Value innovation is what creates blue oceans

Key takeaways

  1. Finding and creating a blue ocean market (a business that turns non-customers into customers, rather than competing for the same customer) is about creating a new value proposition, not technological innovation.
  2. Technology is not why Uber and Starbucks are now worth billions, they created offerings that appealed to non-customers (people not using taxis or people not going to retailers for coffee).
  3. You thus cannot rely on your technology or R&D group to create new opportunities, instead you need to find a new value proposition.

Value innovation is what creates blue oceans

I have written and spoken many times about Blue Ocean strategy, which is effectively turning non-customers into customers, rather than competing for the same customer. One problem many companies often make, though, is confusing product innovation for creating a blue ocean. A recent post, Confusing Technology Innovation with Market-Creating Strategies, highlights why R&D is not synonymous with market creation.

The success of two companies highlight how you can create a blue ocean without creating a product innovation. The first example is Starbucks. Starbucks was able to take a commodity business, selling coffee, and create a new industry by focusing on the customer experience. The post also points to “JCDecaux, which unlocked a blue ocean in outdoor advertising by providing and maintaining “street furniture” for municipalities in exchange for prime stationary downtown locations for ad displays. These strategic moves opened new markets without any bleeding-edge technology.”

Even technology companies that have created blue oceans have not necessarily done it by creating cutting-edge technology. Bleeding edge technology did not make Uber into a multi-billion technology company, instead it was applying relatively straightforward technology to traditional industry and using it to appeal to new customers. Same can be said for Wikipedia, which put information online but did not need new technology to do it but by combining existing technology with a traditional business, it created a product for a new range of customers.

The post points out that value innovation creates compelling new markets, not technology innovation. “Successful new products or services open market spaces by offering a leap in productivity, simplicity, ease of use, convenience, fun and fashion, or environmental friendliness.” Thus, you need to look at your business, your customers and non-customers and create value for them, rather than relying on your tech team to come up with a game changing innovation.


New management skills for a new era

Key takeaways

    • Technology changes the competencies needed to lead a team or company successfully. You need to expand your skills to be a successful leader moving forward.
    • Leaders need to retain their expertise and control over their tasks and processes, even when these tasks are undertaken by computers and algorithms and not individuals.
    • You need to adapt to adding managing artificial intelligence and digital algorithms to your skill set. You need to change from optimizing a common workday for your team to flexible schedules. You need be flexible and thoughtful in how you manage people with different preferences in how they use technology and what IT they use.

New management skills for a new era

While there have been thousands and thousands of useful articles written to improve management over the last hundred years (including some of my blog posts), they all share a common flaw, they are based on skills needed for the past 100 years, not the next ten years (I think it is crazy to look beyond ten given how quickly things change). New technology, new business models, new employer-employee implied contracts, etc., have changed the workplace. These changes mean you also need to change to remain an effective leader.

Both business leaders and employees face new challenges as we deal with changing digital technologies. An Article in the MIT Sloan Management Review, The Three New Skills Managers Need by Monideepa Tarafdar, lays out the three core competencies managers will need moving forward.


Partnering with digital colleagues

The first of these is the ability to manage algorithms and artificial intelligence as well as people. As Tarafdar writes, “Employees across a wide spectrum of industries will be working with what are, in effect, “digital coworkers” — algorithms that help them tackle a range of tasks such as answering call-center help desk questions, making financial investment decisions, diagnosing medical conditions, scheduling and running manufacturing assembly lines, and providing dashboard advice regarding important performance indicators. These digital colleagues will embody intelligence that evolves cognitively and learns continuously about the specific task it is applied to, by incorporating new solutions learned from experience and applying them to future problems.”

Putting the Terminator aside, there is a risk of algorithms disconnected from the reality of the phenomenon they represent, leading to incorrect solutions. It would not be optimal to maintain a team to oversee these digital colleagues; you would be negating the benefits. The human team would likely slow their digital partners or simply not be able to do the work, the reason it is being done digitally instead of by a person to begin with.

To prevent errors, however, leading to misguided actions (either directly by the process or decisions based on faulty conclusions), leaders need to retain their expertise and control over their tasks and processes just as you would over a human BI team. You need to provide context and recommendations for your digital employees, monitoring their decisions and actions and recalibrating when needed based on your experience, intuition and insights. Just as with human employees, you need to know when to agree, question, compromise and stretch your digital staffs

Becoming digitally mindful

Due to digital technologies, nine-to-five is becoming an obsolete workplace concept. It is much easier for people to work remotely and sometimes in different time zones. With people working remote, the reasons to abide by a 9 to 5 schedule are less compelling. There is also a higher probability you have people in different geographies, technology makes it easier to find the optimal partner. As Tarafdar writes, “current management mindsets still focus on the separation of work and nonwork time. Consequently, because managers find it difficult to establish boundaries between work and nonwork, organizations face the fallouts of “techno-stress,” technology addiction, and information overload. However, technologies will only increase in flexibility, richness, and seamlessness, and that will lead to their greater use at home for work and vice versa.”

The current skills based on managing work-home time does not account for the possibilities created by technology. Rather than staying with the current structure and simply forcing a balance, there are now opportunities to break from the old mold and create a better relationship. Again, to quote Tarafdar, “Managers should start thinking about cultivating a mindful relationship with the technology — one that embodies their individual preferences about what constitutes such flow. Rather than being troubled about work-home boundaries, which perhaps cannot be maintained in the future, organizations will need to support employees in managing the possibilities of flexibility. The paradigm should shift from conflict to flexibility, from technology detox to flow-driven use, and from the digital dark side to digital mindfulness.”

Developing empathy for others’ technology preference

Anyone who has tried to convince a colleague to go from a PC to a Mac, or to give up their Blackberry, understands how coworkers have different digital preferences. This also applies to how people use IT, some respond to emails at 3 AM while others only email at certain hours. Most managers have focused on the best technological solution for themselves and do not consider that employees or colleagues might have different needs and desires.

When people at a company clash on technology, it can often break down collaboration and teamwork. They may not share files (one uses Google docs, another uses Excel), they may not get each other’s communications (one focuses on emails, the other on texts) or they may miss appointments (one uses an Outlook calendar, the other uses JIRA), etc. Rather than forcing people to use solutions they are not adept at or comfortable with, managers need to act proactively to optimize productivity. Put people with the same preferences on the same team. Get tools that bridge the differences between preferences. The key is to be both flexible and thoughtful in how you respond to differences.

It is a new era

The key to leading into the next decade(s) is understanding things have changed. You need to adapt to adding managing artificial intelligence and digital algorithms to your skill set. You need to change from optimizing a common workday for your team to flexible schedules. You need be flexible and thoughtful in how you manage people with different preferences in how they use technology and what IT they use. Otherwise the successful leader of yesterday will become a failed manager.