It's Rishi

It’s been a while since the last review I posted and I must admit that the pace at which I’m going through The Personal MBA reading list is not as brisk as I would like. The good news, though, is that I just finished reading Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne.
The book has quickly garnered a laundry list of awards and is endorsed by one of my business-world idols, Carlos Ghosn. My curiosity was piqued so I hopped over to Amazon and ordered it.

The book promises to teach the reader “how to create uncontested market space and make the competition irrelevant”. That’s a pretty bold promise. So, does the book deliver? I think so. Or about as well as a book can.

So “What’s this ‘Blue Ocean’ thing??”, you might ask. Well, to define what a Blue Ocean is, it’s easier to first define what it’s counterpart, the “Red Ocean”, is.

Red Oceans represent all the industries in existence today or, in other words, the known market space. The boundaries in such industries are well-defined and the competitive rules of the game are known. Companies in Red Ocean industries try to outperform their rivals to snag a greater share of existing demand. Because of such factors as accelerating advances in technology, trend towards globalization, and stagnant worldwide demand, industries have witnessed accelerated commoditization of products and services. This commoditization means that buyers increasingly select based on price which leads to price wars which leads to shrinking profit margins. Every industry is or will eventually become a Red Ocean and companies regularly employ traditional competitive-stategy techniques to survive in bloody Red Ocean environments.

However, for a company to sustain high performance, it must look beyond it’s current environments and grab new profit and growth opportunities. This is precisely what a Blue Ocean offers. Blue Oceans represent all the industries that don’t exist today or, in other words, the unknown market space. (If you raised the BS flag after reading that sentence, think about this: Many multi-billion dollar industries of today did not even exist 30 years ago e.g. bio-tech, personal computers, mutual funds, cell phones, express package delivery, coffee bars, and the list goes on… )

The underlying process of creating a Blue Ocean is something the authors call value innovation. Instead of focusing on beating the competition, focus on making the competition irrelevant by creating a leap in value for buyers. Value innovation is contradictory to the commonly accepted competition-based strategy concept of a “value-cost trade-off” which says that there must be a compromise between product differentiation (added value) and low cost. Blue Oceans achieve differentiation and low cost simultaneously.

The authors cover the basic analytical frameworks of the Blue Ocean strategy: the strategy canvas (the value curve), the four actions framework, and the eliminate-reduce-raise-create grid. In later chapters, the authors go into further detail about the formulation and execution principles (there are 6 in total) of the strategy.

One thing I really liked about the book was that the authorss unit of analysis is a single strategic move of a company, not the entire company or industry. In the first chapter, the authors find fault in books such as In Search of Excellence and Built to Last which had put several companies on a pedestal as “model” firms, yet, today, many of these firms are far from being industry leaders. The authors reasoned that if the same company can be brilliant and lame at different points in its history, then it doesn’t make sense to make the company the unit of analysis for studying strategy.

Another aspect of the book that I really liked was the extensive use of case studies. They helped to solidify the concepts being explained as well as making the text more enjoyable to read.

Overall, I would highly recommend this book. This shouldn’t be the only book you read about competitive strategy, but I think it should be on your reading list if you want a more complete perspective of the subject. At the very least, find a copy of the book and read the first section as it does a nice job of covering the key points of the strategy.

Note: As I did before, I made fairly detailed notes while reading the book. If you would like a copy of the notes, shoot me an e-mail and I’ll be happy to send you a copy.

No matter how technologically sophisticated the mediums for human communication become, ultimately success in business will rely on your ability to interact with people. Whether you’re trying to raise money from investors, sell your product to a prospective customer, build an effective online marketing program, or lead a team of employees to success, a fundamental understanding of human nature is essential.

So I decided that there was no better way to start my own personal MBA reading curriculum than by reading this book. Not only has it sold something like 20 million copies since it was first published in 1937 (yes almost 70 years ago), but it has been recommended by several people that I respect highly. After just the first few pages of reading, I knew that I had indeed made a fantastic pick.

Carnegie, and his team, put an unprecedented amount of research into this book. They searched all the respected published works on the topic, interviewed accomplished businessman (i.e. Charles Schwab, Andrew Carnegie, and others), studied the behavior of men famous for their handling of people (i.e. Abe Lincoln, Ben Franklin, and others), and even studied philosophy. The lessons found in the book represent the recurring themes that Carnegie, and his team, found across all their research.

Some quotes:

The deepest urge in human nature is the desire to be important

Talk to people about themselves and they will listen for hours

The unvarnished truth is that almost all the people you meet feel themselves superior to you in some way and a sure way to their hearts is to let them realize in some subtle way that you recognize their importance, and recognize it sincerely.

A person usually has two reasons for doing a thing: one that sounds good and a real one. The person himself will think of the real reason. You don’t need to emphasize that. But all of us, being idealists at heart, like to think of motives that sound good. So, in order to change people, appeal to the nobler motives.

You can’t win an argument. You can’t because if you lose it, you lose it; and if you win it, you lose it

You will never get into trouble by admitting that you may be wrong. That will stop all argument and inspire your opponent to be just as fair and open and broadminded as you are. It will make him want to admit that he, too, may be wrong.

Many of the ideas set forth in the book you might read and think “oh yeah, everybody knows that!”. And you may be right. However, I can all but guarantee that while you may have this knowledge, you are not utilizing it in your everyday life to be more skilled in people relations. That’s where this book really shines. Carnegie not only tells you what you need to know, but included numerous examples of how the technique has been used in real life situations. These examples not only help you to relate to the material, but also make the book very enjoyable to read.

The key thing to remember about this book is it defines a new approach to dealing with people in nearly every situation one encounters. This is a very difficult thing to embrace because even though it makes a lot of sense on paper, after decades of human interaction, each of our approach towards people has become all but set in stone. Don’t expect to just read this book cover-to-cover and be a changed man. It will take work. Carnegie suggests some studying approaches in the book’s preface.

I really would encourage everyone to go out and pick up a copy of this book. If you even are able to employ just one or two of the components outlined in the book, you will be more likely to succeed. As promised in my earlier post, I have put together my own “cliff notes” for the book. I’m still deciding whether or not I will post it up on the blog, but if you want a copy of it, shoot me an e-mail (click “Contact” at the top of this page) and I’ll hook you up. However, even if you do read my notes, I still absolutely recommend you do yourself a favor by finding a copy of this book and studying it.