Discovery Plus: Blue Oceans Needn't Be High Brow

The Discovery Channel lineup epitomizes differentiation at low cost

The core of blue ocean strategy involves thinking about higher value and low cost, rejecting the idea that higher cost equates to higher value. While it’s common to evaluate value in terms of efficiency gains, many blue ocean offerings are simply fun. For example, the Nintendo Wii, Cirque du Soleil, casual games, Marvel movies, and Yellowtail wine might not do much to help at the office (especially Yellowtail) but they’re profitable and often beloved businesses because they’re fun. This post examines another entertainment business, Discovery Plus.

In a prior life, I worked with a lot of reporters trying to unravel the financial crisis. One of those was an award-winning assistant producer of 60 Minutes, the pinnacle of American news television. We spent a few days together while I introduced him to the people and processes related to the foreclosure crisis.

When we weren’t in court with me whispering who was who and what was happening, we spent a fair amount of time talking. One of my questions was how does one become a leading TV news producer? It’s not one of those jobs you apply for from an advertisement.

Apparently, he was always interested in TV & film and got a job with a low (low, low) budget production doing TV crime reenactments. How low was the budget? Low enough that in at least one episode he had to come from behind the camera to the front and play the perpetrator crouched in a stairwell with the gun. Look left, look right, be dodgy then run away (back to being a producer).

The list of serious awards that 60 Minutes has won is long enough it takes a noticeable amount of time to load in a web browser. While not exactly the same high-brow media, the Discovery material is informative and arguably more fun. Why? There are lots of visual learners who’d rather watch a reenactment on TV than read about one. Also, lots of people who want something brainless to stream while washing dishes.

Discovery tends to focus on biopics, documentaries, cooking shows, and reality. I worked with the people who created Marvel Studios to transform my award-winning case study into a biopic, a project that is quickly morphing into a possible TV series. Why, besides that it’s a great story and something to do while locked down for COVID? Because I love biopics and so do my wife and daughter. They are, by far, our favorite stuff to watch.

Cooking shows come second; who doesn’t like a cooking show? And, finally, certain types of reality TV (think goofy challenges, like Naked & Afraid, and not sadistic prison survival shows like 60 Days In or highly scripted like The Apprentice). Granted, we’re more likely than not to read the news on our iPad’s, play a casual game, or catch up on a Facebook news feed while these shows play in the background. That’s OK - even the people who create these forms of media don’t expect laser-like focus.

We’re Americans living in France; we came here because of INSEAD, where I work as an Institute Executive Fellow at the Blue Ocean Strategy Institute. One thing we missed after moving, especially my wife, was the never-ending stream of crime biopics Discovery’s ID Channel offered up. Apparently, she’s not the only one; Discovery ID is the #2 ad-supported channel among women. France has great bread, awesome healthcare, good schools, and a deep love of life and the land but no ID Channel.

Therefore, I perked up when I found that Discovery is starting a streaming service that includes the ID Channel and lots more. Granted, it’s not available here in France yet but, I’m hoping, soon enough.

As I mentioned, I work a lot with entertainment companies and, reading the press releases and articles, realized Discovery itself is an underappreciated blue ocean network.

Specifically, Discovery uses the term “casual viewing” to describe their audience. Those who’ve been following my work or other blue ocean material will note that sounds a lot like the blue ocean category “casual gaming” pioneered by Nintendo and adopted by, well, everybody else.

Casual viewers read the news, play games, cook dinner, and do whatever else they do while vaguely watching a TV show. Media expert Brian Wieser referred to it as “ambient or genre-based viewing — something to watch when the viewer doesn’t want to watch anything in particular.”

Remember that a benchmark identifier of a value innovation offering, the core of blue ocean strategy, is differentiation and low cost. This is exactly what Discovery is offering. I don’t know the price but can’t imagine Naked & Afraid, How It’s Made, or Guy Fieri’s content is especially expensive to produce. Some of the shows look like they could be filmed and edited with a smartphone. Despite that, they are both popular and different. I love watching The Crown but the $260 million production cost is admittedly pricey and the finished show isn’t the type of thing you fall asleep to.

Media pundits question whether Discovery has a defensible position. Can they survive an expected onslaught from Netflix, Amazon, Disney, and everybody else? The truth is the rest of the offerings, the competitors, are largely irrelevant. The Discovery lineup is about brainless fun. Netflix and all the rest are likely to offer up some of their own but they’ll never catch up to the King of Stupid … Discovery.

Marvel famously relies on its characters to anchor its media offerings rather than relying on stars. Sure, there are movie and TV stars in Marvel movies and shows but they’re usually working for less than the normal price (well, they were when the studio first was created).

Similar to Marvel, Discovery relies on its own brand of brainless fun as the core of its offering and not any individual person. Sorry to break the news to Guy Fieri but if he quit tomorrow they could easily replace him with somebody similar and most of the audience wouldn’t even notice much less object. The brand and style of Discovery shows differentiates and attracts viewers, not the individual television personalities. Discovery’s ubiquitous reality-style TV programming is a fine example of lower cost and higher value (again, with value described as entertainment value).

Will audience members pay $5 with ads or $7 without to stream endless episodes? I will as soon as I can and suspect lots of others feel the same. Discovery Plus is priced slightly less than Spotify because it’s essentially the same service, high-quality background noise, albeit without literal or figurative expensive rock stars. Something to listen to or watch while doing dishes, gaming, or falling asleep. Where Netflix will ask “Are you still watching?” Discovery Plus might ask “Were you ever watching?”

There’s no need for Discovery to create big-name stars or shows. In fact, stars and expensively produced shows would probably detract from their core offering. Nobody tunes into the Discovery lineup to actually pay attention. Spending the money to create shows that required much thought would be wasted money on the part of the network.

The benchmark of a blue ocean offering is low-cost/high value, with value defined as what buyers believe to be valuable: high-school civics teachers needn’t necessarily agree. By that standard, Discovery has unlocked a classic blue ocean move.

On Feb. 13, 2021, Discovery announced a merger with AT&T’s WarnerMedia, with Discovery and Warner being spun off into a new company called Warner Bros. Discovery and led by current Discovery CEO David Zaslav. As part of due diligence, Discovery has projected revenue will rise from $28.2 billion in 2020 to $45 billion in 2025.

Newton on Business

Newton's Laws of Motion are great business advice.

Sir Issac did a lot in his lifetime. There was his work with optics, gravity, inventing calculus, and the whole Newtonian physics thing.

I’m a businessperson, teacher, consultant, and writer. I’m not a physicist but buried in Newton’s laws of motion is some great business advice.

Newton’s three laws of motion create the foundation for anybody who wants to get into or thrive in business, to build a blue ocean. He all but created a roadmap centuries before anybody else was systematically working through these ideas.

Paraphrasing:

Law #1. Objects at rest stay at rest. Objects in motion stay in motion with the same speed and in the same direction unless acted upon by an external force.

Law #2. The acceleration of an object is directly related to the net force and inversely related to its mass.

Law #3. For every action, there is an equal and opposite reaction.

Let’s dig deeper.

Law #1. Objects at rest stay at rest. Objects in motion stay in motion with the same speed and in the same direction unless acted upon by an external force.

This rule gives us two great insights.

Objects at rest.

The first seems intuitive but is all too often ignored. It’s arguably the #1 cause of premature business death: your business won’t start itself.

Your new idea, in business or anything else, is an object at rest and unless you put energy into it then it’s going to stay at rest. The only person who will make your brilliant idea move along is you.

There is no one size fits all roadmap, there is no guarantee, no magic formula. This isn’t a job where you’re guaranteed a paycheck or anything else besides the satisfaction of knowing that, whether things work out well or not, that you’ve done your best.

Contrary to what most people say there is a participation trophy in business: experience. Whether you lose a fortune or make a mint knowing you went for it, that you didn’t remain an object at rest, is an enormous reward.

Objects in motion.

I’m often asked how some big businesses stay solvent. Their management skills are underwhelming, their product mix stale, and, on execution, they “walk like flies in the ointment” as my grandma used to say. They’re big, slow, and honestly kinda’ stupid.

There’s even a management consulting term to justify setting up an organization like this, to not do much anything at all … heavily matrixed. Management consultants made it up and those same consultants are, in hindsight, rethinking whether it’s a good idea.

A brief definition of how it’s supposed to work: heavily matrixed organizations require people to work for more than one manager, bouncing between projects. This is actually a good idea if put into use well, which it seldom is.

In real life, heavily matrixed organizations mean there are countless managers involved in a project, too many to make a decision, which is the point. This slows down the ability of anybody to actually get anything done besides minor product line extensions. Especially because some of those matrixed managers see stopping a project as an achievement.

I’ve heard senior people, backed by human resources officials, say “results don’t matter” and actually mean it.

So … why would a business purposefully put in place an organization to slow things down? Because the business is an object in motion and comfortable with their speed and direction. They want things to continue exactly as is and set up a management plan to make it so.

Which brings us to the second part of the rule: “unless acted on by an external force.” This the core of the late Prof. Clayton Christensen’s disruption theory, the heart of The Innovator’s Dilemma. If you don’t disrupt your own business, somebody else eventually will. Of course, “eventually” can be a really long time.

Law #2. The acceleration of an object is directly related to the net force and inversely related to its mass.

I have seven years of post-secondary education, an undergraduate and JD degree, and I work at one of the best business schools in the world. I’m surrounded by teachers, many of them the very best. But one of the very best I remember is my high-school government teacher, Constance K. Holland (she always used the K).

Mrs. Holland marched with Martin Luther King and believed she could make a real difference in the lives of her students. She cared. And she had one signature line, “You won’t learn by osmosis.” That is, you have to do the work.

You have to do the work.

When I consult, I mainly work with people who want to start something new. Some are inside other businesses and others are startups but they all are looking for new opportunities, for blue oceans.

Now, blue ocean opportunities aren’t necessarily big businesses but they do have potential. And anybody working on a new product or service is, by definition, starting at or near zero (in the case of existing big businesses they may even have some headwinds thanks to blockers).

If you have no momentum and you are starting something potentially big you need a lot more net force than you need for something already going.

You have to put in more work and, oftentimes, more capital too.

That doesn’t necessarily mean you’re doomed without investors; some of the very best businesses are bootstrapped. But it does mean that if you bootstrap a business you won’t be able to take out much even if the business does great; you’ll have to reinvest in it for some time.

Similarly, if you have an ongoing business and simply want to give it a nudge, less effort is required.

I teach and advise many people and, to get a feel for what people are saying, I read lots. This morning, before writing, this I saw yet another person with a “great startup” pleading they don’t have enough time to do something or other. Stop. If you don’t have enough time, you are not going to get your business moving. It won’t happen by osmosis.

If you want to make something big and meaningful you’re going to have to give a big push. Since you’re starting from zero, be prepared and accept the mountain you’re about to climb. Embrace it.

Ever wondered why insanely rich people keep working? Because that pushing is addictive. It brings Bezos into the office and has Musk sleeping there. It’s why Warren Buffet hasn’t retired long ago. Why Bill Gates is constantly working. They’re gym junkies except that their gym is an office building. You need to adopt the same work ethic if you plan to get something going.

Law #3. For every action, there is an equal and opposite reaction.

Your competitors aren’t nice.

You may create a product or service to make them irrelevant but the moment they see what you’ve done they won’t be irrelevant much longer.

That doesn’t mean they’ll be mean to you; on the contrary, they may act extremely nice to you. In fact, one of the very worst pieces of business advice I’ve ever seen — that I will write a whole post on because it’s so bad — is “always be kind and supportive.” Your friends will tell you when you have a problem; your enemies will be kind and supportive and guide you right off a cliff.

Do not expect competitors to sit still. Do not believe investors have your best interests at heart. Don’t think that potential strategic partners aren’t just trying to feel you out and steal your work. That doesn’t mean avoid them; you can’t and even if you could, you shouldn’t. But it does mean be careful. See everything they do as an equal and opposite reaction. Few will sit idly by as you make their offering irrelevant.

For every action, there is an equal and opposite reaction. Be ready for it because if you do the work and create something meaningful and important and profitable they will come for it.

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Expensive Diapers: It's Time to Realign Our Innovation Values

An innovation popular in rural India offers a solution to the diaper duopoly stinking up the budgets of western households.

Bloomberg reports diaper costs were up 14% year-over-year since last January and show no sign of slowing down. That same story article details a man spending $300 per month keeping the tuchases of his twin 3-year-old grandkids dry. The New York Times reports about a man who walked out with diapers and without paying after his bank card was declined. When his photo was circulated by the store, they were criticized and he was heralded as a folk hero.

The reason for diaper inflation is arguably more greed than global supply chain woes. Specifically, a duopoly by Kimberly-Clark and Procter & Gamble controls about 70% of all diapers. It doesn’t matter if people buy Huggies, Pampers, Luvs, or Pull-Ups; the funds all flow to the same two businesses.

A formerly illiterate Indian weaver developed a business model to break the diaper duopoly keeping baby tushies clean and their parent’s pocketbooks solvent.

First, some explaining. There are two types of diapers; cloth and disposable. Cloth diapers are usually handled by a diaper service that takes away the stinkies and delivers clean, bleached cotton at a cost typically slightly more than disposables.

However, many people prefer disposables both for convenience and that they’re less likely to leak. It’s easy to criticize but, having raised two tykes and used cloth for awhile, the disposable crowd has a point. For example, imagine changing a cloth diaper at a shopping mall — assuming anybody goes to those anymore — and carrying the used one home for the diaper service. Yuck. Besides, due to the environmental impact of cleaning cloth diapers, it’s not entirely clear if they’re overall environmentally better.

Naturally, the disposable diaper businesses blame the price increase on increasing material costs (never mind their stock buybacks) but, just as naturally, a quick glance at those material costs makes those claims iffy. It’s not that costs haven’t gone up but, rather, material costs are like when you change a diaper and find there isn’t much there. The core ingredient in diapers is a product called fluffy pulp, which is essentially fluffed up tree fibers, plus a small amount of plastic that goes around it and, sometimes, a “super absorbent layer” which is apparently something called sodium polyacrylate and is also super cheap.

Fluffy pulp is widely available on Alibaba from China for $850 per ton which Google tells me yields 907,185 grams of pulp. At 13-25 grams per diaper, the cost of the active ingredient per diaper ranges from $.012 - $.023 at today’s presumably inflated prices.

Hold on, you say: there’s also shipping and the whole supply chain fiasco. Correct … at rates long ago negotiated. Besides, because the pulp is a paper byproduct, it’s widely available from Canada and the US. Even if the pulp prices are higher, and they’re paying those prices (rather than long-term prenegotiated rates), we’ll see it doesn’t matter because the impact of an increase on overall costs of goods sold is negligible.

Amazon says Size 2 Pampers are a bestseller. They charge $53.44 for 234 diapers, labeled a one-month supply (a higher estimate than others; diaper banks typically give families 50 diapers per month). At the prices listed above, the material cost for pulp would range from $2.85 to $5.48 plus the plastic to wrap it, ship it, and profit margin. That is, material costs may drive down profit margins slightly but they aren’t what’s driving up diaper prices. Obviously, those companies could absorb the material price fluctuations rather than causing them to leak into people’s food budgets.

At this point, I could and probably should harangue about monopolies but there’s no point; they’re not going away anytime soon. Even if Congress were to call the CEOs of those businesses in and yell at them nothing would happen. We could make demands to break up the diaper duopoly but, even in the unlikely even Congress would go along, by the time the lawsuits ended the tyke in diapers would be a geezer. Sue them? Sure - something may happen in many years but that something is likely a friendlier administration takes over and uses the suits to enter a consent decree protecting the monopolies.

A more sustainable answer might be to leverage an innovation created by Arunachalam Murugananthamis, India’s Pad Man. You can see his invention in the Academy Award winning Netflix documentary Period. End of Sentence. (available free on YouTube) or the Bollywood blockbuster Pad Man. I also wrote a case about him and we spent time talking.

Realizing Indian women would never purchase menstrual pads even if they could afford them, which they couldn’t, Murugananthamis invented a business model and the machinery to encourage the use of pads around India and other developing nations. He sells women-owned businesses micro-factory equipment they use to create pads they then sell or barter to local women. The pads allow girls to remain in school after their menses — when, not long ago, they would’ve been relegated to menstrual huts or fields — and women to own a small business gaining independence from men.

Murugananthamis purposefully uses a capitalist model because he says it best aligns incentives. Although the Netflix documentary talks about raising funds to buy the machinery for a collective, donations are usually used for microloans which are paid back from profits of the pad manufacturing collective to fund more businesses.

“If you depend on money from others, then indirectly you are a beggar. Your hand is always out,” he told me. “I give them dignity and make them into women entrepreneurs. It is amazing to see the transformation that happens. This is the way to help this universe have a new day, not repeat the old days.”

Despite being famous worldwide, Murugananthamis himself lives in a one-room apartment with his wife and children and still hauls manufacturing equipment to rural Indian villages.

Getting back to diapers, the factor that enables Murugananthamis’s business is low-cost fluffy pulp. Indian women buy the raw material, which is even cheaper than the processed prices above, and transform it into pads with his machines. But even bleached and ready to be made into pads or diapers, fluffy pulp isn’t pricey.

There’s no reason small groups of parents couldn’t get together and form a collective to create diapers for their children, assembling the diapers either by hand or with low-tech manufacturing equipment. I’d imagine there are regulations around diaper manufacturing, but I’d also imagine they wouldn’t apply if parents were making diapers for their own children.

Besides costing less, parents could choose from the various pulps that work best for their baby butts, balancing ecological concerns with diaper rash. They’d see how much material goes into each diaper and learn about business, like the Indian women and their menstrual pad machines. Plus, it’d be fun. Once a month, somebody could watch the kids while everybody else cranks out a supply of diapers. Call it a playgroup with purpose.

None of this would be especially difficult to get going; a group of parents would need to round up others, find a spare garage, buy some material, and get out the scissors. Once they get a basic design down, somebody can engineer machinery to make the diapers faster though that isn’t necessary to get started.

This post was inspired by a tweet from Matt Stoller. I haven’t written in a while and have been reading about the countless startups getting rich inventing not much of anything. I was finally shocked back to the keyboard by Matt’s tweet combined with the following I found deeply disturbing:

Say what you will about Squid Game, there is value in art beyond the financial rewards, not to mention the jobs created filming and distributing the series. Yet, the modern beasts of finance have reduced everything into money. If you can’t spend it, their reasoning seems to go, there’s no intrinsic value. This is a cynical, terrible mindset.

When combined with articles about the surging price of diapers, I realized it was time to write again. The world doesn’t need another chatbot, and the real value of crypto is seriously iffy, but we do need art and affordable diapers. It’s time to realign both economic incentives and our personal values to make that happen.

My personal focus lately has been on subtractive theory with the behavioral economists — the economic ideas that less is often more — and both Murugananthamis pad factories and my diaper ideas seem to embody the concept.

Is US Healthcare Genuinely Capitalist?

Framing the question about US healthcare as socialist vs capitalist is dishonest, unhelpful, and unfair.

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I haven’t been writing much because I’ve been doing a great deal of research about psychology and, specifically the work of Amos Tversky, Daniel Kahneman, Cass Sunstein, and Dan Ariely. One reason I’ve been reading so much is my back went out leaving me to lay around more than I normally would healing. Besides giving me more reading time than usual, that also opened an opportunity to think about the US healthcare system and what these psychologists can tell us about perceptions.

There’s a pernicious message, a widespread perception, that the choice for reforming the US health system to lower cost is between capitalism and socialism. I’ve come to realize that perception, like many perceptions, is simply untrue. There are healthcare systems that provide universal care while simultaneously embracing the benefits that capitalism provides.

Two of the concepts I’ve been studying involve framing and anchoring. They’re simple but powerful concepts to understand. Vastly simplified, framing refers to the insight that people tend to react based on how something is presented. Anchoring is the concept that people tend to judge something based on an initial thing, an anchor. I believe both these concepts are important to understand when thinking about healthcare in the US. Pointing out the obvious, these lessons apply far more widely than healthcare.

Some background: for those who don’t know, I’m American but live and work in France, at INSEAD. When I was living in the US, I had both employer-provided health insurance and also purchased private plans, both before and after Obamacare. My insurance is provided, like everybody else legally working in France, by the government. Like the vast majority of French, I also have a private supplemental policy.

I’ve come to realize that Americans have an enormous misunderstanding of European healthcare systems. Most Americans believe that, for better or worse, US healthcare is a capitalist system and the French system is socialist. I know both systems and believe that is exactly backward. That is, the US system was framed and anchored as capitalist and the European systems, including France, as socialist. The perception that the US is capitalist and France is socialist is simply taken for granted. Like many perceptions, I believe it’s also incorrect and, especially in the context of healthcare, harmful to both the physical, mental, and economic health of the US.

Let’s check out how the French system works. Everybody is covered under social security. It’s similar to US social security. US social security costs 15 percent of pay up to $142,800 (in 2021) plus 2.9 percent for Medicare, uncapped: a total of 17.9 percent. In France, social security taxes are 20% of pay with no caps. For those earning less than $142,800, the cost of the French system is 2.1 percent more expensive.

What does that 2.1% buy? There’s core health insurance that covers everybody, short and long-term disability, some life insurance, and retirement benefits more generous than the US system.

It’s about this time that somebody will jump in to argue wait times for doctors must be terrible, the quality of care awful, the medicines similar to medieval potions, and the entire system staffed with faceless uncaring bureaucrats. That description is not only wrong for France but — when we think about it — is actually closer to how the US system works.

Don’t take my word for it about French wait times: fire up Google Translate, go to doctolib.fr, and search. You’ll see there are plenty of openings at reasonable times with all the same specialists the US has. If you have a more pressing need, your general practitioner will almost always see you the same day or refer you to somebody else who will. You can also show up to the emergency room which will have a longer wait time — more comparable to the US emergency departments — though with vastly lower cost. Some doctors will come to your house though they charge more; when my back went out I had a house call that cost €55 that was covered entirely by insurance.

Click through on doctolib and you’ll also see prices because virtually all medical providers have entirely private practices and set their own prices. The base price for a GP visit is €25 and there are lots of doctors who charge that. However, there’s nothing stopping doctors from charging more and there are plenty who do just that, especially in Paris. My first doctor, who since retired, charged €35 per visit. Most but not all hospitals are run by the government but this isn’t especially different than the US where emergency departments are required to take anybody who walks in. Except, of course, the patients in France are actually cared for and the hospital reimbursed at reasonable rates whereas the US is known to dump them outside in the middle of the night.

This brings me to the next part where the French system is more capitalist than socialist: there is an active and competitive market for supplemental insurance that covers co-pays and those doctors and clinics that charge more. Google “acheter mutuelle france” and you’ll see lots of listings, including the obligatory wall of paid ads, for the “mutuelle” private supplemental policies.

My employer provides one though there are even mutuelle’s that provide double supplemental insurance for those who, for example, don’t want any co-pays if they need excessive dental work. The market for health insurance in France is large, thriving, competitive, and private.

One benefit of my mutuelle is that prescriptions are covered 100%. Despite that insurance pays, pharmacies tell you the price and I have one prescription that costs €34. The lowest price for the same prescription in the US — same dose, same brand, same everything — costs just over 9x as much.

When the government bargains in bulk to set prices, those prices are far lower which is exactly the case with any bulk buyer. Preventing a large buyer like Medicare from negotiating prices as the US does is not capitalist by any stretch; it’s some type of mutated socialism for businesses. By the way - those prices aren’t tied to social security. If you’re on vacation in France and need a refill, find a doctor to translate your prescription then walk into any pharmacy and, even as a tourist, you’ll pay the negotiated price.

What about the argument that pharma companies need the funds for R&D? It’s bunk: they consistently spend more on stock buybacks than R&D (yes, that’s my photo in the story). Look how fast Pfizer and Bio-N-Tech produced an affordable effective COVID vaccine they sell at a reasonable price. This is a great example of how the system could and should work when these businesses focus on medicine instead of markets and marketing.

I’ve been asked if this is like Medicare for All. The answer is … not really. Medicare Advantage, with the supplemental policies, is a similar system except there is no option in France for coverage that doesn’t allow doctor visits, cover medications, and the mutuelle supplemental policies are far less expensive. My parents are on Medicare and told me they pay about $500 per month give or take. A top-tier mutuelle with no co-pays for an older couple would be far less expensive.

One important element the French system eliminates is administrative overhead (yes France, of all places, has less administration for healthcare than the US). Everybody has a green social security card that ties to your mutuelle and bank. Most doctors visits are paid for by patients out of pocket but, with a swipe of the magic green card, funds are reimbursed in a bank account within a week from both social security and the mutuelle. That same green card reader exists in every clinic and pharmacy.

Many doctors don’t have receptionists much less billing clerks; they’re not needed. A shared phone and online scheduling service like doctolib take care of their administrative needs. The state even provides a healthcare records system for free to medical providers.

Are physicians paid less? I’ve done some back-of-the-envelope calculations and don’t think so after expenses are taken into account. Without all the overhead including bickering with insurance companies and massive malpractice policies, they’re able to see more patients. I’m not sure they make as much as US physicians but they’re very well compensated and spend the vast majority of their time practicing medicine, not doing a payment tango with various insurers. Plus, medical school is free so they don’t carry the burden of student loans. Ironically, one reason malpractice insurance costs far less is that if a patient is injured their lifelong care will be taken care of by social security so there’s no need for enormous compensatory damages to pay medical costs for life.

I don’t see that the US health system is capitalist. There’s a lack of competition, enormous centralized decision-making, inadequate price transparency, massive government regulatory support for the status quo, illegal collusion, and, until recently, even legal price collusion. Patients have little to no bargaining power and are at the mercy of a bureaucracy. Don’t like it? Pound dust and die, comrade. That sounds more like a system Karl Marx would design, not Adam Smith.

The French system, in contrast, sounds a whole more capitalistic. Healthcare providers compete for patients by offering different prices, hours, and attitudes towards the practice of medicine. Thanks in large part to genuine capitalism, the French provide better care at a far lower cost.

All this leads to the question of why Americans believe the French system is more socialistic. Even those who support radical reform buy into the perception that European countries like France, which isn’t atypical, are socialist and the US is capitalist. I’d argue it’s long past time to rationally think through and correct that perception. I strongly believe that capitalism, like the French health care system, works well. Soviet-style communism — with the faceless bureaucracies making decisions from afar — doesn’t. Yet that’s exactly what’s going on with US healthcare.

Find the Right Tool

Different tools do different tasks and what works well for one may not be best for another.

The Ankarsrum is, depending upon which review is believed, a really expensive but mediocre mixer or the mother of all mixers and totally worth the price. Unlike the Kitchen Aid and countless knockoffs, the Swedish mixer rotates the bowl which forces whatever is inside through a series of rollers. For doing things like whipping egg whites, there’s a plastic bowl with some beaters that looked jerry-rigged which they probably are.

There’s an easy explanation for the split reviews and the higher price tag: the Ankarsrum is what the French refer to as a Pétrin, a machine that kneads heavy dough. It has a specific purpose including a heavy-duty motor to match that purpose. Baguettes, pizza, and bagels will come out great in the Ankarstrum where they’ll break the internals of a Kitchen Aid.

However, the Kitchen Aid is what the French call a Robot Pâtissier. As the name implies, its primary purpose is to make pastries, not dough. It’s great at whipping up eggs, cake batter, and all manner of other delicious fattening stuff. There’s a bread hook on it but for the cook who tries traditional heavy doughs, they’ll be disappointed or break their machine.

It’s not that the Ankarstrum is better than the Kitchen Aid or vice-versa; they’re different tools. Sure, you can use one of the jerry-rigged attachments to force the Ankarstrum to do what the Kitchen Aid does, and you can try to make traditional pizza dough in the Kitchen Aid, but soon or later — and, based on countless reviews, probably sooner — you’ll be disappointed.

I just released an exercise/case study that explores the difference between technology innovation and value innovation. I don’t normally pitch stuff for my day job at the INSEAD Blue Ocean Strategy Institute but, if you’re doing work with any firm that’s technology-focused, as many are, I’d strongly recommend it. Of course, there is one important point not there: sometimes it is necessary to focus on engineering, on technology innovation, because a specific task requires it.

We obviously need architects to make buildings that will not leak or collapse. We also want them to be aesthetically pleasing, environmentally efficient, and comfortable to work or live in. A good building will appeal to buyers and nonbuyers. A great builder will build buildings that make competing buildings irrelevant. But, at some point, those buildings must neither collapse, burn down, have their pipes freeze, nor do countless other things that a poorly engineered building might do. The engineering component of an architect is largely invisible unless it is not.

Similarly, there are countless aspects of developing a product or service that aren’t really strategic ideation but are focused on constraints beyond buyer demand. After all, if we could suspend gravity and create a flying car that used no fuel we’d surely sell a lot of units. But deep-diving into this is probably pretty pointless because it’s not going to happen.

Engineering methodologies, like six sigma, may be great for creating engineered products. Nobody wants their stuff to have manufacturing defects, after all. Strategic ideation methodologies, like blue ocean strategy, are similarly great for ideating products and services that customers and noncustomers actually want but aren’t especially good for, say, ensuring the building complies with electrical code.

Both methodologies, like my two types of mixers, were built for a specific purpose. Like the mixers, they can be jerry-rigged for a different purpose and that may even work. However, also like the mixers, it’s really best to focus on what they’re meant to do. Want to mix up some baguette dough? Use the Ankarstrum. How about a batch of croissant dough or a cake? Time to pull out the Kitchen Aid. It’s not that either is better than the other. Rather, they’re engineered for a specific purpose.

I research, write about, consult, and teach blue ocean strategy. I’m a fan and have been for two decades now, since I started using the methodology in the workplace and met the authors of the book (back then, a series of HBR articles). Still, people shouldn’t use blue ocean strategy to conform to the fire code; it’s not made for that and won’t work. Similarly, you shouldn’t use six sigma or any of the alternatives to develop a business strategy: no matter what your six-sigma consultant may say, it’s not made for that.

Use blue ocean strategy to create a product or service and unlock a blue ocean. Then use six sigma or whatever else to make sure every one of those products that rolls off the assembly line, through the app store, or out of the kitchen is the highest quality possible. These frameworks work together; there’s no need to pick and choose.

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