Creating Blue Oceans

Defying Conventional Wisdom: Windmills in the sky

Companies today, facing an environment of great uncertainty, can no longer cling to traditional industry assumptions.  Instead, the perspective of defying conventional wisdom goes hand-in-hand with the process of Blue Ocean Strategy, which is a systematic approach to turning unconventional ideas into winning strategies.   This week, to provide some inspiration, we feature an example of Defying Conventional Wisdom from the energy sector. 

Why build ground-based windmills when enegery-producing winds are more abundant higher up in the atmosphere?  Contrary to the conventional wisdom that windmills must be near-to-earth, new wind machines placed thousands of feet above large cities have the potential to meet global electricity demand a hundred times over. 

More on this uplifting thinking from Wired:

The wind blowing through the streets of Manhattan couldn’t power the city, but wind machines placed thousands of feet above the city theoretically could.

The first rigorous, worldwide study of high-altitude wind power estimates that there is enough wind energy at altitudes of about 1,600 to 40,000 feet to meet global electricity demand a hundred times over.

The very best ground-based wind sites have a wind-power density of less than 1 kilowatt per square meter of area swept. Up near the jet stream above New York, the wind power density can reach 16 kilowatts per square meter. The air up there is a vast potential reservoir of energy, if its intermittency can be overcome.

Even better, the best high-altitude wind-power resources match up with highly populated areas including North America’s Eastern Seaboard and China’s coastline.

[Image via Future Energy.]

Global Crisis – The Comic Angle: Amusement parks and bailouts

No matter where one turns these days, it seems nearly impossible to escape the news of the latest company or industry to unravel.  So to challenge the status quo of doom and gloom,  and to inject a layer of much needed levity, our series presents satirical articles of different industries in crisis.  This week, we turn to two short, humorous bulletins.

From Daily Comedy:

Six Flags Bankruptcy
Due to the slumping economy, Six Flags is filing for Chapter 11 bankruptcy protection.  Ironically, when they get to bankruptcy court, they'll have to wait in a line a mile long for two hours only to realize later that this ride really sucks.

Banks Want to Return $68 Billion in Bailout Money
Banks want to return $68 billion in bailout money to the government. They were upset at all the hidden fees.

[Image via Six Flags.]

Blue Ocean Strategy: The 2nd ‘E’ of fair process

In our Blue Ocean Strategy Basics series, we continue to highlight building execution into strategy and the three ‘E’ Principles of Fair Process. Once featured, each principle is made accessible through the Blue Ocean Strategy Basics archive of this site. For our introduction to building execution into strategy and the second E Principle of Fair Process, we turn to page 175 — 176 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

There are three mutually reinforcing elements that define fair process: engagement, explanation, and clarity of expectation. Whether people are senior executives or shop floor employees, they all look to these elements. We call them the three E principles of fair process.

Explanation means that everyone involved and affected should understand why final strategic decisions are made as they are. An explanation of the thinking that underlies decisions makes people confident that managers have considered their opinions and have made decisions impartially in the overall interests of the company. An explanation allows employees to trust managers’ intentions even if their own ideas have been rejected. It also serves as a powerful feedback loop that enhances learning.

Related links:

Buy the Blue Ocean Strategy book.

[Image via sunny-drunk.]

Blue Ocean Strategy: What is the fabric of your company’s success?

Paraphrasing the timeless wisdom of William Shakespeare:

‘Some companies are born great, some achieve greatness, and some have greatness thrust upon them.’

If you accept this deterministic view of business, then your company either falls neatly into one the three categories above, or it’s not (yet) a great company. Which is it?

But there is an alternative view professing a level playing field. Any company can become great, regardless of where it is today. The barometer of success is no longer the size of companies or R&D budgets, but making the right strategic decisions at the right time.  This is the premise of Blue Ocean Strategy.

Between 1975 and 1995 sixty percent of Fortune 500 companies on the list were replaced,  and results published in 2008 show that this trend is likely to continue.  In 2008 earnings from Fortune 500 companies were down 85% compared to the year prior, and 128 companies on the list had losses compared to 57 the year prior.

Suddenly the clear delineation and hierarchy among companies is blurred. Which way is your company headed?  Might it be time that you embrace Blue Ocean Strategy as your company’s framework for success?

[Image via Michael Downey.]

Blue Ocean Strategy: The 1st ‘E’ of fair process

As part of our Blue Ocean Strategy Basics series, we continue to highlight building execution into strategy and the three E Principles of Fair Process.  Once featured, each  principle is made accessible through the Blue Ocean Strategy Basics archive of this site.  For an introduction to the first ‘E’ Principle of Fair Process, we turn to page 175 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

There are three mutually reinforcing elements that define fair process: engagement, explanation, and clarity of expectation. Whether people are senior executives or shop floor employees, they all look to these elements. We call them the three E principles of fair process.

Engagement means involving individuals in the strategic decisions that affect them by asking for their input and allowing them to refute the merits of one another’s ideas and assumptions. Engagement communicates management’s respect for individuals and their ideas. Encouraging refutation sharpens everyone’s thinking and builds better collective wisdom. Engagement results in better strategic decisions by management and greater commitment from all involved to execute those decisions.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Jordi, Mons i Víctor.]

Contributed Article: Leadership and Innovation Lessons

Inspired by the recent TED Talks, this week we feature the article “Leadership and Innovation Lessons” contributed by Cheenu Srinivasan.  In the article, Mr. Srinivasan presents the story of “El Sistema” and its Blue Ocean Strategy-like approach which has positively affected the lives of over 350,000 children around the world by making “music by the masses for the masses.” 

From “Leadership and Innovation Lessons” by Cheenu Srinivasan:

Challenging the entrenched supply-side thinking of those days in the mid 1970s, economist and amateur musician Jose Antonio Abreu struck upon the idea of combining social work with classical music orchestras as a way of offering an alternatively lifestlye to that of a life of crime on the streets for the poor. 

Rather than cramped class rooms for vocational training, he assembled children in open spaces to learn and practice classical music as a group. While classical music was hitherto the exclusive reserve of the wealthy and connected, that which he called classical music by the few for the few, he opened up entire new vistas of opportunity with his vision of music by the masses for the masses.

Continue reading “From Leadership and Innovation Lessons” by Cheenu Srinivasan in PDF here.   Read previous contributions by Mr. Srinivasan here and here.

Watch the TED talk which inspired the article by clicking on the video image above.

Will the waves of praise ever subside for Nintendo?

Here at CreatingBlueOceans.com we have monitored closely the success of Nintendo and the Blue Ocean marketspace it has created with its mold-breaking Wii console.   With all the accolades it has received, writing about the Wii is almost getting, dare we say, monotonous? But we are compelled to tell the whole story, and just last week, the Nintendo Wii again scored big with yet another distinctive title: “fastest selling” game console in North American history.  As competitors continue to duke it out in bloody red oceans, Nintendo’s position is an enviable one, and serves a keen reminder of the heightened relevance Blue Ocean Strategy especially during difficult economic times. 

From Gaming Industry online:

The US video games market may well be starting to struggle in the face of the global recession, but Nintendo is undoubtedly fairing best in the face of economic instability as Wii sails past yet another significant sales milestone.

Since its release a mere 31 months ago the Wii has now sold over 20m units in North America, making it the fastest selling console in the territory’s history.

Let’s not forget either the extent to which the DS outstripped its console opposition in May, with the DSi shifting 390,000 machines and the DS Lite 244,000 units. The combined sales of 633,000 placed it far ahead of any other platform.

“The continued enthusiastic consumer response to our products shows that Nintendo has something for everyone,” Nintendo of America’s executive vice president of sales and marketing Cammie Dunaway stated.

[Image via xispo.]

Blue Ocean Strategy: Building execution into strategy

Shifting to the next segment in our Blue Ocean Strategy Basics series, over the course of the next three weeks we will highlight building execution into strategy and the three E Principles of Fair Process.  Once featured, each  principle is made accessible through the Blue Ocean Strategy Basics archive of this site.  For our introduction, we turn to page 172 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

The more removed people are from the top and the less they have been involved in the creation of the strategy, the more trepidation builds. On the front line, at the very level at which a strategy must be executed day in and day out, people can resent having a strategy thrust upon them with little regard for what they think and feel. Just when you think you have done everything right, things can suddenly go very wrong in your front line.

This brings us to the sixth principle of blue ocean strategy: To build people’s trust and commitment deep in the ranks and inspire their voluntary cooperation, companies need to build execution into strategy from the start. That principle allows companies to minimize the management risk of distrust, noncooperation, and even sabotage. This management risk is relevant to strategy execution in both red and blue oceans, but it is greater for blue ocean strategy because its execution often requires significant change. Hence, minimizing such risk is essential as companies execute blue ocean strategy. Companies must reach beyond the usual suspects of carrots and sticks. They must reach to fair process in the making and executing of strategy.

Our research shows that fair process is a key variable that distinguishes successful blue ocean strategic moves from those that failed. The presence or absence of fair process can make or break a company’s best execution efforts.

Related links:

Buy the Blue Ocean Strategy book.

Wii don’t focus on the competition

Last week we brought you the story of Nintendo’s continuing blue ocean with the recent launch of Wii MotionPlus — a new, gyroscopic sensor which precisely mimics hand movements for better on-screen accuracy.  As a follow-up, this week we bring you an interview with Satoru Iwata, CEO of Nintendo.  The interview is especially timely, given the announcements by Sony and Microsoft of new motion-control devices meant to infringe upon the Wii’s blue ocean.  In the interview, Iwata discusses Nintendo’s Blue Ocean Strategy, the iPhone, the recession, and free games.

From Venture Beat:

When we talked about it two years ago, a lot of people thought the Wii Balance Board was crazy. They thought Nintendo would start selling a bathroom scale. But Wii Fit became a success because we saw a “blue ocean strategy.” But now a lot of companies are fighting in the red ocean of follow-up exercise games. [Note: As discussed in the Blue Ocean Strategy book, too many sharks in one area make a red ocean; but innovators who swim in the blue ocean have no rivals]. When we introduced the Wii controller, we were in the blue ocean and this year is still the blue ocean. But the year 2010 may become the red ocean for motion-sensing controls, based on what Microsoft and Sony say. The advantage for Nintendo is that we always try to do things that other companies don’t try to do. That is something that the general public appreciates. That’s why we have to introduce this Wii Vitality Sensor. A lot of people must be wondering what the hell this is about. But that’s exactly the way people felt two years ago with the Wii Balance Board. Looking at the history of video games, and game controllers in particular, you have always controlled it consciously. That’s what the name implies. Starting from the movements of your fingers to the shifting of the body mass, you always control it consciously.

[Image via Venture Beat.]

Defying Conventional Wisdom: Not Enough Memory

Blue Ocean Strategy is all about challenging conventional wisdom – questioning taken-for-granted assumptions, and overstepping industry boundaries. It’s a frame of mind of continuously questioning and searching for a different angle and fresh perspective. You can draw inspiration from everyday life, and train your mind to have a discerning view of the world around you. Consider the following bit of comic insight as examples of challenging conventional wisdom.

Defying Conventional Wisdom: Not Enough Memory

Not long ago personal computers used to simply tell you when they were incapable of executing some task. You saw on the screen “Not enough memory to perform this calculation or operation.” At that point the user had the choice of abandoning the task, saving further futile attempts, or to expand the system’s memory in order to proceed.  In today’s age of information overload, wouldn’t it be nice if people could do the same?  If we could know in advance if some complex thought or reasoning we are attempting to complete is simply beyond our capacity? That way we could choose not to waste further energy, or opt to continue by installing sufficient supplementary brainpower to tackle the issue.

[Image via Max_au.]