Best Line #1: To focus on the red ocean is therefore to accept the key constraining factors of war—limited terrain and the need to beat an enemy to succeed—and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.
Best Line: #2: Because blue and red oceans have always coexisted, practical reality demands that companies succeed in both oceans and master the strategies for both.
Given the name of this service, Striving Strategically, it’s obvious that I value strategy. So much so that I’ve deliberately scoured a lot of mediocre books on the topic in order to find the few diamonds in the rough that are the most coherent, distinct, and helpful. There are four books that stand above the rest. They are listed below:
- Good Strategy, Bad Strategy (review here)
- Playing To Win (review here)
- The 33 Strategies of War (review here)
- Blue Ocean Strategy
I admire a lot of what others offer, whether it’s Mintzberg or Porter or the daily brilliance of Ben Thompson, but unless someone wants to be a deep scholar of the topic, these four books are the real foundation for strategic thinking. I offer them in a deliberate sequence.
Richard Rumelt’s book, Good Strategy, Bad Strategy, is the best place to start because he gives us such a clear view on how to think strategically. Far too often, we rely on poorly formed intuitions and fail to think consistently with what he calls “the kernel.” He clears the muddy waters better than anyone.
Playing To Win gets you the best of what our featured book would refer to as “Red Ocean Strategy.”
Meanwhile, The 33 Strategies of War lends a self-help flavor to the strategic mindset so you can think differently about challenges in your own life. It’s potent stuff packed in a set of principles that lend towards model thinking. It’s also just a really good romp through history.
Then we get to our feature book, which completely changes the paradigm. I don’t know if a person can really appreciate Blue Ocean Strategy without years of exposure to the more conventional thinking of red ocean strategy. It’s akin to a technology shift.
Like going from CD media to digital media. If you never had to lug around a flimsy wallet of CDs, and CD players, you can’t fully appreciate the incredible beauty of an iPod. Similarly, if you haven’t slogged through a lot of red ocean thinking, you can’t even recognize how different a blue ocean really is.
Anyway, whenever I find myself stuck on a problem, fixated on the constraints around me, or worried about what others are doing, this book brings me back to center. I’ve genuinely looked forward to the day that I would feature this book here on this service. I hope I have done enough with this week’s work to persuade more people to buy the book.
To illustrate some of the deeper concepts, I’ve offered the following articles for the week:
Wednesday: The Head, The Heart, and Profit Margins
Thursday: Netflix’s Looming Merger
I’ll feature a few more concepts below and again invite you to purchase a copy yourself. As always, I do my best to give a productive, unique look at the ideas without explicitly plagiarizing. For more information, you can also check out the authors’ official website. It’s worth a visit. If only for the lovely feel of the homepage.
Where The Puck Will Be
As much as I support the iterative, feedback-driven methods of LEAN management, I’ve seen many of us (myself included) be shackled by feedback. This was never the intent of LEAN methods but it is the result of our perpetual focus on the validation aspect of the methodology. Are we doing the right thing? Is this useful enough to people? Will they be upset if Feature X or Product Y goes away?
That sort of information helps, of course, but I always remember the apocryphal quip attributed to Henry Ford:
If I had asked what people wanted, they would have said faster horses.
He didn’t really say that but here’s another oft-quoted industry titan, Steve Jobs, expressing the idea another way:
It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.
And finally, another well-worn adage, transposed from sports to business, belongs in this same thread. This one comes from Wayne Gretzky:
Skate to where the puck is going, not where it has been.
All three quotes express a central idea that we can lose position when we fixate too much on market/customer feedback for a specific product or service. Put more bluntly, no one really knows what they want until you show them. Feedback can help us validate what’s working, what isn’t working, but it can’t give us a direct signal of what will work. The steps we must take to move forward, creating what will be, are always less certain, obscured by uncertainty.
It’s the difference between using LEAN to improve a product and using Blue Ocean to help a customer.
I think this is wildly obvious but you can do a google search right now and find countless articles that criticize the sentiments expressed above. A lot of them conflate the idea of product development versus customer development. I suspect the critics have not read Blue Ocean Strategy. There’s nothing heretical about looking at where the proverbial puck (i.e. existing market offerings) is and formulating your identity on where you think it should be. In fact, anything short of this approach is just more of the same red ocean thinking that empowers someone else’s disruption.
Our authors write the following to illustrate:
Our research found that customers can scarcely imagine how to create uncontested market space. Their insight also tends toward the familiar ‘offer me more for less.’
The trap here is that “more for less” and “faster horses” means you have to put your primary focus in a single vacuum: driving costs downward.
All you can do in these “more for less” circumstances is manage your product or service so that it becomes the cheapest game in town. That doesn’t have to mean lower prices; it can truly mean more for the same price. All the same, it’s a big, dumb race to the bottom of some cost factor and it leaves you barking the same slogans as those car dealerships who fiercely proclaim they will NOT be undersold.
Existing products matter. Existing customers matter. Existing markets are important. But this race-to-the-bottom more-of-the-same cost leadership is only good for those who have cornered their market and only lasts as long as the market itself (see Kodak’s 2012 bankruptcy).
Is there any reason to not try to capture the best value and the lowest cost? This is what our authors refer to as value innovation and it requires new thinking, movement to where the proverbial puck will be, and a departure from the typical guidance that market analysis yields.
As the authors write,
To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategy focus from competitors to alternatives, and from customers to noncustomers of the industry.
It’s the equivalent of keeping one eye on the horizon at all times. Without such a view, we lock ourselves into a fixed position where we only remain hypersensitive to existing customers and competition and the faulty desire to maintain whatever is familiar for as long as possible.
This isn’t just narrow-minded. It’s also fragile.
You can’t create the greatest value with the products or services you already have. This is why we see sequels in the entertainment industry. Whatever was the greatest value before creates an appetite for greater value later. The evolution is constant.
And we can squeeze more value out of anything. Even something as staid and glacial as real estate is seeing massive undercurrents of disruption as online platforms drink the brokerage’s milkshakes and offer something more convenient and effective.
Again, this feels blindingly obvious and yet our authors had to write a book that reinforces the idea for all the skeptics out there. And still people (myself included) will misinterpret the notions or fall back to old habits.
I think it’s because strategy is an unpracticed endeavor for most people. We just don’t apply it enough to have any real sense of comfort or mastery. So we need tools to help. Thankfully, Blue Ocean offers some of the best, most clarifying and accessible tools I’ve come across.
Four Steps To The Blue Ocean
The above subtitle is a twist on the title of another great business book, Four Steps to the Epiphany by Steve Blank. In this book, Blank explains the important distinction between product and customer development. Product development, while helpful, doesn’t yield success. Customers do. And through a series of four major phases (customer discovery, validation, creation, and company building), Blank guides us through the proto-version of LEAN management to see how new ventures can succeed not with new products but new customers.
It’s really great. I think it’s the best of what “design thinking” has to offer but with more transferable methods removed from the design of actual products. And when it comes to tactics for developing new ventures, it’s probably the best guide. Here’s a link to a brief guide on the concepts, written by Michael Batko.
But strategy comes before tactics, of course. So Blue Ocean is the first place to start before venturing into Blank’s techniques. Using a four-step process our authors devise in the book, you can determine the space where you think the proverbial “puck” will be. Frankly, the work is easier than I expected.
It’s also very graceful—free of any heavy reliance on data or forecasts. The authors gives tools that actually unearth the best of our intuitions while also helping us adopt an outside view from the standpoint of a consumer.
Step one involves the strategy canvas I highlighted in Tuesday’s article. In a very visual, even somewhat physical sense, you determine the open spaces in the existing industry and thus find the gaps where the “puck” might slide through. This requires a strong grasp of industry factors in order to feel real confidence in what you’re doing but that doesn’t take long to develop.
Step two is a method of alignment. Recognizing how you want to style your product or service, via the canvas, you then go through a straightforward exercise of measuring internal and external factors and categorizing your efforts on a simple four part grid. Each piece of the grid represents one of four basic actions: eliminate, reduce, raise, or change. This is also known as the ERRC grid.
A Brief Moment of Appreciation …
This model, at this stage, is the best thought generator that I’ve come across for this particular task. If step one helps you formulate a basic vision of what you want to create, through the strategy canvas, this model helps you quickly assess the cost of that vision. I honestly think that it’s the most important part of the four-step method. It can also be a real difference maker for anyone on the team that uses it. Why? Because most people don’t think about this as fully and precisely as the tool encourages.
Case in point, before really using this model, I had applied a simpler technique at this stage of ideation. Having a vision in-hand (thanks to step one), I previously used the more-basic question of what do we want to change and what do we want to maintain in order to achieve the vision? I featured this question in my coverage of the book Lean Analytics (review here). It’s the first question I would ask when faced with new information.
That practice was very powerful in its own right because many of us, as managers and leaders, often fail to think about what is going to stop in order for something else to start. We usually just bulldoze right past any constraints and delude ourselves into thinking we can just get more-more-more without any real shift in focus. Straddled, muddled strategy is the result. Nothing is optimized. It’s just maximized. That’s how you get low-grade results and a whole lot of mission creep.
But to switch that two-part question with this four-part model is something of an upgrade to my brain. This new thought (what to eliminate, reduce, raise, or change?) is obviously more precise, more nuanced, and practically as easy. It’s sharper thinking, through and through, and it helps us get out of the logjam of dichotomous thinking.
A pivot doesn’t have to be a blunt instrument. You don’t have to stop all things and do a complete 90-degree turn. Modest course correction is probably best and this question, again, puts us in the mindset to do so.
To some who read this, it may feel like I’m spending too much time on this one small thing. Maybe I am. But if there is one aspect of this book that is going to be perpetually overlooked and undervalued, I think this is it. The strategy canvas is deeply compelling. The later steps are really fun. But this second step, where the hard thinking about cost and change really comes into play, is a spot where I bet most efforts fail.
Anyone can drum up a creative strategy in stage one, thanks to the canvas.
Few will figure out how to accomplish that strategy in stage two. That failure won’t be the fault of the ERRC grid tool itself. It will be the fault of the users who skip this step or discount it.
Fairs and Displays
Steps three and four are where the big, fun, engaging aspects of strategy kick in. I have never been a part of something like stage three’s visual strategy fair; it makes me a wee bit sad to think of all the excitement I’m missing.
The fair itself is very much like a science fair. Team members build a variety of canvases, ERRC grids, and present their visions to a body of judges who then question, debate, critique, and select favorites. The importance of this process is that it develops that build-measure-learn cycle of the aforementioned LEAN methodology. But rather than make it about a product, per se, it’s about a strategy.
This is especially beneficial because the judges weighing in on each proposed vision must be external constituents—customers and potential customers. To have these people, your actual market, participate at this stage, before a product has even been developed, sounds very useful. It gives you a blend of Blank’s customer development process with our authors’ strategy-making process. After some guidance and refinement, you’ve basically stress-tested your ideas and validated a blue ocean to some extent. It won’t be perfect but it will definitely build confidence.
Next, in stage four, is the presentation or communication of a final approach. Whereas most strategic plans still rely on text-heavy, multi-page documents, the idea here is to build a beautiful one-page vision of the old approach and the new approach to symbolize the changes that lie ahead. I think this is a brilliant idea. Having both the old and new strategies, side-by-side, helps people understand the real distinction of this new strategy in ways they can’t understand without the visual contrast.
Such contrast has an effect on people. As the authors explain,
Employees were so motivated by the clear game plan that many pinned up a version of the strategy canvas in their cubicles as a reminder of [the company’s] new priorities andn gasp that needed to be closed.
Who ever gets excited about strategy? Few people. Mostly odd fellows like me. But this four-step process, specifically with these tools used in this sequence, gives you something few others seem to offer.
I hesitated to even cover the four-step process because I worried that people would read this and think they can just go emulate it without reading the actual book. I suppose some may feel that way. If so, I wish you luck but I think you’ll miss out on a lot more that a modest $20 investment can provide.
The process itself constitutes the first 100 pages of the book. There’s a great deal more that I cannot cover here. And there’s much more in the latter half about classic issues with alignment, drift, and some much-appreciated thoughts on misinterpretations that deserve your attention, too. Finally, the style of writing is a bit dry at times but the clarity demonstrates that our authors really understand strategy better than just about anyone I’ve come across.
Blue Ocean Strategy is, itself, a blue ocean in the strategy world. Some equate it to the work we find in Peter Thiel’s Zero To One. That is a fine book and an extension of blue ocean thinking. However, I find it truly better suited to startups whereas Blue Ocean can apply to practically any organization. It’s more useful.
Especially when you reread it. Of my Top Four strategy books, this is the one that really helps me be a well-rounded strategist. The other books develop a logic and framework that is familiar to everyone. It starts with problem diagnosis and clear logic, a’la Rumelt. Then it leads to competitive strategies and alignment a’la Playing to Win. Then, for a more flexible mindset, there are the principles found in Robert Greene’s work. He even plants the seeds for Blue Ocean thinking on many occasions.
But for all the wisdom those resources provide, it’s the noncompetitive, customer-focused mindset of Blue Ocean Strategy that helps me transcend convention. As our authors say, we need both red ocean and blue ocean thinking. Theirs is the only book that I think can provide the last half. Here’s the link again to buy it on Amazon.