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Mental Traps and why there is no such thing as a Blue Ocean Strategy

29 Dec

It’s been a while since I have been uploading posts into MindSpring. The “slow down” started from September and has continued till now. However the number of viewers have remained fairly stable despite the lack of updates and for that I must thank you for checking in.

Anyway, my absence has been due to a combination of factors, the biggest factor being “research.” Although MindSpring (the company) is small and very boutique, it is essential we push on the research front in order for our knowledge base to grow.

The last few months of research had been energized by my strong view that WK Chan’ Blue Ocean Strategy is a brilliant way to sell more consulting work but is a flawed concept. And I hinge my argument that it is flawed because if exploiting Blue Oceans were as easy as the “Six Principles of Blue Ocean Strategy” (see page 21) then every company would be pursuing with relentlessness this “Blue Ocean Strategy”. And if every company were pursuing a blue ocean, then there would not be too many blue oceans or better still, what used to be red oceans will turn blue as competitors leave the red oceans and head out to the blue….

The biggest flaw of the book, like all other consulting work, is that it looks at things in hindsight and we know that hindsight is 20/20.

On page 6, para 2 the authors ask “Now put the clock forward twenty years – or perhaps fifty years – and ask yourself how many now unknown industries will likely exist then.” I ask a more simple question:

Can you tell me of all the companies around today, which one will be around in 50 years time? As much as WK Chan knocks “In search of Excellence” and “Built to Last,” I suspect “Blue Ocean Strategy” will also get knocked off in a few years time. Why? Because we have ZERO ability to predict the future.

(The only best predictor of the future is socio-demographics.)

We make many bets of the future, and at the point of making that bet, we do not know which will and will not succeed. We can only recognize success after the fact. The entire Venture Capital business is build on taking on calculated gambles and VC players are the first to admit that they are playing the odds as they have no ability to predict which will be the next big thing.

Think of all the successes we see today -> Google – how many people believed that GOOGLE would unseat Yahoo. Why didn’t you and I buy Google share when it went public?

Likewise look at the failures, see what people said of ENRON they day before the scandal broke out. The reality is we have no ability to predict what the next big thing is. The best we can do is to keep trying and innovating. Charles Handy (one of may favorite authors) in his book The New Alchemist featured ENRON and went on to show how Enron was they way to go!

At the CEO level, it is better to be safe than wrong. That’s why people are in red oceans. It’s proven and we fight it out. To run contrary to the herd is a huge gamble and only time will prove if the gamble was right or wrong… unfortunately if you run against conventionality it is likely you will loose your job before you are proven right.

The two books that have done a brilliant job in debunking the myth that we can actually plan out a blue ocean strategy are Black Swan by Nicholas Taleb and The Undercover Economist by Tim Hartford. Both are brilliant reads to understand why we can’t predict the future and why we stay in red oceans.

Let me give a few more examples:- Read Banker to the Poor by Muhammad Yunus – Nobel Prize Winner – and you will see he was clearly in a blue ocean, yet he himself never ever saw or thought how big Grameen would become. Likewise during the inception stage of Grameen, everyone – the Banks, IMF, World Bank etc. all could not see it succeed. Of course today when Grameen is already a proven success, we can look back and say Yunus has a blue ocean strategy. The question is how come no one, not including Yunus could see it before success became apparent?

Next example: How many people on December 23 2004 said that “tomorrow there will be a Tsunami?” likewise how many people on September 10, 2001 said that tomorrow the World Trade Center would collapse? NONE – right.

What if someone did tell you on the 23rd December 2004 that tomorrow a tsunami will strike and kill 250,000 people. What would you think of that person at that moment and what would you think of the person after the Tsunami struck? Read this:

‘Mad’ Scientist Gets Belated Recognition

By Raffy Tima

BANGKOK – Ten years before the deadly 2004 Indian Ocean tsunami, a Thai scientist boldly predicted a powerful earthquake hitting the Andaman Sea that could trigger giant waves lashing the western coast of Thailand. He warned the government to be prepared.

Dr Smith Dharmasaroja was not just ignored and ridiculed. Tour and hotel operators and other businesses heavily dependent on tourism warned him against ever setting foot on the famous beaches he had forecast would be hit by a tsunami.

When the disaster struck on December 26, 2004, people who had scoffed at the prediction could only sit up and recall those dire warnings which could have saved lives.

Sadly proven right, Dr Smith could only shake his head. “It’s a very valuable lesson by not listening to me ten years ago. If they only listened to me we could have saved at least ten thousand lives.”

The earthquake that occurred on December 26 was 500 kilometers away from where he had said it might happen. But all the areas in Thailand listed in his confidential memo as being at risk were all hit by the tsunami.

One of the worst hit was Phuket, the tourist paradise which declared the scientist a persona non grata after he first issued those tsunami warnings in 1994.

Dr. Smith explains, “It’s very difficult to tell people what’s going to happen because that (natural phenomenon) didn’t happen for a long time. The thing has not happened for a hundred years, and you say this thing can happen in the future. They say you’re crazy, there is no proof. But from now on they are starting to believe because we have proof.”

We have a predisposition to believe what we want to believe and reject everything else until it is proven true. A company will seek a “blue ocean” only when it is in dire straits – unless it is like Intel were Only the Paranoid Survive.” Even then Intel only became paranoid during Andy Grove’s tenure at the top when the memory business was collapsing and they had to get out of it, pdq. By the way I think Andy Groove’s discussion of strategic infection points (SIPS) is much more helpful to strategy than is blue ocean strategy.

Why does the IPOD rule its category, while Xbox, Playstation and Nintendo are still slugging it out? A good explanation for this can be found in my marketing bible – The 22 Immutable Laws of Marketing – Al Ries and Jack Trout. IT will take you no more than 60 minutes to read this book and you will get from it a life long learning that will hold you in good steed, unlike Blue Ocean Strategy.

In all seriousness, if anyone had any ability to predict or to create blue oceans, they would’t be writing books about it but be actually doing it. As a final note on WK Chan’s Blue Ocean Strategy – as they say the proof is in th eating, so how come WK Chan did not “Blue Ocean” his book? Who “Blue Oceaned a book? JK Rowling of Harry Potter fame did it:

“Harry Potter and the Half-Blood Prince,” the sixth of J.K. Rowling’s fantasy series, sold about 9 million copies in Britain and the United States in its first 24 hours. The only book in publishing history to open nearly as well was Rowling’s previous book in the series, “Harry Potter and the Order of the Phoenix.”“Typically, a good book will take about four to six months to go gold and very few books reach platinum in their first year of publication. ’Harry Potter and the Half-Blood Prince’ achieved platinum in less than one day!” said Richard Knight, the managing director of Nielsen BookScan,…”

A search on Barnes and Nobles today reveals that Blue Ocean strategy was first published in Jan 2005 and today is ranked at 2102 while Harry Potter and the Half Blood Prince – July 2005 is ranked 1051.

Why did WK Chan not use his Blue Ocean principles to Blue Ocean his book?

QED.

“Q.E.D.” (sometimes written “QED”) is an abbreviation for the Latin phrase “quod erat demonstrandum” (“that which was to be demonstrated”), a notation which is often placed at the end of a mathematical proof to indicate its completion.
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6 Comments

Posted by on December 29, 2007 in General

 

6 responses to “Mental Traps and why there is no such thing as a Blue Ocean Strategy

  1. Kay Own

    January 2, 2008 at 12:15 pm

    Quoting Warren Buffet, ” In business, the rearview mirror is almost always clearer than the windshield”

     
  2. Matt

    March 27, 2008 at 5:50 am

    Re: “so how come WK Chan did not “Blue Ocean” his book?”… Well, it is a top selling business book. But it’s true that they didn’t go much beyond that segment. Still, probably not fair to compare it to the blockbuster sales of fun, fantasy fiction book that’s part of a multimedia franchise.

     
  3. Linas Simonis, PositioningStrategy

    May 14, 2008 at 6:53 pm

    Bravo, brilliant post! I wish I have written it!

    Blue Ocean is not strategy, it is a hope. But sorry,it’s only the hope that when one finds the blue ocean competitors will not follow…

    Ashraf, you have done a brilliant job, thank you one more time!

     
  4. mindspring

    May 14, 2008 at 8:50 pm

    Thanks Linas….. I think CEO’s really need to get off the fad wagon and back to the fundamentals of managing.

     
  5. S T Pan

    April 15, 2012 at 5:07 am

    Thanks for sharing your insight on this post on the Blue Ocean Strategy book; the intention of the authors meant well, but unfrotunately the principles and theories covered are phrased vaguely (ambiguous), and much of the research done on arriving to their marketing theories are not thorough enough to enable actual businesses to function. BOS is more of a philosophy, an ideal rather than something that can actually be implemented in a real business situation, where actual markets (nothing is fair game) aren’t ideal. The very fact that this book managed to be sneaked into a compulsory curriculum in the final year of an engineering course in a SIngaporean university, is a sign of passing down mis-information – THAT is mass-poisoning of the young minds. I think it’s high time that undergraduates are given REAL proper management modules instead of quick-fix business “innovative” solutions that rely on hindsight.

     

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