What Role Does Tech Play in Blue Ocean Strategy?

I’ve been a certified Blue Ocean Strategy consultant for ages. I used Blue Ocean Strategy years before the book, back when it was a series of articles in Harvard Business Review, and I used it to actually create products and businesses. I used Blue Ocean Strategy at small startups and at Fortune 500 companies.

I didn’t jump in as a theorist: I used Blue Ocean Strategy to make stuff. Working sometimes alone but often in teams, I worked through the value innovation process to formulate strategies then create prototypes, sometimes making them myself and sometimes with others. I focused mostly on software using whatever worked best: LAMP stacks for websites then, later, XCode for apps. I’ve used Java since the earliest releases. Hour for hour I’ve spent more time in various IDE’s than PowerPoint but have spent a lot of time in both.

Given that, I’m often asked what is the role of technology in Blue Ocean Strategy. The official answer is that technology doesn’t matter. Why? Because any Blue Ocean Strategy offering is about buyer value, not technology.

This is correct but overlooks that technology often unlocks buyer value: the value is impossible without the technology. Other times technology genuinely doesn’t matter. It’s often counterintuitive when tech plays a vital role and when it doesn’t so let’s look at two examples. Both are offerings that used the Value Innovation process to develop the offering.

First check out an example from the book that inherently sounds low-tech, Yellowtail, the bestselling Australian wine. Wine? Goes back to the ancient Greeks, Romans, and earlier: nothing new there. Except that Yellowtail is arguably a tech company, using high-end food technology borrowed from the beer and soft-drink industry. Let me explain.

Consider this quote from John Cassella, founder and CEO of Cassella Wines, the maker of Yellowtail:

“We go to great length to make sure that Yellow Tail is consistent from year to year and from bottle to bottle, and that it delivers against our consumers’ expectations,” he told the Chicago Tribune. (emphasis mine)

Of course, a reader might think: every bottle of Yellowtail is the same. Year after year, season by season, it doesn’t matter. Every bottle of Yellowtail Chardonnay tastes just like every other one.

Consider the key factors of Yellowtail from the book. “Use of enological terminology and distinctions in wine communication,” “Above-the-line marketing,” and “Aging quality” are eliminated. “Vineyard prestige and legacy,” “Wine complexity,” and “Wine range” are lowered. “Easy drinking,” “Ease of selection,” and “Fun and adventure” are created.

But how does one eliminate the terminology, specialized marketing, and aging quality for a product that is custom made and differs year-by-year, region-by region? How does one make wine that is always easy to drink, easy to select, and fun?

By eliminating variability.

There is no difference between bottles of the same type of Yellowtail just like there is no difference between batches of beer. One of the founders of modern statistics is William S. Gosset, former lead brewer at Guinness, who developed his statistical theories in the early 1900’s to make beer consistent. Meanwhile, his winemaking counterparts further south, in France, decided old-school is best and to this day some consider any change beyond the methods used by the Romans, updated with steel vats, to be “adulterated.”

Most vintners around the world struggle painstakingly with their grapes and processes whereas beer makers struggle with t-distributions. Adulterated, in winemaking, means quality controlled in beer making.

This type of quality control, along with the agricultural practices that enable it, are technology. But for technology, there would be no Yellowtail; the key factors that add value are not possible without technology. Conversely, the technology is entirely invisible, expressed only in buyer value. How, exactly, does Cassella produce high volumes of consistent wine that taste the same year-after year? Few people know and nobody cares. More to the point, when formulating a strategy, it doesn’t matter, except to the extent that those creating a strategy must know this type of product is possible.

Now let’s pivot to Blue Ocean Strategy mega-hit Nintendo’s Wii. Whereas wine is thought of as low-tech, game consoles are high-tech, right? Actually the Wii is really two Blue Ocean breakthroughs in one. The most important of them, the “casual games” movement, is essentially a no-tech solution.

As part of their noncustomer study, Nintendo strategists famously went into retirement homes when developing the Wii. Did they hope to sell consoles to centenarian’s? Maybe, but the volume would have been negligible. What they really wanted to do is see how the residents passed their time. Nintendo found them playing traditional games: cards, board games, etc… Most of these games were relatively easy to start playing: straightforward, basic rules, but as gameplay advanced they became brutally difficult.

From this insight Nintendo realized their new system had to be approachable, built not for gamers but for non-gamers (noncustomers in Blue Ocean Strategy terminology).

Besides casual games the console had to be approachable. Central to this goal is the second strategic move, which does use high-tech albeit in a different way: a console featuring an easy to use magic wand, the Wiimote. At it’s core is an inexpensive device that was used primarily in airbags called an accelerometer. Airbags use accelerometers to carefully track motion and decide whether it was necessary to deploy. Erring either way — deploying at the wrong time or failing to deploy at the right time — could be fatal. So the accelerometers were highly accurate. Nintendo embedded these accelerometers into their controller. Invisible high-tech, no new chips involved.

There were three consoles for sale at the time. Microsoft’s XBox 360 sold at a loss of about $126 per unit. Sony’s PS3 sold at a loss of about $241 per unit for the expensive version and a loss of $306 for the cheaper one. Nintendo, whose prior console was a distant third, never sold the Wii at a loss.

With Microsoft, Sony, and Nintendo competing who won? Nintendo, and they did so by not competing. Nintendo effectively messaged that traditional gamers should buy an XBox or PS3: either is fine. But they should also buy a Wii because Wii’s are different. More importantly, they messaged to traditional non-gamers to also buy a Wii. Nintendo outsold Microsoft and Sony combined for years. I recently spoke to a Microsoft product manager from those days in the game group and he said, paraphrasing, “Nintendo was a tough competitor; we were blindsided.” Actually, Nintendo wasn’t a “tough competitor” – they didn’t really compete with the XBox 360 at all, and he didn’t realize this years after the fact.

Getting back to tech, the Wii gives us two examples. Despite being a high-tech device — a gaming console — one of the Wii’s primary offerings, casual games, had no technology involved at all. It was a concept about how to make games that appeal to more people. The other, the use of airbag controllers as a magic wand, repurposed existing technology. Without the airbag controllers there would be no magic wand but Nintendo never messaged, and buyers never cared about, airbag controllers.

To buyers the technology is invisible but the value the technology unlocks is vital. That is how technology is used in Blue Ocean Strategy, as a means to unlock value. Oftentimes the value cannot be unlocked without the technology but, even in these cases, we still focus solely on the value.

These are two examples out of countless more. If there is interest I will write more articles about how Blue Ocean Strategy and technology intersect and interact.

Author: Michael Olenick


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