CHAPTER 4
Humanness, Confidence, and Creative Competence
PEOPLE ARE PARADOXICAL. We aspire to make a difference. We want to change the world for the better. That’s what makes our energies soar, our hearts beat faster, our adrenaline surge. Yet, simultaneously, most of us fear we can’t. We need reassurance.
No matter how tough, confident, or polished we may appear, all of us are tender at our core. When we think about people as people, not as corporate executives, entrepreneurs, or government officials, and certainly not as human resources, we realize that, behind our titles, all of us are incredibly vulnerable. We strive to avert reproach. We want to avoid making fools of ourselves. We steer clear of revealing what we do not know. In our organizations, opening ourselves up and putting ourselves out there all too often trigger fears of losing status, respect, security, and power. So, our penchant is to cling to what is, instead of exploring what could be. This includes people at the top, whose egos are often the most fragile of all.
That is your truth, our truth, and virtually everyone else’s truth. That does not make us weak. It’s what makes us human. Not addressing these basic human truths, or assuming them away, is why so many change efforts and attempts to drive organizations to become more creative and innovative fail. They have not acknowledged and built what we call humanness into the process. The process of conceiving and executing a blue ocean shift does.
Humanness builds psychological understanding into the strategic process so that people are willing to engage fully at every step—even when they’re hesitant, may not trust one another, or are skeptical of their ability to succeed on the transformation journey. When we feel genuinely understood and appreciated for who we are as whole people, when we feel respected not because we are brilliant, bold, and perfect, but because we have something to contribute and want to make a difference despite our insecurities and vulnerabilities, we stop feeling like imposters with something to hide. We trust other people. We burn with desire to honor the faith that we feel is placed in us by putting in the extra effort to make success happen.
Humanness, in short, builds our confidence to act by eliciting our emotional engagement. It relaxes us and makes us feel secure enough to reach beyond what we know and explore the as-yet unknown. It inspires us to tap into our curiosity and creativity, which are abundant, powerful, and vastly underutilized by our organizations as well as ourselves. This is critical for reshaping and reimagining industry boundaries.
From Humanness to Creative Competence
While humanness builds our confidence to act, market-creating tools and clear guidance on how to apply them build our creative competence. Market-creating tools and guidance give people the intellectual understanding of the legwork needed to make a blue ocean shift happen.
Think of it like aiming to create your ideal body. Having the right mindset will direct your thoughts away from the kitchen to the gym. The confidence to act will inspire you to actually get in your car, go to the gym, and exercise. But as any athlete will tell you, to transform your body you need to know the specifics of what you have to do: how often to go to the gym, how to stretch, what machines to use in what order with how much weight, how many reps to do, the proper balance between cardio and strength conditioning, and how to eat properly. Without that knowledge, you aren’t going to be able to create the strength, resilience, and flexibility to transform your body. That’s the power that a systematic process, built on creative frameworks and actionable tools, brings to market-creating strategy. The tools and frameworks provide the specifics of what it takes to create and re-create markets. They transform your ambition into what we call creative competence and give you the levers of control you need to reshape market boundaries in your favor.
When confidence to act and creative competence meet, real results are achievable. Don’t let anyone ever tell you that one without the other is sufficient when transformation is your goal. An organization that has the confidence to make a blue ocean shift but lacks the knowledge of how to get there is like a gambler. It can expect lots of misdirected efforts and failed attempts. Conversely, an organization that knows everything you can and should do to create a blue ocean but lacks confidence to act will never actually do it. Let’s look at how the blue ocean shift process achieves both.
How Humanness Is Built
To help people develop the confidence to act, three elements that address different aspects of our humanness are built into the blue ocean process: atomization, firsthand discovery, and the exercise of fair process. Let’s look at each one in turn.
Atomization
While making a blue ocean shift represents a step-change approach to the market, it is purposely designed not to feel that way inside the organization. The process recognizes that the bigness and newness of the goal can be overwhelming. “You want us to chart a future beyond the existing market? You count on us to think differently and shape industry boundaries? Are we… am I even capable of doing this?” That’s most people’s knee-jerk reaction, and it’s natural.
Then how do you get people to make a blue ocean shift? You don’t. That is, not with one great leap. Instead, you break the challenge down into small, concrete steps that move people forward in increments that inspire and build their confidence. So, for example, people are asked to identify the factors an industry competes on. Or to pinpoint the biggest obstacles to simplicity in an industry. Or to zoom in on buyer groups that could benefit from your industry’s offering but don’t currently purchase it. When framed this way, each step pushes the boundaries of our thinking, but no one step overwhelms us. And, at any one stage, none of us can say that what is being asked of us is too big a leap. Yet, the culmination of these small steps leads to a blue ocean shift.
We call this atomization after Einstein’s reflection that if you deconstruct any challenge into its basic components, or atoms, and focus on solving them one at a time, even the largest challenge shifts from being overwhelming to being intellectually and psychologically solvable.1 As people register the feasibility of each step, tangible evidence that creating new market space is possible accumulates. People come to appreciate how what once appeared to be a daunting objective is, in fact, within their reach. Fear begins to melt into quiet confidence and pride, as people feel their creative competence expand.
Firsthand discovery
Our ideas about what is possible and what we are capable of are not only a function of the size of the challenge we face. They are also grounded in our past perceptions and experiences. And, in organizations, what most of us see and know to be true is the red ocean of intense competition. This makes it our safe harbor, emotionally and intellectually. So we cling to it, even when we know we shouldn’t. Every time a new person is “shown the ropes,” it reinforces the organization’s existing strategic perspective.
Challenging people’s view of the world by asking how the established strategy may need to change goes against this natural tendency. But natural does not mean inevitable. The question is, if defending the status quo and trying to bend reality to fit within it comprise the organization’s default behavior, what can a leader do?
Creating the conditions that will enable people to discover for themselves, firsthand, the need for change, instead of being told, is the answer that emerges from our research. The blue ocean shift process achieves this in two important ways. First, people are handed no predetermined conclusions. Rather, at each step, people are given tools that allow them to arrive at the answers themselves. The tools show them how to think in new ways and allow them to discover for themselves the need—or the lack of need—to make a blue ocean shift. With no predetermined conclusions, people don’t feel manipulated. And because the process allows them to reach the conclusions themselves, their creativity and understanding of what matters expand, as does their ownership of the results.
Second, the process changes what people see and experience, leading us to open our minds and change our understanding of what we know to be true because we witnessed it ourselves.2 The process achieves this by creatively putting you and your team face-to-face with the market, instead of praying for insight, or building it and assuming people will come, or relying on third-party market research. It gets you out of the office and into the field to speak with both customers and noncustomers, to act like buyers and experience products and services as they do, to feel buyers’ pain points that were always there but that you’d never seen before, to observe alternative industries and human behavior—in short, to collect visceral insights. In this process, people start to see and feel the need for change and how they might shift the strategic playing field to make it happen.
Seeing truly is believing. It moves us from the unsettling, highly vulnerable mindset of “I don’t know” to the quietly confident one of “I know,” not because we have been briefed by a report or told by a third-party focus group, but because we saw and experienced it for ourselves. People start waking up, thinking, “Why didn’t we ever see that before? It’s so obvious!” No matter how stubborn people are, they start to see patterns that had escaped them or that they’d written off as anomalies before. Confidence rises. Optimism increases. People’s creativity expands.
Fair process
The third element of humanness is fair process. Fair process speaks to the fundamental fabric of who we are as people. It confers the gift of trust, enabling us to relax and inspiring our commitment and voluntary cooperation.
What is fair process? Essentially, it comes down to three principles that we have written about and studied for nearly 30 years: engagement, explanation, and clear expectations.3 The power of these principles cannot be overstated. They are the foundation on which the blue ocean shift process is built. Engagement means actively involving people in strategic decisions that affect them by asking for their input and allowing them to refute and challenge the merits of one another’s ideas and assumptions. When managers do that, they communicate their respect for the people who work for them and for their ideas. It builds collective wisdom. Fostering engagement in this way generates better decisions and greater commitment from those involved in executing them.
Explanation means providing people with a clear account of the thinking that underlies the process and the strategic decisions reached at each step. Explanation reassures people that their opinions have been considered, and decisions have been made with the company’s overall interests at heart. This fosters people’s trust in managers’ intentions—even if their own ideas were rejected.
Lastly, clear expectations means just that: stating clearly what people can expect, and what their roles and responsibilities are, at each step and in moving forward after the process is complete. Although the expectations may be demanding, when people know what the goals and milestones are, and who is responsible for what, they feel safe and respected.
When we talk about expectations, we mean expectations for the entire organization, not just the blue ocean team, so that everyone who will be affected by the shift is brought along and not surprised at the end by an alarming fait accompli. Just as the team’s leader exercises fair process with team members, they, in turn, have to exercise it with their functional cohorts: engaging them in what the team is finding; explaining the process behind it; setting clear expectations about what will come next and why. If you want buy-in, surprises do not tend to go down well in most organizations. Even good surprises may be rejected if the process leaves people feeling discredited and rolled over.4
What makes fair process so powerful is that it communicates through its action how much people are valued as individuals and recognized for their intellectual and emotional worth.5 When we feel valued, we feel emotionally secure and are intrinsically motivated to give our all. We trust, we commit, and we move from being self-protecting to being open to sharing, exploring the new, and giving our best ideas even when we are uncertain as to how they will be received. Anyone who has ever worked in an organization understands how important this is.
The courtesy of the respect that fair process conveys triggers something at the core of the human spirit. Fair process internally civilizes us. It helps us suspend judgment and build trust so that we can listen, learn, weigh others’ points of view, and contribute. Otherwise, it’s too easy for people to put on a show of acceptance, while intending to do the exact opposite, because they feel internally violated. Fair process takes a huge step to closing that gulf, which is especially important when change is at issue.
By weaving fair process together with atomization and firsthand discovery into the process, humanness and, hence, confidence to act are instilled and reinforced. By doing so, execution is no longer an afterthought. Rather it is built into the process by creating people’s buy-in to the outcome of the process itself. What’s special about this buy-in is that it persists, even when the resulting decision is at odds with what people had originally hoped for. While we may wish it were otherwise, we also accept that things cannot always go our way, and that short-term personal sacrifices are sometimes needed to advance the success and promote the survival of an organization. This acceptance, however, is conditional on the presence of a humanistic process.
Figure 4-1 captures in one graphic the essence of how humanness is built into the blue ocean shift process. The figure shows how the three elements address different aspects of our humanness and collectively produce the confidence to act and make a blue ocean shift. As shown, atomization breaks the challenge down, so that it is easy to act on; firsthand discovery allows people to see things that they never saw before and firmly believe in the need for change; and the exercise of fair process makes people feel valued and respected, inducing their voluntary cooperation.
Figure 4-1
How Humanness Is Built in the Process
When strategy implementation is internally driven in this way, instead of externally imposed or manipulated through carrots and sticks, people voluntarily support and enact strategies to make a blue ocean shift. The attitude at the end of the blue ocean shift process is palpable. In two words, it’s “We’re launching.”
The Right Tools with the Right Guidance
Eight to 9 out of 10 entrepreneurs fail. In almost any other context that would be a shocking statistic, but, for some reason, it’s something that the entrepreneurial community has long accepted as okay. We were never okay with it. The blue ocean shift process comprises five systematic steps that minimize the randomness and trial and error in creating new markets so you maximize the chances of hitting the bull’s-eye. It uses proven market-creating tools and frameworks to build an organization’s creative competence to pioneer a new value-cost frontier with a supporting business model that simultaneously achieves differentiation and low cost. And it provides clear guidance on how to apply these tools in action, including what to expect and how to avoid errors and missteps along the way. The tools are visual, which makes them easy to understand and apply. We’ve used them with equal effectiveness with C-suite executives, people on the front lines, and the owners of small Main Street businesses. People in the arts, government, and education have also used them to unlock blue oceans. So have high school students and religious organizations. We dare to say that no one who goes through the process will ever see and understand their market—or any market—the same way again. Here’s the sequence the process follows, and the tools and guidance you’ll learn in each step.
Step One: Get Started
Step one tackles how to choose the right place to start your blue ocean initiative so that your zone of transformation is not too ambitious and you focus on areas that are most feasible in light of the organizational constraints you may confront. To achieve this, we introduce the pioneer-migrator-settler map, which guides you to target the area where you have the most to gain by the blue ocean journey. Here we discuss how to apply the map, and what the results reveal. We also identify the key traps and pitfalls teams fall into in applying this tool and explain how to avoid them.
Once the scope of your transformation is set, it’s time to construct the best team for your journey. How many people should be part of the team? What mix of skills should ideally be brought together, and what levels of functional and hierarchical authority should be represented? How much time can team members and you expect to commit to the process, and how will that affect people’s regular work? And what will this look like if you’re a small business owner or entrepreneur, a CEO, a product manager, or a government leader?
Step Two: Understand Where You Are Now
Step two tackles how to inspire a natural wake-up call in the team and in the wider organization about the current state of play in your industry. It shows how to collectively build a clear picture of the current competitive landscape. When people see what the strategic reality is, and agree on the need for change, you can create real alignment and a collective will to make the shift.
To achieve this, this step introduces the strategy canvas tool. The strategy canvas allows your organization to see in one simple picture all the factors an industry competes on and invests in, what buyers receive, and what the strategic profiles of the major players are. It exposes just how similar the players’ strategies look to buyers and reveals how they drive the industry toward the red ocean. Importantly, it creates a commonly owned baseline for change. In this step you will learn how to draw the strategy canvas, what you can expect as people work together on this, how to interpret the completed canvas and build a shared understanding of its strategic implications, and what the potential traps in applying the tool are and how to avoid them. The beauty of this step is that, once you’ve completed it, you will not need to tell anyone that a blue ocean shift is necessary. Rather, the organization will find this out for itself and tell you. People will viscerally feel it.
Step Three: Imagine Where You Could Be
To make the shift from what is to what could be, step three introduces the buyer utility map. This analytic tool helps you discover the specific pain points and points of intimidation that your current or target industry is imposing on buyers throughout their entire experience. More importantly, it helps you identify the unexplored spaces where value is trapped and waiting to be unlocked. In the blue ocean shift process, pain points and boundaries are not constraints. They are blatant opportunities to change the playing field of strategy—opportunities that most industries have become blind to. Here we walk you through how to apply the buyer utility map to your situation, and what to watch out for as you trace and assess buyers’ total experience. We discuss how to interpret the results, and highlight the potential pitfalls in working through the tool and how to overcome them. By understanding the ways in which an industry, even an intensely competitive one, blocks buyer value and narrows the basis of its appeal, the seeds for new pathways to unlock innovative value begin to sprout. People gain confidence that blue ocean opportunities are out there, and that they just might have what it takes to create them. Already the organization has benefited from the identification of low-hanging fruit.
Step three then shows you how to break away from conceiving too narrowly of whom an industry’s customers are. To achieve this, we introduce the three tiers of noncustomers. This analytic framework allows an organization to identify the total demand landscape that lies outside the current industry understanding. Here we show you how to apply each of the three tiers to your situation, discuss how to interpret the results, and highlight the questions people are likely to have in working through the framework and how best to address them. In this step, noncustomers that were once invisible to an organization are made visible, so latent demand can be unlocked. With shock, amazement, and sometimes even humor, people wake up to discover that the customers everyone has been fighting over are often only a fraction of the potential total demand. The concept of a blue ocean is no longer a metaphor. People start to see, feel, and define its potential.
Step Four: Find How You Get There
Step four is where organizations learn how to create commercially compelling new market space by redefining the playing field of strategy. This is when you learn how to put random brainstorming aside and apply systematic paths to reconstruct market boundaries and create and re-create markets. The six paths framework, the analytic tool introduced in this step, demystifies and provides a structure for blue ocean creation. The paths show you how to look at the market universe anew and to see what others don’t see. Here you will learn how to explore each path to extract the insight needed to redefine, reimagine, and shift market boundaries: whom you should interview and observe in the field to gain insight; how to record and synthesize your findings; and how to identify and avoid the common traps that lie along the path to reconstructing market boundaries. The result is firsthand insight into practical ways to reframe and redefine the problem an industry focuses on, identify and solve brand-new problems or seize brand-new opportunities, and create breakthrough solutions to the existing problem of an industry.
Step four then shows you how to make sense of these insights and formulate them into well-constructed strategies. To achieve this, we introduce the four actions framework, which drives the team to focus on what they could eliminate, reduce, raise, and create to construct six potentially viable blue ocean strategic moves. What makes this tool so powerful is that it forces everyone to push their thinking to pursue both differentiation and low cost, which is what will break the value-cost trade-off and create blue oceans.
Step Five: Make Your Move
Step five introduces the blue ocean fair, where the decision is reached on which blue ocean move to pursue. The fair is designed to take the politics out of the decision-making process, obtain validation and feedback on the strategic options, and consolidate people’s commitment to and support for the chosen move. This step addresses the dynamics of the fair, including who will attend, what should be presented, the dynamics of the presentations of the strategic moves, and how the participants vote on the moves’ strengths and weaknesses. It also illustrates the calibration that occurs as people voice their opinions and reasoning, and how, ultimately, top management selects which option to move forward with.
The result is a clear decision, validated by key stakeholders with a wealth of feedback and insight on how the chosen strategic move can be further refined and potential gaps in execution can be efficiently and effectively closed. After the fair, rapid market tests with the chosen offering’s rough prototype are conducted to cross-check market reactions and refine the idea, as needed.
Step five then elaborates on how to finalize and launch your blue ocean move. Here we show you how to formalize a big-picture business model for the move that can deliver a leap in value for buyers and strong profitable growth for you or, in the case of a nonprofit, a leap in the net donations available for the cause. You’ll learn how to effectively launch and roll out your new blue ocean move and how to use the strategy canvas to guide decisions on what to do and what not to do, so the organization has integrity in its execution. The rollout process also outlines how to further validate, calibrate, and refine your blue ocean approach to maximize the size of your new market and hence your success.
How to Make the Process Work for You
Figure 4-2 provides a high-level overview of the process. The process is a balance of hearts and minds, of humanness, confidence, and creative competence. And when you balance hearts and minds, you gain hands: People act. The beauty of the process is that each of the five steps with its corresponding analytic tools and guidance has value on its own. This is important because, although the five steps comprise the full process for making a blue ocean shift, not every organization will be at the same starting point. For example, you could be part of a company that was once a market leader and whose profits are still strong, but whose competitors are closing in fast. Buyer reviews suggest your company’s offering no longer stands out, but most of management remains in denial. You may not be ready to go through the full process, but you know you need to wake the organization up to the imminent threat, and you don’t want the wake-up call to be hitting the wall and entering the valley of death. What to do? Apply step two and the analytic tool of the strategy canvas. It is a highly effective way to change the conversation from one of illusion and denial to one grounded in reality.
Overview of the Blue Ocean Shift Process
Or suppose your organization’s offering still stands apart, but the size of your industry is small and you are yearning to grow. Fighting over existing customers will cut your profit margins. Yet you don’t have a grip on who the industry’s noncustomers are. Jump to step three and apply the analytic framework, the three tiers of noncustomers, to gain insight into the latent demand you might be able to tap into.
Are you tired of A/B testing random new business ideas in the hope of someday hitting on one that will create a new market? Do you find your creative pathways blocked? In either case, jump to step four to learn how to apply the six systematic paths to creating commercially compelling new market space.
The principle of atomization that works for individuals also works for organizations. While most organizations today need to break out of the red ocean, we’ve found that, despite their desire to create a blue ocean, many are not yet ready to embark on the entire journey. That doesn’t mean they can afford to stand still, however. That’s why we designed an atomized process so that every organization can get value out of applying a step or steps, as needed, to start moving. In other words, the process is not an all-or-nothing deal.
As illustrated above, organizations can zoom in on the step that best addresses their current need and apply it independently. Insights on moving from red to blue can be had at each step, whether done in isolation or as part of the overall process. As we discuss each step in the following chapters, the independent value that can be derived from it will become clear. In this way, every organization can start sailing, based on who they are and what they are ready for. Importantly, each step has the three elements of humanness woven in, so your organization’s confidence will strengthen as its creative competence grows. In this way, mobilization is built into each step of the process.
With the above understanding of the blue ocean shift process and how each step simultaneously builds confidence and creative competence, let’s dive in. The next chapter tackles the first part of step one by showing you how to choose the right place to start your blue ocean initiative.