The difference between ignorance and stupidity is that ignorance is not knowing something while stupidity is not knowing something while you think you do.
What consistently separated winners from losers in creating blue oceans was their approach to strategy. The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation.
-Blue Ocean Strategy, Page 12
Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition. Importantly, value innovation defies one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously.
-Blue Ocean Strategy, Page 13.
Let’s return to the example of Cirque du Soleil. Pursuing differentiation and low cost simultaneously lies at the heart of the entertainment experience it created. AT the time of its debut, other circuses focused on benchmarking one another and maximizing their share of already shrinking demand by tweaking traditional circus acts. This included trying to secure more famous clowns and lion tamers, a strategy that raised circuses’ cost structure without substantially altering the circus experience. The result was rising costs without rising revenues, and a downward spiral of overall circus demand.
These efforts were made irrelevant when Cirque du Soleil appeared. Neither an ordinary circus nor a classic theater production, Cirque du Soleil paid no heed to what the competition did. Instead of following the conventional logic of outpacing the competition by offering a better solution to the given problem- creating a circus with even greater fun and thrills- it sought to offer people the fun and thrill of the circus and the intellectual sophistication and artistic richness of the theater at the same time; hence, it redefined the problem, itself. By breaking the market boundaries of theater and circus, Cirque du Soleil gained a new understanding not only of circus customers but also of circus noncustomers: adult theater customers.
This led to a whole new circus concept that broke the value-cost trade-off and created a blue ocean of new market space. Consider the differences. Whereas other circuses focused on offering animal shows, hiring star performers, presenting multiple show arenas in the form of three rings, and pushing aisle concession sales, Cirque du Soleil did away with all these factors. These factors had long been taken for granted in the traditional circus industry, which never questioned their ongoing relevance. However, there was increasing public discomfort with the use of animals. Moreover, animal acts were one of the most expensive elements, including not only the cost of the animals but also their training, medical care, housing, insurance, and transportation.
[The book goes on into more detail of how Cirque du Soleil didn’t follow the traditional circus industry pattern of getting famous ‘circus stars’ and changed the techniques of clowns from slapstick to humor more sophisticated.]
By looking across the market boundary of theater, Cirque du Soleil also offered new noncircus factors, such as a story line and, with it, intellectual richness, artistic music and dance, and multiple productions. These factors, entirely new creations for the circus industry, are drawn from the alternative live entertainment industry of theater.
-Blue Ocean Strategy, Pages 14-15
This example in the book’s opening chapter clearly blows up the notion that Blue Ocean Strategy means ‘dumbed down products’ or ‘targeting new demographics’ or simple and raw ‘expansion’.
Blue Ocean Strategy means ‘differentiation’. It means a new context of use. This is why the Birdman and the Casual Fallacy exist because these companies do not wish to understand the new context of gaming. They think that by mimicking the most surface details, such as mini-games or Mii like characters or a ‘simple experience, their games will sell like a Wii Sports. Companies that are finding their way into this new context for games, like EA and Majesco, still have bumps in the road, but they are getting there.
So let’s get to the stupidity (people who think they know what Blue Ocean Strategy is but actually don’t and play the role of Internet clowns):
Of course the “Blue Ocean Strategy” is nothing but a flawed theory made up of several preexisting economic principles wrapped in a PR bullshit and a marketable story. But hey, if Nintendo references it, it must be golden! It surely wasn’t just a credibility move by Reggie/Iwata at a time when the “strategy” was immensely popular. And the fact that they’ve done things “counter to the blue ocean strategy” is surely not because the strategy doesn’t actually help anyone with running a company. Surely!
The last time Iwata referenced the “Blue Ocean Strategy” was at E3 2009 which is quite recent. The clown can’t even get basic facts right.
I guess the “Blue Ocean Strategy” being an ‘international best seller’ and being one of the best selling and most influential business book this decade means nothing.
When teaching a complicated subject, say law, math, or Shakespeare, it is not uncommon for students, who are unable to raise themselves up to understand the concepts, to only seek to tear them down. “Law is gay.” “Math is stupid.” “Shakespeare is dumb.” People don’t like to admit they have difficulty understanding something. But education can only begin when one admits he doesn’t understand something. Business is just as complicated and difficult to absorb as law, math, and Shakespeare.
Attacking and trying to tear down the “Blue Ocean Strategy” only reveals the failure of the attacker in understanding it. It is not like any of the attackers of “Blue Ocean Strategy” can coherently quote or explain what Blue Ocean is about in the first place.
I am very ignorant of advanced physics. But if I said that “Advanced Physics is a waste of time, it is nothing new, etc,” I’d be guilty of stupidity. There is no shame in ignorance.
The next clown comes by the name of charlequin. He says, responding to someone else:
You’re right that they’d be “giving up on” that, because “that” was a dumb idea that never had anything beyond a tenuous relationship to reality. Consoles drop in price over time; Nintendo wasn’t going to be able to avoid that reality just by wishing really hard.
Apparently, Charlequin doesn’t have much of a relationship to reality. The DS, aside from the early price drop after its launch, hasn’t had a price drop in almost half a decade. The DSi is effectively giving the DS a price increase.
|
They are submitting to defeat.
|
Waiting longer than any previous system ever to make their first price drop is not “submitting to defeat.”
Dropping the price as a way to prop up the value of the system means Nintendo has failed to increase value on their own through content.
|
Again, it’s counter to the Blue Ocean Strategy, a strategy Nintendo has stated they were following.
|
Not dropping the price has nothing the fuck whatsoever to do with the Blue Ocean strategy.
Oh really?
“While supply is on the rise as global competition intensifies, there is no clear evidence of an increase in demand worldwide, and statistics even point to declining populations in many developed markets.
“The result has been accelerated commoditization of products and services, increasing price wars, and shrinking profit margins. Recent industrywide studies on major American brands confirm this trend. They reveal that for major product and service categories, brands are generally becoming more similar, and as they are becoming more similar people increasingly select based on price. People no longer insist, as in the past, that their laundry detergent be Tide. Nore will they necessarily stick to Colgate when Crest is on sale, and vice versa. In overcrowded industries, differentiating brands becomes harder in both economic upturns and downturns.
“All this suggests that the business environment in which most strategy and management approaches of the twentieth century evolved is increasingly disappearing.”
-Blue Ocean Strategy, page 8.
From the smorgasbord of ‘tactics’ suggested in various message forums to analysts quoted as if their words had value, these are all ‘thoughts’ from the twentieth century and various ideas of management practices that are rapidly becoming obsolete in this new century. Probably what analysts were taught, when they were young, all worked. But today, those ways apply less and less.
Just as every other industry evolves and becomes better, why would management practices not evolve as well?
The Blue Ocean Strategy, at its core idea, is not allowing your product to become a commodity. As the quote above said, pricing was the only differentiation customers saw in products. Cutting price is the fast road to becoming a commodity.
The Blue Ocean strategy centers around the prospect of entering into an untargeted market and thereby attracting a broad array of customers who are not currently under heavy competition from other competing brands. There is no part to this whereby once you have entered this market you are required to avoid altering your price.
He clearly doesn’t know what the hell Blue Ocean Strategy is at all. It has nothing to do with ‘targeting other markets’. This is what the ‘casual fallacy’ is all about. How the hell do you target a market that does not yet exist? Durr…
Here is another joker named “Eat Children”:
You keep using the word ‘value’, but value is totally relative to the buyer. People who found the Wii valuable at its current price already own one. Huge sales dips tend to indicate that the market of people who agree the system has value is dwindling. Dropping the price = potentially larger audience, ie; those who felt the system was overpriced to begin with.
How is this a sign they are defeated? It’s a consumer market. Your object is to sell your product to as many people as possible, and when one market is extinguished alter your product/marketing/price in some way to appeal to another market.
People who already own a Wii don’t matter. They already paid for the system. How they feel about a price drop is irrelevant. It’s the people who don’t own a Wii that matter, and if they don’t own one due to competitive pricing from other systems, or simply because they think the Wii is too expensive, then dropping the price and/or bundling with more content (essentially the same thing) is the best way to hook them in.
The fact the Wii has stayed at full price for all this time does not show they are defeated. It shows they outlasted both Sony and Microsoft. If they drop the price now, they’re still the last to do so. Wouldn’t that mean they ‘won’?
Eat Children is citing the old traditional view of product management. Note how the DS is somehow mysteriously absent from the discussion. Nintendo didn’t cut the price on the DS (except soon after it launched) and even the PSP began outselling it. Nintendo just released Nintendogs and other content and the rest is history.
Cutting the price would be allowing the Wii to march on to become a commodity. It is definitely not the Blue Ocean way.
The next clown, doomed, says:
except that you fail to understand that consumer electronics work in a way different than you understand the Blue Ocean strategy. even Apple dropped the price of their iPod eventually, and prices of similar entertainment devices such as DVD players go down in time as well. the Wii is a piece of consumer electronics. lowering price with time is a natural progression in the life of the product, Blue Ocean or not, because quite simply, some people won’t even think of purchasing an entertainment device until it drops to a lower price, the Wii included.
Again, no mention of the DS! But a rush to bring up the iPod who doesn’t exactly qualify for the “Blue Ocean Strategy”. Apple’s history is more on the ‘Red Ocean’ side. All the new iPhones are clearly competing and targeting other smartphones. Apple does see its competition as a benchmark. For example, the ‘PC vs Mac’ ads are something that would never come from ‘Blue Ocean’.
But here is a non-message forum board example of Blue Ocean Strategy stupidity. Not ignorance, but sheer stupidity.
When Nintendo announced the existence of the Wii a few years ago, terms like “blue ocean” and “innovative” were thrown around. Since the game console’s launch, the Wii has become a huge success, appealing to both Nintendo fanboys and to casual-gamer families.
Nintendo is playing by its own rules and profiting well. But I think the company has alienated the hardcore fans and followers of the industry. By not lowering the price of the Wii, the company is breaking the usual practice of incremental pricedrops that occur across the lifetime of a console. These pricedrops usually increase sales and make a system more widely adopted. And while it is true that Nintendo’s sales do not need increasing and have already found mainstream adoption rates, this move bothers many hardcore fans who were waiting for a pricedrop to increase the value of the Wii.
To that writer, Blue Ocean is just a *term*. Perhaps if he learned what Blue Ocean Strategy was all about, he wouldn’t speak such nonsense.
I bolded the above. Yes, it is true a price drop does increase the value of the Wii. However, this is very temporary and is contrary to what the Blue Ocean Strategy is about. Blue Ocean is about ‘value innovation’. Cutting the price does not innovate the value. It slides the product on the road to irrelevance. A declining value can mean nothing but the product becoming irrelevance.
It is clear that the decline in Wii sales are coming not due to price, but due to lack of software. Iwata aiming the Nintendo ship at the illusion called ‘user generated content’ certainly didn’t help.
If Nintendo does cut the price, it would be the second big strategic mistake Nintendo has done with the Wii. The first mistake was ‘user generated content’. After the first price cut, people are going to expect more and more.
It is also becoming apparent that the “Game Industry” is going absolute bonkers that the Wii hasn’t lowered its price. They are still stuck in the ‘old context’. There very well could be third party pressure for Nintendo to act against their interests.
However, one thing that is certain this generation is that third parties do not pick the winner (and boy, are they furious about that). It has been quite entertaining to watch the Wii, in that it has no high profile third party games, consistently outsell the HD Twins. It is third party pressure that did get Reggie to make the public comments about how bad ‘used games are’ (which Iwata slapped down rather fast).
It is incredible that despite how often “Blue Ocean” is mentioned by Nintendo execs, no one is reading it. Not even our brilliant analysts where it is their job to know these things. We should make it a practice that if you wish to discuss Blue Ocean Strategy, you should be able to quote it rather than just rely on make believe stereotypes and “assumptions”. There is no shame in being ‘ignorant’. But at least we will have less of the ‘stupid’.
Malstrom's Articles News 