A business book, Blue Ocean Strategy, became a bestseller when released in 2004. Blue Ocean Strategy was written by Chan Kim and Renee Mauborgne. They combined as professor and experienced business consultant in their review of break out businesses. Their suggestion was that businesses could “borrow” from two unrelated disciplines to come up with a unique approach in a established area. In many sports and most businesses, the arena is looked at as fixed. The fences close off the area in which competition occurs. Players go head to head in what is viewed as a zero sum game. This type of competition is all too common. Kim and Mauborgne encouraged their readers to visualize this type of competition as “a bloody red ocean of rivals fighting over a shrinking profit pool.” The only way to outperform is to take from others. Price becomes a driver and players beat each other into the ground by lowering pricing to grow their individual share of what’s viewed as a fixed market size.
Kim and Mauborgne conceived of a way that this model can be blown up to create new opportunities. Instead of competing in the closed constraints of a given field, businesses break out from the crowded field of cutthroat competitors by creating a new one upon which to play. A new arena is erected drawing on desirable traits of separate existing fields. Cirque de Soleil presented an example of Kim and Mauborgne’s Blue Ocean Strategy. Cirque de Soleil was the first business of its kind to offer acrobatic circus style acts in a high end theatre setting. The founders of Cirque de Soleil broke free of the dwindling field of circuses by taking a specialized discipline from the circus and migrating it into a new setting. Existing fans of high wire circus and trampoline acts were keen to follow. Moreover, fans of fancy theatre settings were drawn to this new concept. The market of interested customers expanded while competition disappeared. This is the outcome of a Blue Ocean Strategy. By breaking free of existing constraints, new progress is made.
In the car manufacturing business during the 80s each of the big three North American manufacturers set up their own finance company. They did this in order to help themselves sell more vehicles. In time, these divisions of their organizations became the largest and most profitable contributors. In real estate, there are realtor offices that merge with mortgage brokers. These outfits differentiated themselves by being able to sell two things to the same customer. The customer benefitted by being able to make firm offers as the financing was looked after concurrent with purchase offers. At Broker Builder, we applied these approaches to the insurance side where we help independent insurance brokerages provide payment plans for their customers. Brokerages had until that point had limited options. Either they were sending insureds to work directly with insurers with respect to payments using the insurer direct bill offerings, or where direct bill wasn’t an option brokerages used the services of third party finance companies. In either case, care and customer service of the insured was passed from brokerage to another entity and the brokerage’s revenue per customer is capped at just the commission. With the Blue Ocean approach Broker Builder began offering, brokerages benefits by being able to generate additional revenues on existing business. Profits on the same effort almost double with this approach.
As we noted in a past article, many business schools break down strategy into one of two general directions: exploitation or exploration. A strategy of exploitation is one that seeks to cling to the status quo. Efforts involve wringing the last drop of dollars from the existing golden goose. They are trying to create efficiencies, expand market share, increase productivity, etc. All things that build on the way things are. They are trying to exploit the business field as it is. This can be contrasted with a strategy of exploration that involves looking outside of the current playing field for opportunities. This is the world of the entrepreneur. Tinkerers, experimenters, creatives, coaches, and athletes seem willing to step outside the status quo and chase uncharted waters.
Yes, clarity and certainty are nice things to have. It feels better knowing where we’re going, how we’re going to get there, and at what time we will arrive, than not knowing these things. However, we do differ in our quests for clarity. Researchers are driven by this desire. They want to understand exactly why something is going on. The effect of something is less important than the why. Researchers need to be able to explain something in order to know it is real. Before they can trust something, it must be proven to them. Scientists seem driven by a need to understand. In Great Expectations, Charles Dickens, writes, “Take nothing on its looks; take everything on evidence. There’s no better rule.” This is the default mantra for scientists. They want to be shown why something is the way it is. Show me, don’t tell me. They don’t trust suggestions or anecdotal evidence. Researchers pursue the real reasons the way things work the way they do. Scientists are by nature sceptical. If they can’t explain why something works, they don’t trust the approach. Science studies. Experiments are erected and time spent trying to rule out other causes in order to isolate single variables. Adopters of science need ironclad guarantees before they try something. Show me the evidence. Where are the studies? What’s your proof?
This approach certainly serves a purpose. However, the craving for certainty, needing to know something with 100% accuracy can lead to inaction. Many good ideas are ignored because they can’t be perfectly proven. This less than two minute video reflects the challenge that science’s well intended search for objective proof can place on limiting the growth of knowledge in various fields. Nowadays, science is confused with academia in that information is only considered real where it has been peer reviewed. We ignore great insights that come from the fringes because they lack peer support. We coalesce around common ideas and follow each other. If the information doesn’t arrive in an approved way from recognized groups, it’s discounted. It doesn’t even become something we can learn from. It’s outright ignored. The speaker in the video notes that the finest candlemakers in the world couldn’t even conceive of the idea of electric lamps.
We can contrast the approach of science and researchers with that of creatives and coaches. They are less driven by the need for both cause and effect. Creatives and coaches seem to be ok exploring the edges. Creativity is their fuel. Anecdotal information is just fine. Coaches care less why something works and care only that it does. They see the real world as a lab. They are open to trying things with the only rule is does it work for me and my athletes. They happily jump in where others sit on the sidelines waiting for guarantees. They will explore the approach others offer based on anecdotal experience. They will try the approach of others based solely on observation. This looks like what Team X tried, let’s try that ourselves. Coaches are driven by the idea that life’s a lab, you’re an experiment of one, try stuff. Joe Friel writes in Fast After 50 about the transition in technique used for high jump. Friel notes that sports science didn’t suggest the technique adopted in the 1960s by Dick Fosbury which came to be known as the Fosbury Flop. Fosbury, a college athlete, conceived of and implemented his new style. It was, first ridiculed, then copied after the results proved its value. Only then did scientists step in and explain the biomechanical advantage Fosbury’s Flop achieved relative to past technique. Fosbury’s only proof wasn’t scientific, but performance based. Because his style worked, it had utility. The utility drove its acceptance, not science.
These two approaches lead to different results. Try it versus prove it. Scientists find answers. Success for science is being able to explain events. This is why x occurred. A catch phrase that’s thrown around all over the place these days is “follow the science.” Those that follow science will usually be a step behind. Sure, it’s good to do things because we know what will occur. It can be risky and costly to throw ourselves out into the great unknown. However, following the science always involves following. It’s another way of conforming. Following the science results in the opposite of differentiating. It’s no way to distinguish oneself or their business.
Not only are there individual differences with our comfort level in these approaches, there are circumstances where one approach makes more sense than the other. If the consequences are significant and the result irreversible, then adopting the mindset of a creative or explorer can be physically risky. We shouldn’t happily explore the side of a steep cliff or venture down into the great unknown of a never explored cave. However, if we’re trying a new approach to sales or an exercise program, cap what one is willing to allocate as a resource (time and money) and get after giving it a chance. Be open to trying things in these circumstances. The worst case is that you’ll end up learning something.
Friel writes, “It’s largely athletes and coaches, not scientists, who do the innovating.” Coaches are driven by a desire to improve. The great are willing to create. In order to create, we must deviate. Creatives crack the cuffs of constraint and break through to explore new areas. The existing rules are seen not as limitations. Leaders work to explore the edges of existing territory in order to find new ways to express their efforts in order to differentiate. The approach of explorers was exemplified by that used by martial arts legend, Bruce Lee. Lee created his own, new, unique discipline of fighting known as Jeet Kune Do. It was a hybrid martial arts philosophy developed from foraging through many others. He ruthlessly filtered through as many disciplines as he could find in order to capture and preserve those elements that seemed to have merit while discarding other aspects that weren’t effective. By cherry picking the best ideas from different disciplines, the end product was a new domain. His filter was binary, based only on effectiveness. If it worked, extract these elements. If it doesn’t, discard it. Period. The result was something new that no one that was an “expert” in an existing, traditional martial art understood. Lee’s early efforts were ridiculed by established experts. However, his approach led to broad market appeal in movies. The end result of his exploration, Jeet Kune Do, is credited as being the original Mixed Martial Art (MMA) which has morphed into a popular world wide sport. Investor and entrepreneur, Naval Ravikant, has adopted an approach which echoes that of Bruce Lee where Ravikant suggests, “try everything, test it for yourself, be skeptical, keep what’s useful, discard what’s not.” Explore your own experiments. Determine your own conclusions. Adopt what works.
Our Evolution of Excellence implies that we can’t lead unless we’re willing to leap. After we’ve looked and learned from others, leaders leap. They are willing to explore. While others are waiting for proof, peer reviews, and science, you’ll reap the fruits of your leap alone for some period. David Allen wrote the business classic, Getting Things Done over twenty years ago. Back then, he felt like he was a lone voice lobbying for the value of his ideas. In 2020, Allen released an updated version with some additional chapters included. He notes that since the original release, scientific data has validated several principles and practices originally put forth. Allen devotes a new chapter to exploring some of the science that affirms his original ideas. Those that were comfortable adopting Allen’s original anecdotes derived the benefits of his principles for a couple of decades until others are now catching up and following the science. If you were waiting for proof, you were passed by those willing to explore. It’s those that are willing to try without the safety of a known outcome that give themselves a chance to get ahead. Strivers are comfortable taking actions without having all of the answers. Explorers are comfortable with uncertainty. They are proactive, not passive.
Creatives do this in other fields as well. We have music bands that have created chart topping tunes by merging the music of different genres. It’s become such a popular approach, it has earned it’s own name. Crossover artist is a term given to a musician that moves freely between several music genres. It’s worked in the development of vehicles as well. The crossover SUV is now one of the more popular selling styles of vehicles in North America. Blending the rugged, off-road capability of bigger, gas guzzling SUVs with a smaller frame and mobility of urban sedans creates the Crossover SUV. The original type of this vehicle class arrived in 1979. The AMC Eagle was a fringe market participant for a few years. It took until the mid-90s and Toyota’s RAV4 for this market segment to become substantial. Crossovers transitioned from non-existent to representing a market share in excess of 50% of SUV sales in North America in less than 15 years.
As we noted in a past article, the way we outperform is to cease to conform. In order to breakout we must break free. That’s the definition of being at the cutting, bleeding, or leading edge. You’re charting new frontiers or exploring new depths. You’re precisely where you are because you’re intentionally going where others haven’t gone before. If you’re here, of course you don’t know what you’re doing. You’re not supposed to when you’re in rare air. As Ralph Hodgson wrote, “Some things have to be believed to be seen.” Where we are willing to suspend our fixed view of what’s known and leap into the unknown is where the evolution of excellence extends. Our explorers teach us the value of leaping. Vinod Khosla, a cofounder of Sun Microsystems, notes the importance of experimentation to his business approach offering, “I only plan to succeed 10 to 20 percent of the time. I try a lot of different things, and by sheer dumb luck some of them work.” He recognizes that conforming isn’t the answer. It’s a willingness to fail. Sam Kyle in The Decision Checklist affirms this idea writing, “We have to be willing to make decisions that are different than everyone else.”