Nintendo & Blue Ocean Strategy: Record Profits ... Again

The blue ocean strategy Switch blew away the competition by ignoring it, just like the Wii did way back when.

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Results are in and the Nintendo Switch is the second bestselling videogame console in history, in both volume and revenue. Only 2008 Nintendo Wii sales were higher:

Story: Nintendo Switch: 2020 Sees the Second-Highest Annual Dollar Sales in US Console History

I briefly worked with Nintendo way back when while they were developing the Wii, explaining the core of blue ocean strategy in the days before the book.

I knew what they were working on and found it wildly exciting. When the Wii was released, I went with my then young son and waited in the parking lot of Target at 2 AM to stand in line and buy the console.

The excitement in the air was palpable. Enthusiasts stood around talking to one another and playing on their DS handheld consoles. My son quickly gave up and went to bed in the car. I asked people why they were excited and got some really interesting information.

We waited and waited. Eventually, chipper Target employees, amused to see us there, arrived and handed out numbers. Soon after, the door finally opened and we bought a Switch. It was the coolest console I’d ever imagined, even having worked on the strategic framework (I never got the details).

Not long after, others from the blue ocean strategy team asked if I could get them consoles to check out. I called Nintendo and they asked how many we wanted. Sure, that was a little anti-climatic after the all-nighter but showed how the firm believed in and embraced blue ocean strategy.

My long-time friend and colleague, Jason Hunter, wrote a case study about the original Wii. It’s distributed, like all blue ocean strategy case studies, by Harvard Business School Publishing:

The Nintendo Wii: Lessons Learned from Noncustomers

I eventually went on to write about the Nintendo Switch and how the firm went back and forth from the Wii (blue ocean) to the Wii U (red ocean, and a total flop) back to the blue ocean Switch. My piece is here:

Nintendo Switch: Shifting from Market-Competing to Market-Creating Strategy

Like all genuine blue ocean strategy cases, both were written under the direction of Blue Ocean Strategy co-authors and INSEAD professors Chan Kim and Renée Mauborgne.

During consulting projects, I’m often challenged to provide cases where companies actually used blue ocean strategy and Nintendo is one of the best. I strongly recommend buying and reading the cases above to see why. They’re not expensive and provide a great overview of blue ocean strategy in the real-world.

Back to the Switch, Nintendo became an inadvertent lab experiment demonstrating that the same company, operating in the same market, during a similar timeframe, and even with the same competitors, can use blue ocean strategy to fly (the Wii and Switch) or pivot to competitive strategy and sink (the Wii U).

To contextualize, when the Wii was released there were three console game competitors, Sony, Microsoft, and Nintendo. Sony was releasing the PS3 that featured a graphics chip that cost over a billion to develop and could fly cruise missiles. Microsoft was selling Xbox 360 consoles, losing almost as much per system as the sale price. Before the Wii, Nintendo was a distant third who couldn’t afford to lose any money at all on each console sale.

Many analysts believed Nintendo should have exited the home console market, focused on handheld systems, and simply created games for Sony and Microsoft. Instead, Nintendo released the Wii and outsold Sony and Microsoft combined.

A couple of years ago, I was talking to a Microsoft product manager who was on the Xbox team when the Wii was released.

“They sure surprised us as brutal competitors,” he said.

Actually, they aren’t. Even after all those years, he still didn’t get it, which I’ll take to mean that Microsoft didn’t understand. Nintendo wasn’t competing with Sony and Microsoft. Nintendo produced a game console that appealed to gamers and non-gamers: noncustomers in blue ocean strategy terminology.

While Sony and Microsoft were beating one another up to buy a Playstation or an Xbox, Nintendo focused on selling gamers a Wii (and, later, a Switch) and a Playstation or Xbox, the latter two being optional for those who wanted a traditional high-powered game system.

Today, the young son I waited in line with is all grown up; his Wii put away on a dusty shelf. But his fifteen-year-old sister is inseparable from her Switch and the high-quality games on it. Young, old, male, female, gamer, non-gamer … Nintendo’s use of blue ocean strategy has, again, put them solidly on top by not stressing about the competition.

Wikipedia: the Overlooked Monopoly

Low-quality anonymous "editors" combined with some type of tie-up to Google have turned an interesting experiment into an overlooked but destructive monopoly.

I realize it’s Biden’s inauguration tomorrow and could write about politics, especially the effect I think it will have on business. But, seriously, there’s a certain amount of burnout. For those who need something else interesting to think about here’s an article reframing Wikipedia as the destructive monopolist that it is.

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You’ve never heard of Wikipedia’s Tim1965 or the countless others like him but they quietly affect your life and your perception of the world. Tim is a Wikipedia “editor” who brags, in bold, that on June 2, 2019, he made his 50,000th edit on Wikipedia. Just a few months later, on September 4, 2020, the Innowiki consortia I’m a part of got a front-row seat showing how lame that boast is and realized it highlights a serious but overlooked problem with Wikipedia.

What happened is, as these things go, seemingly insignificant enough I paid it no attention for a half year until I thought things through. Specifically, Tim eliminated some quotes I added about my favorite business executive, the late, great Archie McCardell, the worst CEO in history. I’m somewhat of an expert on Archie, having the misfortune of studying and writing about him and even naming an award after him, the Archie McCardell Award for Horrendous Management. Come to think of it, Tim deserves an Archie Award.

Before we get back to the problems about Tim and Wikipedia, the overlooked monopoly, some review is probably in order.

Archie was CEO of Xerox when the Xerox Palo Alto Research Center (Xerox PARC) was set up. It’s the division that gave us pretty much everything interesting about modern computing. He became the President of Xerox in 1971 and for three years, the firm recorded record profits just as it had the prior two decades. Then, with Archie’s management style in place, all quickly started going south and Xerox never recovered. They never commercialized the inventions at Xerox PARC that included, among other things, the graphical user interface, the laptop, ethernet networking (WiFi is wireless ethernet), object-oriented software, or all sorts of other cool and wildly profitable stuff. Steve Jobs swiped stuff from Xerox PARC and used it to create the Mac. Bill Gates knocked that off to make Windows.

Back to Archie; he laid the groundwork for a few years of wretched sales during which they blew the future and ceded the copier market to Japan. As a reward, Archie was recruited by Booz Allen Hamilton to lead International Harvester, then one of the largest businesses in the US. With a starting salary of $460,000, he was one of the highest-paid executives in the US. Archie also received a then unheard of signing bonus of $1.5 million and a low-interest (at the time) loan of another $1.8 million. Before Archie, International Harvester was a profitable, stable family business but management consultants wanted “a high-powered executive from the outside.”

So, how’d the guy that ensured Xerox wasn’t Apple do at his new gig? Every bit as wretched as you’d imagine and worse. He cut costs and poked the lead union, the United Auto Workers (UAW), in the eye. They responded with a 172-day strike.

By the time the strike ended, Harvester lost $479.4 million-plus another $397.3 million the next fiscal year as a result of the fallout. Archie borrowed money to stay afloat, eventually bloating the firm with $4.15 billion in debt. Eventually, he cut the budget another $200 million and demanded further union concessions while paying out $6 million in executive bonuses. The union agreed to the concessions on May 2, 1982; Archie was fired the next day. International Harvester was forced to sell their crown jewel, the farm equipment division, and renamed what remained Navistar.

Archie’s feelings about his performance (copied from my original articles):

“I don’t think we made any one major mistake,” McCardell said in a 1986 UPI interview. “I feel very good about my years at Harvester.” Later, he adds, “I think I was underpaid.” In a different interview with the New York Times he said: “I think I rate myself superb.”

Pundits aren’t as enthusiastic. One speculated he might have been carrying out “an industrial sabotage operation.”

Back to Tim & Wikipedia

My Innowiki project is edited by a small number of people. We typically write under the moniker Ruby Day because WordPress requires attribution. Tim, with his 50,000 edits, apparently watches the Archie McCardell page for edits. He deleted the quotes above and justified the deletion writing: “removing biased source (self-promotional edit, using an article written by the editor), linked to nonreliable wiki source…”

So, what’s the problem?

Well, for one, the source, here, clearly has all information including quotes well cited. That Innowiki entry ranks #2 or #3 in Google, depending on the day, with Wikipedia ranked #1. That is, there’s no point in self-promoting: there’s no higher placement for that page except to overtake Wikipedia which isn’t going to happen. All that was apparent to anybody who did the slightest bit of research, something Tim1965 clearly didn’t bother to do before pressing delete and justifying it with baseless ad hominem insults.

This happened in September and I shrugged it off. After all, there really is no SEO benefit. Adding those quotes only helped contextualize Archie McCardell, improving the page to better reflect his mindset that eventually metastasized into modern management practices. But I have a family, a day job, my other writing, and a life; no need to have a war with some dude who has the time for 50,000 Wikipedia edits.

Something didn’t feel right and I eventually figured it out. That Wikipedia entry about Archie, presumably written by Tim, doesn’t contain those quotes and materially misstates other information. It’s oddly appropriate that a key article about Archie is run by a lazy researcher exhibiting poor scholarship but it seems inappropriate for Wikipedia.

More to the point, why is some anonymous creep in a position to run around hurling ad hominem attacks? Why should some dude who has the time to make 50,000 Wikipedia edits and goes by the anonymous “Tim1965” be in a position to whine about that the author of a third-party source filled out a Wikipedia entry (which isn’t even entirely true, though that’s a different issue)? Especially because he’s doing exactly the same thing? What gives him the authority?

I thought about it and realized: Wikipedia’s source as a monopoly is what.

Wikipedia is a monopoly.

And it’s not a harmless one, either. Editor ranks are filled with people just like Tim1965. They’re unpaid basement dwellers who have some motive to spend enormous amounts of time “editing,” a process that invariably often includes the mass deletion of useful and accurate information. Look - maybe Tim et. al. would fine if the attribution of my edits were to other primary sources but, of course, that would cut out other secondary sources. This happens to be exactly what monopolists do. Google at least still links to underlying websites even if, as illustrated above, they push them below a barrage of pictures.

But Wikipedia is a non-profit with volunteers, huh? Nonsense. Wikipedia’s no-pay policy is a bug, not a feature. Facebook, Google, and Amazon are also monopolists but at least they allow some people to buy food, shelter, and diapers; Wikipedia doesn’t. Wikipedia is not only a monopoly; it is the very worst monopoly, one that saps wealth, erodes knowledge, spreads false or misleading information, allows anonymous edits, and returns nothing to the economy. It props up Google’s ability to circumvent eyeballs strengthening their own monopoly (again, as illustrated in the screenshot above). Why does anybody think this is a good thing?

Almost nobody recognizes the problem or calls out Wikipedia as a monopoly despite that it obviously is. There is some unspoken rule that Wikipedia is good and mustn’t be challenged. That tie-in with the high Google ranking? Sure - Wikipedia deserves it, goes the thought. Why? Because they don’t pay people and don’t accept advertising so there are no conflicts of interest, right? Wrong.

Only the very naive believe somebody would bother with 50,000 edits for no gain. A quick search for Wikipedia experts returns countless people who can help “manage” one’s Wikipedia presence to see how plenty of these “editors” are paid. It’s the same model as Google or Facebook but a whole lot less honest. That doesn’t mean many people don’t volunteer their time: I write plenty for free. But there’s a big difference between releasing a newsletter/blog post once or twice and week and 50,000 edits. There are other ways to profit from an edit count with none of them adequately disclosed.

Sure, Wikipedia has a code of ethics. Even that’s a joke. I’m an American living in France so often surf the web using a VPN to get English-language pages. I have to turn the VPN off to make Wikipedia edits. They block VPN edits better than any other VPN blocker I’ve ever seen. I can watch Netflix as if I’m in the US but can’t even login to Wikipedia with the VPN on. This is a minor inconvenience to me but literally deadly to, say, dissidents of many countries.

Just how common are people like Tim on Wikipedia? Plenty common and plenty of a problem. The way most of them get to those high number of edits is by reckless deletions — digital vandalism — as I’ve illustrated above. Wikipedia even has a term for them, deletionists. They used to have their own Wikipedia page when I first came across the term but deletionists deleted it. Instead, in a self-righteous bit of false equivalency, they merged it in with a page of so-called “inclusionists” who are people that want to actually expand knowledge.

Deletionists define adding information they may not like — I suppose including links to other well-documented articles in other places — as “vandalism” and edit for “appropriateness of content,” a vague-standard that sounds like something from the North Korean Ministry of Truth. Borrowing from Richard Stallman, knowledge should be free as in speech, not free as in beer for those who can afford it. Wikipedia has it exactly backward.

Monopoly Busting

There’s finally some momentum to police “Big Tech” monopolists from both the left and the right. We’re used to seeing Bezos, Zuck, Pichai, and Cook uncomfortably suited up and testifying on Capitol Hill. Lately, the people asking the questions even seem to be more tuned-in to issues that matter.

Ignoring Wikipedia, which is every bit as much a monopoly and a monopolist as the rest, is a dire mistake. There is nothing positive about sucking away users from high-quality content published by individuals, small blogs, or focused wikis. They’re not providing some type of public service by providing free content for Google to monetize without worries about being sued for copyright violations (and, surprise, Google funds Wikipedia). Wikipedia went dark to prove the point they’re vital and immediately missed. However, by doing that, they simultaneously proved another point: they’re a monopoly.

Next time tech execs are called up to testify, Jimmy Wales should join the gang. Until then, Google and the rest should work to promote some diversity of information by pushing Wikipedia’s rank down or even throwing the site off search results entirely; if people want to search Wikipedia they can go there directly. In its current state, all Wikipedia does is concentrate, corral, and offer up eyeballs to their for-profit monopolist cousins while purposefully harming lesser-known sites.

Still not convinced and think Wikipedia is a cute and cuddly non-profit? Let’s keep going. Wikimedia Foundation, the parent of Wikipedia, brought in $113 million on their last tax return, filed 2017. They don’t pay writers but do pay a lobbyist. Executive Director Katherine Maher earned $356,641. The CFO and Treasurer (of the non-profit volunteer website) earned $260,519. The lowest-paid executives are Chief of Community Engagement Angela Reid ($154,707) and Director of Engineering Trevor Parscal ($127,547). Yes, you read that right: the two people in charge of the community that creates the content and keeping the site lit up — the only two things the vast majority of us care about — are, by far, the lowest-paid.

There’s something poetic about a seemingly insignificant edit on the Archie McCardell page reframing the core brand of Wikipedia as the monopolist that it is. If any executive could screw up something from the grave, a dozen years after his death, it’s Archie. Still, he also has a history of leaving interesting ideas in his wake of destruction. One of those ideas is that it’s long past time to recognize the value of researchers and writers, to label Wikipedia the monopolist that it is, and to reorient public perception towards the site to recognize its economically destructive nature on individual independent researchers and journalists.

I agree wholeheartedly with this pinned tweet by Katherine Maher but disagree entirely that Wikipedia does this. Enabling creepy anonymous unpaid editors and providing free content for search engines to bypass independent writers achieves the opposite of this goal.

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Oneida: The Victorian Free Love Commune that Changed the US

The 1850s commune spawned business practices and businesses that exists to this day.

This post explores the business impact of the Oneida Community. A follow-up will explore the political impact that has profound ramifications to current events.

Businesspeople are expected to look and act a certain way. There’s a not-so-subtle amount of racism, sexism, and ageism in this belief which research shows is oftentimes a lousy predictor of business success. My research includes countless innovators who built enormous businesses or changed the world but looked and behaved in a way most investors would shun. Conversely, Charles Ponzi and Bernie Madoff looked and acted perfectly. Today, we explore the utopian communist enclave, Oneida, who built a business that lasted ages and a political movement that continues to reverberate.

“Property and persons are held in common. No one of himself owns anything. They commenced poor, now they are rich. The location is the most beautiful in the land. It embraces over 500 acres in the choice Oneida Valley. The principal residence is brick, three stories high, and as extensive, as neat, and as elegant as are buildings erected by the State for benevolent purposes. The grounds are laid out by a scientific, rural architect. There are evergreens, hedges, clumps of trees, shaded winding walks, bowers, summer-houses, and borders and gardens of flowers. The most refined taste is gratified. Last summer they had 6000 visitors.”

— New York Tribune, May 1, 1867

In 1848, the same year Marx and Engels published the Communist Manifesto, a group of men and women formed a communal utopian community in upstate New York. Led by John Humphrey Noyes, the original group of 87 members quickly grew in size, wealth, and influence.

Educated at Dartmouth and Yale in law and theology, Noyes wasn’t an economic outcast who decided to reject capitalism; his father was a Congressman and his cousin President Rutherford B. Hayes. Noyes, however, embraced a radical theological underpinning against individual ownership. Specifically, Noyes practiced and taught “mutual criticism,” “complex marriage,” and “male continence” were key to a good and godly life. Noyes joined a theologically like-minded group called “perfectionists” and became their leader.

Mutual criticism is the easiest concept to understand and remains a management principle to this day. It’s essentially an ongoing “360-degree review” with the notion that in professional or personal matters transparency and honesty are vital to individual and collective well-being and growth. A century before Ray Dalio was born, Oneida practiced the radical truth and radical transparency principles he’d institutionalize at Bridgewater.

Complex marriage is nonmonogamy where every member is married to every member of the opposite sex. Despite his own marriage to Harriet Holton, whose grandfather served in Congress, Noyes didn’t believe that one-to-one relationships were healthy or beneficial. He was not a polygamist like Joseph Smith, the founder of the Mormon Church. Rather, Noyes thought and taught that men and women should interact with one another on a non-exclusive basis at work, home, and in bed. Holton, his wife, shared his beliefs.

Male continence was used as birth control. With no other known birth control method available, Noyes believed men should not finish which, in his theory, prevented pregnancies that bogged down and limited women’s choices in life.

Others at the time weren’t especially enthusiastic about his ideas, especially regarding free love, and in 1848 Noyes was forced by “a mob” to flee Connecticut to the town of Oneida, in rural upstate New York. During the early and mid-1800s, upstate New York was to radical religious sects as Silicon Valley is these days to tech companies.

It’s unclear if Noyes was aware of Marx’s work or if his drive towards communal living was out of economic necessity that dovetailed with his theological teaching. In any event, the members of his commune were so poor, at first, that they slept on the floor in a barn. Most of the early adopters, besides those who’d moved with Noyes when they fled, were equally poor New England farmers who had little to lose when joining the quirky cultish religious group.

As Oneida formed, all rights to exclusivity in all matters of life were deeded to the community. Nobody owned anything individually and, during an era when sex wasn’t openly discussed, the community embraced Noyes’ teachings and disavowed monogamistic relationships. “All men and women were expected to have sexual relations and did,” wrote Noyes, explaining the arrangement bluntly.

Many of Oneida’s practices were far ahead of their time. Women enjoyed vastly more rights than other women of the era, including an expectation to education and work in similar jobs to men, the right to accept or reject sexual partners and to enjoy sex, and even a vastly more comfortable wardrobe than other women of the time. Just as substantively, there was no expectation that women should bear or raise children. Pregnancies were carefully planed and children raised by the community.

While the people of Oneida personally believed in communal living, the collective as a whole eventually did exceptionally well in business. Initially, the commune started farming which went about as poorly as one would expect for a group of New England intellectuals. Soon, they moved into industry opening a sawmill, blacksmith shop, and a manufacturing facility focused on animal traps. The commune ventured into furniture making, travel bags, satchels, silk production, preserved fruits, and even some type of ferry service.

Their ventures thrived. By January 1857, the commune had cash and inventory valued at just over $67,000, an enormous sum at that time. Throughout, they used their wealth to expand. The original farm at Oneida was 40 acres but, by 1874, they purchased another 654-acre farm nearby, and soon after, a 240-acre farm at Wallingford. The free-love communists were kick butt capitalists.

Thanks to carefully selecting members, demographics at Oneida were well balanced. By February 1874, 131 of the commune members were men and 152 were women. Of those, 219 were adults and 64 were children. About half the adults, 104, were over 45 years old. Members came from eclectic backgrounds; there were doctors, teachers, and lawyers but also farmers and mechanics. As word of their wealth and lifestyle spread, the commune received countless applications and rejected most of them.

The commune employed non-member locals as laborers in the workplace and, as their wealth grew, as servants to cook and clean for the collective. Locals reportedly loved their commune employers who paid well, extended far better working conditions, and built workers privately-owned homes on nearby farms. “The members do not now work very hard … but they are steadily industrious. Mere drudgery they nowadays put upon their hired people” explains an eyewitness historian.

Their free-love principles were straightforward. Anybody could have sex with anybody else as long as both consented. Unlike the rigid expectations for women of the time, any member was free to make advances and reject the advances of any other. The emotional attachment of two people in a monogamous relationship was termed “selfish love” which they sought to break down “rigorously.” This was apparently a recurring problem, especially for young people.

“Male continence” seems to have worked and the commune was able to control the number of children to a “normal” number (their word) based on the commune’s adult population. Children were raised by a committee of men and women; a woman’s individual obligation to her child ended after the child weaned. Children had their own house. They ate in the same communal dining room with the adults but sat together at their own tables.

Some children were sent to college while others learned trades. College was gender restricted so male children attended Yale where they became physicians, engineers, chemists, and architects. Promising females were sent to art schools. Other children learned various trades without regard to gender; for example, girls learned to be machinists and boys learned to weave.

The collective practiced a form of eugenics, purposefully coupling men and women they thought would produce more religious babies. They referred to the practice as “stirpiculture” and the subsequent children as “stirpicults.”

Daily and longer weekly meetings involved “mutual criticism,” where the person being criticized sat silently and listened. A witness describes the process: “This system takes the place of backbiting in ordinary society, and is regarded as one of the greatest means of improvement and fellowship… This ordinance is far from agreeable to those who egotism and vanity are stronger than their love of truth. It is an ordeal which reveals insincerity and selfishness; but it also often takes the form of commendation, and reveals hidden virtues as well as secret faults. It is always acceptable to those who wish to see themselves as others see them.”

One session describes group criticism of a young manager who is especially skilled at work but has developed a haughty attitude. His peers explain their perception of him and how his behavior makes them feel. The session is in no way mean-spirited but, rather, geared towards explaining that a better attitude on his part would meet with a better attitude from others so everybody would be happier and emotionally healthier. It sounds like an early form of group therapy rather than an unproductive airing of general grievances.

Books and all business matters were entirely open and business operations are made by consensus. If any member objects, the commune discusses their concern until everybody agrees. The commune had an enormous number of administrative committees and women were equal to men in positions of power.

Tensions continued to flare as Noyes aged and attempted to pass control of the commune to his son, who was largely indifferent to the teachings of Noyes, rather than a different member the community preferred. Furthermore, it is suggested many members, led by James W. Towner, frowned upon Noyes’ control and initiated an internal revolt. They were especially the practice of initiating the older children into the community.

In June 1879, Noyes was accused of statutory rape and fled to Canada where the commune ran a factory. Already facing internal conflict, Oneida’s disintegration accelerated in the late 1870s as outsiders revolted against complex marriage. Noyes advised the commune to abandon complex marriage and the members coupled into monogamist relationships. The community officially dissolved in 1881, the business converted into a corporation with shared issued to members. Noyes died five years later, in 1886. His body was returned to the commune and buried in the communal cemetery.

After the dissolution, Towner and his followers moved to California with their share of wealth. They purchased enormous tracts of land. The Governor of California recognized their political power and rewarded them by carving a piece of land, naming it Orange County, and appointing Towner the judge. Oneidian Townerites still practiced free love, egalitarianism, and communism though they’d learned their lesson about upsetting the locals and kept the practice more discreet. The Townerites were influential in establishing a moral openness that persists and permeates California thinking to this day. Their influence on the Republican Party, which they embraced as Civil War veterans firmly committed to freedom and abolition, cannot be overstated.

Oneida’s most successful business, Oneida tableware, still exists. Over the past decade or so, US operations were largely shuttered and outsourced, after 150 years, as private equity firms did that voodoo that they do so well. They eventually bankrupted the business. Twice. Today, Oneida is owned by The Oneida Group.

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Remembering Farmville, a Game that Changed It All

Nintendo studied noncustomers to create the blockbuster Wii and all went well until blue ocean Farmville.

As 2020 drew to a close so did the end of an era; game maker Zynga shut down Farmville, the original massively viral blue ocean game. Let’s take a minute to check out the history of Farmville that traces its roots to the Wii.

Nintendo Needs a Hit

I’ve repeated the story of blue ocean blockbuster Wii so many times I can type it from muscle memory.

Summarizing for those just being reanimated from a deep sleep, Nintendo was a distant third in the console wars. Market leader Sony was releasing the PS3, a console with a proprietary chip so advanced it could steer cruise missiles plus a Blu-ray disk reader. Microsoft was competing vigorously with the Xbox 360, losing about $550 on every $400 console sold.

Nintendo decided to release a new system but could not afford to lose any money on even the first console. Rather than compete, they used blue ocean strategy to study noncustomers and develop the idea of “casual games” — that is, approachable games anybody could play that became more difficult over time.

Specifically, Nintendo studied Tier 3 noncustomers in retirement homes to see what they spent their time doing. The Kyoto firm found the retirees were playing games like Chess or Bridge, games that had relatively simple rules but became maddeningly complex when played against clever opponents.

Nintendo’s Wii was a smashing success outselling the Sony and Microsoft consoles combined for two years, an eternity in the fast-moving world of high-tech. At one point, Nintendo was the highest per-employee grossing company in the world. Everybody wanted a Wii whereas traditional games also wanted a Sony or a Microsoft console.

Driven largely by their focus on casual approachable games, Nintendo launched a blue ocean of gaming.

Until Farmville

By any rational measure, Farmville should’ve been a flop. The “game” — if you can call it that — was ridiculous. People were required to plant virtual crops they needed to then harvest after a certain amount of time to be exchanged for in-game currency. Space out harvesting your crops for too long and they withered, requiring virtually digging them out and replanting them. To plant or harvest crops you’d chose a crop then click on a rectangle of adjacent squares, one after another. In gaming parlance, this is referred to as “grinding,” — requiring brainless no-skill tasks over-and-over to advance.

Players use virtual coins to expand the farm, buy virtual buildings (that had no utility besides aesthetics), or gain access to more crops. Expanding the farm meant more grinding planting and harvesting crops in an effort to build the farm even larger. For those who wanted to go faster — who didn’t want to wait for their crops to mature — people could purchase in-game coins for real coins which is how Farmville owner Zynga earned a living.

Farmville ran on Facebook and relied heavily on community functions. Specifically, players were able to ask their Facebook friends for help with their farms. The more friends that joined in to help, the faster things moved along. This created a naturally viral game — where players advertised to one another via friends networks — but it also quickly became a spammy experience, especially as other game makers copied the functionality and countless game notifications filled the Facebook news feed. Eventually, Facebook made it far harder for game makers to engage in this type of advertising and far easier for users to entirely prohibit the game notices.

The viral method worked. The game shot to the top of the charts for Facebook games in 2009 and, at one point in 2010, Farmville had 83 million active users and 34.5 million daily active users.

There’s a strong argument to be made that Farmville is a knockoff of the wildly successful Farm Town. The evidence seems to support this but, for the purpose of analyzing what makes it a blue ocean game, this unseemly aspect of its origin story isn’t all that important.

Blue Ocean Strategy Analysis

So - what makes Farmville a blue ocean game? Let’s run through a four actions framework exercise thinking about what they eliminated, reduced, raised, and created.

Eliminate

The game eliminated the need for skill. If you can tap, you can play Farmville. There’s also zero buy-in cost. Before Farmville, most games required people to purchase the game. Farmville is entirely free, which was new at the time. Also, the game eliminated the need to install a game; it all ran in a browser.

Reduce

The reward mechanism of achievement was vastly reduced. Remember to show up in time to harvest your virtual crop and you win some more coins. The cost to advance is also reduced in terms of risk. That is, with a traditional game you’d purchase the entire game and risk that it stunk. With Farmville, you purchase small amounts of coins at a time. The purchases can and did often aggregate to as much or more cost than buying the game but it was just a few dollars at a time and you knew, immediately, what you’d receive for the purchase.

Raise

Zynga, or whoever actually made the game, raised the level of creativity. That is, where most games involve a small set of preset screens you do something with (play cards, shoot monsters, etc) with Farmville you design a virtual farm; it actually involves some creativity. Additionally, the reward system unlocked more design options than simply the satisfaction of beating a monster or advancing a level.

Create

Finally, they created the viral part of the game looping friends in to help which also helped it spread. There was also the need to return to the game or suffer a penalty whereas most games were perfectly happy to be ignored when not played.

Back to blue ocean strategy and the Wii

Farmville brought the appeal of Wii games to the masses in a way that didn’t require a proprietary console or even a download and installation. Rather, these casual games were played in web browsers and connected via Facebook.

The game does rely on the Flash plugin from Adobe, antiquated technology now abandoned that, even at its peak, ran poorly and is a perennial security risk. But surely Zynga could have reprogrammed it with newer more modern tech if there was any cost justification to do so. This is a good example of why technology is never a key factor: Flash didn’t matter but the ability to play in a browser — for which there are several better methods — did.

Furthermore, they could also have built traditional iOS and Android games if Farmville would’ve attracted even a fraction of the users it did (at one point they did then withdrew the offering). And, indeed, there is a Farmville 2, Farmville 3, and a few others. But none ever caught on like the original.

Finally, one criticism of blue ocean strategy is that many of the cases we cite did not use the strategic framework. Instead, we study strategic moves — usually, products and services but sometimes also government programs or social movements — to search for patterns. Nothing is actually wrong or even unusual about that though the practice draws critics. However, I’ve been personally told by a senior Zynga employee speaking confidentially that, during their early years, they did use the blue ocean tools and frameworks. However, Zynga eventually lost its way and became a deep red ocean competitor with the predictable chaos that creates.

Leadership: INSEAD Professor Neil Bearden

Leadership often requires radical change, pushing us well outside our comfort zone.

During a seminar about careers in business school academia, a young woman asked:

“Medical school professors work in hospitals. They have patients. Law school professors have cases and causes or sometimes they work as judges. But how do business school professors get experience with what they teach?”

“Well … we teach executives who visit for classes and they tell us about their business,” the visibly flushed lecturer answered. “And some professors take consulting work.”

“But is that really the same as, say, taking care of patients or seeing lawsuits through?” she replied.

I’ve created and sold two startups then worked as an intrapreneur inside two Fortune 500 businesses I’d joined after acquisitions. Now, I’m a research fellow at a top-tier business school.

Teaching is different than pushing a project forward as an employee or flying in as a consultant. That’s not to belittle either teaching or consulting but they’re not the same as starting or running a business.

This brings us to a recent decision made by one of my favorite INSEAD faculty, Neil Bearden, professor of decision science. Seemingly, out of nowhere, he made the decision to quit and work as an entrepreneur, opening his own school.

Nothing was wrong with Neil’s job; just the opposite. He had what many people would consider a dream life; the job security that comes with tenure at a top-tier school, the adoration of students, a flat in Singapore where Hawker centers sell great food at rock-bottom prices. He loves teaching and researching. Neil has a wife and a young child. Really, everything countless people in life would want.

And, to clarify, he’s grateful for all of it. Like me, Neil’s a first-generation college student from what many consider a backwater red state. Plenty of childhood friends work blue-collar jobs, a few can’t find work at all, and a small number are all too familiar with the US penal system. More than a few are familiar faces in AA and NA meetings. He’s not familiar with the other side of the tracks; he’s from there. Neil has no trust fund to fall back on or family business with an always-open position.

And yet, as the magic age of 50 inches ever closer, Neil found himself in a Tony Robbins seminar.

My sole knowledge about Tony are memories of late-night infomercials back when people still watched commercials. I’d be almost asleep when the sound boosted up and Tony burst into the bedroom like an uninvited evangelist on too much Adderall. What could Neil, a Ph.D. psychologist with a long list of academic papers, possibly learn from Tony Robbins, a man whose education ended with high-school?

Quite a bit, apparently.

I won’t claim to know what Tony Robbins is about, positive or negative. Except that a whole bunch of people I know and respect seem to be willing to act on his advice to change their lives, Neil being one of them.

At Tony’s seminar, he pictured himself in 20 years, a semi-retired Professor Emeritus in the same office doing the same thing he’d always done.

For many people, it’d be an idyllic life. Corduroy jackets with elbow patches, maybe a pipe, messy desk, adoring students, super flexible schedule, and plenty of money in the bank.

For Neil, it sounded like a recipe for a life of missed opportunities, of regret. A life not lived to the fullest. Of not pushing to and through the boundaries he taught students to conquer. Teaching mountain climbing is, after all, a whole lot different than climbing mountains.

And so one day, not long ago, after discussing the issue with his wife, they found a house in the US, decided to buy the kid a dog to ease the transition, then he marched into the dean’s office and resigned.

My time as a shepherd

I finished high school at 17 and went to a kibbutz, the only place that didn’t require any money to hang out, money being something I didn’t have. I shepherded sheep for a year and a half working in fields near Meggido, watching my flock graze and thinking. When I wasn’t with the sheep I hung out in a communist enclave with people from all over the world, living and playing underneath red flags. All of which wasn’t a bad way for a kid from southern Indiana to grow up.

You learn a lot as a shepherd. Sheep have a bad rep. They’re far more self-reliant than people give them credit for. If you zone out, the sheep will find their own way back to the sheep barn as a flock. If you get lost the sheep will guide you; getting lost with 400 sheep following is an interesting experience. When sheep birth a lamb in pasture good shepherds will notice and carry the newborn back. I was a lousy shepherd and missed at least one birth so baby and mama made the multi-mile hike back surprisingly none the worse for the wear.

There are sheep in the flock who are natural leaders. They’re noticeably smarter than other sheep and lead while the other sheep (and, sometimes, a directionally challenged shepherd) follow.

The biggest challenge shepherding sheep is that if a shepherd isn’t careful the sheep will split into two or more groups each walking a different direction. It’s a pain to get them pointed back towards one another. They’ll also sometimes start walking in circles around enormous bushes where they can’t see the other side. They follow the sheep in front of them thinking they’re going somewhere while they’re actually just wasting energy walking to nowhere and not eating. It’s best to avoid getting to a place where the sheep are walking to nowhere because it’s really hard to get them out of this pattern.

People often make fun of sheep, “sheeple” being a common insult. But people are actually more like sheep than we care to admit and that’s not necessarily bad. We’re taught from a young age to conform, play by the rules, fit in, and not cause trouble. We graze and work as a group. We’re pushed together when we stray, we generally collectively find our way back to the sheep barn safely. If we leave a flock, it’s usually to a larger group. More than a few of us blindly follow those in front, oblivious that we’re walking in giant circles.

Still …. Beautiful pastures, limited responsibility, fresh grass, going to bed in fresh hay. By any objective measure, life isn’t bad for sheep, or people, if you're part of a strong flock. Of course, once they can’t produce anymore it’s off to the kebob stand but the sheep don’t know that until the end.

Leadership

This raises the question, what is leadership? When we teach leadership what do we really mean? What are we teaching? Are we just encouraging people to be the sheep that walk in front or is there something else?

Arriving at the sheep barn one day, I’ll never forget the day one of my favorite leader sheep was being carted off to the butcher. We used paint colors to identify groups of sheep and she had a spot of purple on her head earning her the name Punkie.

“Punkie’s one of the first to follow me and leads the flock,” I told my boss, objecting.

“I know but she’s too old for lambs,” he answered.

He didn’t contest she was a leader but those leadership traits weren’t useful enough anymore so off she went, the butcher driving her away, leaving a trail of dust behind. If she could talk, I’m sure Punkie would say she’d had a fine life.

Neil, an expert in decisionmaking, made a decision to short-circuit that possibility.

One unfortunate pattern in life is that I seem to always meet the most interesting people when they’re on the verge of leaving and Neil is no exception. I didn’t know him nearly as well as I should have but, true to what I do know, he’s decided to step far outside his comfort zone, to climb the mountain rather than teach how to.

Leadership is ultimately taught by doing. Neil’s demonstrating the courage to upend his life, to radically change direction before that old van arrives. It’s scary, but admirable. I wish him the best.

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