Ocean Strategy has a focus on genuine consumer utility woven through virtually every element of the process (conversely there's thinly veiled contempt for raw marketing: items that do not bring about utility). The core part of value innovation -- requiring that factors be eliminating and reduced -- is clearly explained to consumers, who accept the trade-off for the factors that were raised and created.

Honesty. It doesn't always mean delivering a great product. But it means trying then, when that fails to happen, admitting to it and continually working to improve. It means disclosing when a person or company blows it then working hard to live up to the reasonable expectation of the buyer. It means exposing and rooting out the pariahs so they don't gunk up the system like seaweed does an ocean.

Blue Ocean Strategy: Getting Started

I get asked a lot about how to get started using Blue Ocean Strategy. The authors answer the question beginning on page 84. One poorly understood notion is the amount of introspection and work needed to find a Blue Ocean offering. I'll relay the individual steps but the authors do a better job than I ever could with this concise summary about the work of one of their case-study companies: "It was a painful experience."

Blue Ocean Strategy has two primary components: value innovation and a set of management techniques, including Fair Process & Tipping Point Leadership. As a business and product developer I tend to focus most on value innovation: making new businesses. The first part of value innovation the authors call "Visual Awakening" -- it's an uncomfortable experience.

Visual Awakening involves the process of mapping exactly where your business is, and where the various substitutes consumers can use are, and comparing the two. When done honestly the results are rarely uplifting. For each substitute you draw a Value Curve: a plot-diagram with the key factors that the industry competes within drawn at the bottom and the plots of each substitute drawn low to high. Most companies quickly realize that their curve looks virtually identical to the substitutes, an indication that they are competing on commoditized factors like price: red-ocean competition that that results in ever-shrinking margins and customer base.

It's rare that the Visual Awakening stage isn't disquieting. I'll address what comes next -- how to navigate to a better place -- in a future post.

Newton & Product development

Like many engineers that cross over to the business world I find it amazing how the Rules of Physics applies to business. The most obviously applicable to creating new businesses and products are Newton's Three Laws of Motion. Let's examine them:

1. Objects at rest tend to stay at rest. How many times have we seen a company that's making no apparent movement towards innovation say that they'll magically start? Windows Live manager Brian Hall told an investor conference this week "...[Microsoft is] now are focused on how we grow as fast as possible organically." Huh? The web browser was invented fifteen years ago but Microsoft is going to start magically growing organically. This just isn't the way things work, which leads us to Newton's Second Law:

2. The velocity of acceleration is mass times force. That is, the bigger something is, the more force is required to make it move. It's common for companies to underestimate the effort required to "change the needle" -- to launch a new business or product. I've often compared new business development to a three-stage rocket launch. The first stage uses almost all the fuel, is massively risky, and has the highest chance of catastrophic failure. Luckily the whole thing is over in a few minutes. The second stage uses exponentially less fuel, is much less risky, and really just positions the spacecraft for orbit. It lasts longer than the first stage, but typically lasts no more than a few hours. The third stage is orbit: just going around and around. Most companies live in Stage 3; they don't have the risk tolerance or the people to pull off a Stage 1 launch even if they want to, and most secretly don't. People mustn't underestimate the amount of energy required to launch a substantial business. Once we've launched our business we get to Newton's Third Law, which we should have anticipated while planning:

3. For every action there is an equal and opposite reaction. I obviously believe much more in Blue Ocean Strategy -- making competitor's irrelevant -- than Porter's Five Forces, duking it out. But companies should never underestimate the reaction of competitors to a new initiative. Competitors don't like to become irrelevant, and most will do everything they can to prevent it.

Call me Ishmael - Beware trying to bloody a Blue Ocean

"...to the last I grapple with thee; from hell's heart I stab at thee; for hate's sake I spit my last breath at thee."
- Captain Ahab, Moby Dick. Herman Melville, 1851.

Using the Blue Ocean metaphor it's impossible to not imagine a certain chief executive of a business in Redmond in the role of Captain Ahab, chasing down legendary Moby Dick in a dangerous effort to bloody the blue ocean. Ahab says he's given up the hunt, but everybody knows Ahab can't quit as long as Moby is alive.

Skipper Steve, his ship unable to navigate the stormy waters of the web, wants nothing more than to harpoon one of the whales that caused this mess; that battered both him personally and the vessel that served him well all these years. As long as Moby's cousins Google and Yahoo! -- the latter admittedly one lame beast after a harpoon took out half its brain -- swim the wild blue ocean our modern Ahab will be called to hunt them.

With more money than most countries Ahab is certain to eventually harpoon our modern-day Moby, but at what cost to himself, his ship, and his crew only history will tell. In any event, I'm symbolically composing this post on my Dell Ubuntu machine. It's not a dual-boot. The only thing worse than having a competitor build a blue-ocean in your sector is polluting your formerly Blue Ocean to the point that its new red hue is unmistakable.

"Give not thyself up, then, to fire, lest it invert thee, deaden thee; as for the time it did me. There is a wisdom that is woe; but there is a woe that is madness." - Moby Dick.

Nintendo building an island in Linden's blue ocean?

Click here for a link to an article, intelligently postulating on the theory that Nintendo may have purchased a virtual island in it's Blue Ocean Strategy hit Second Life that they intend to build into some type of Second Life Wiiville.

I've written lots of posts about the Wii, and one analysis about Second Life. It make sense that these two BOS rock-stars to join together and introduce Nintendo's blue consoles into Linden's blue world.