Hindsight Experts

by Krishna on November 8, 2008

I generally use best seller lists to avoid wasting time on poor books. But many of these best-sellers turn out to be quite ordinary and sometimes horrifyingly stupid. The most recent book I read, “Blue Ocean Strategy”, sold almost a million copies, is published in 39 languages and taught in universities across the world, yet it struck me as one incredibly bland book recycling stale ideas by re-branding them.

The basic concept of the book is that it is difficult to succeed or make large profits in a market where there is already heavy competition by providing a me-too product. Instead, you have to provide a product that differentiates itself by providing something new to customers, thereby creating new customers and opening a new marketplace to exploit. The competitive market is branded “red ocean” (because of the blood from competitive fighting) and the new market branded “blue ocean” (where no blood has been spilt yet).

Isn’t that the most obvious piece of advice that you have ever come across? This is economics 101. Any market invites competition until previously high profits have been battered down. You have to enter or create a new market, but once again, competition will keep coming at you. Entry barriers such as patents or initial high investment can temporarily deter some competitors, but not for long.

So a new or differentiated product is essential for success. But importantly, it is not sufficient for success. A new product may be rejected by consumers. Companies invest millions of dollars in researching how consumers may react to different products and in marketing those products. But many products end up being huge failures. Business analysts are quick to hype the products before their launch and much quicker to denounce the product after its failure and attribute it to some aspect of the product or the company’s business processes.

“Blue Ocean Strategy” has found a fantastic strategy to deal with this problem. The authors analyze industries and, apparently without feeling any irony, repeatedly explain away failed companies that created new products as “failing to create a blue ocean”. So MITS (which created the unsuccessful first PC, the Altair 8800) did not create a blue ocean, while Apple (through Apple II) created a “blue ocean of home computing”. So anything that leads to market success is a blue ocean strategy, while everything else is a red ocean strategy. Talk about cyclical definitions.

The authors also use a chart they call the “strategy canvas” which is simply a list of product attributes and the positioning of the company’s product in relation to other competitors’ products. The idea seems to be that you must offer something different. Nothing revolutionary, but a book gimmick that attempts to convince the reader that it is expounding something profound.

Most of these kind of books, as Rosenzweig’s book, “The Halo Effect“, explained, investigate successful companies and try to find a common theme. They fail to see how many companies failed using the same techniques. Some of these books (like “The 4-Hour Workweek” and “Go Put Your Strengths to Work“) seem willfully dishonest, meant to push book sales (by bombastic claims) or increase the author’s visibility or consultancy services.

On purpose or not, “Blue Ocean Strategy” is intellectually lazy and dishonest. It cherry-picks examples that matches up with its theories. It ignores statistics that show the true costs of entrepreneurship (such as the failures of new product launches). Well-drawn charts and diagrams are used to mask its lack of originality and provide a facade of scientific research. It confuses good management tactics (that avoid mistakes) with good management strategy (that leads to success). It offers no information of its theories being put to the test.

There is no silver bullet to success and no single strategy that you will guarantee it. All we have are possibilities. Entrepreneurs choose to build products or services that offer such possibilities for success. They expend time, effort and money to improve execution of the product-building and marketing process, and increase the probability of success, without assuring it. Books that promise unconditional success offer false hope and do harm.

{ 4 comments }

gregory November 10, 2008 at 8:43 am

you should use your intuition to give you what you need when you need it .. infallible .. the hell with lists, they are for dullards only

Richard March 30, 2010 at 1:51 pm

This is one of the best, most clearly articulated critiques of Blue Ocean strategy. I am currently writing my thesis on the validity of Blue Ocean strategy. While other critics tend to fail by putting words into the mouths of Kim and Mauborgne or by missing the point of Blue Ocean Strategy completely, the criticism of its lack of originality, as described here, is the one clear, undisputed chink in the armor.

Krishna March 30, 2010 at 2:05 pm

Thanks for your comment, Richard

sgxstockpicker March 7, 2011 at 9:44 am

good critique. almost bought the book. without having to read the book, i think this book is like rich dad poor dad – makes you think that there is a way out in the harsh world.

I condense your points as follows – their theory is tautologous and thus non-falsifiable. This makes it poor management science. also, the book data mines and is filled with survivorship bias. enough said.

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