The modern-day Ai prospector

TL;DR

It’s 1897, and John Sutter, a grizzled prospector, is trudging through the icy wilderness of the Klondike. He’s got dreams of gold nuggets as big as his fist. But what he doesn’t realize is that the real gold isn’t in the ground — it’s in the strategy.

Today, we have modern-day gold seekers, armed not with pickaxes but with shiny new AI products. All are hoping to strike it rich. They’ve read “Blue Ocean Strategy” and believe that success lies in creating uncontested market space. But hold on a minute — let’s not get carried away just yet. Sometimes the real gold isn’t in uncharted territories; it’s right where everyone else is digging.

John Sutter had been living a modest life in California when news of Skookum Jim Mason’s (Keish) fortune spread like wildfire. Sutter, a hardworking man with a sense of adventure, couldn’t resist the lure of the gold rush. He’d read about Mason’s incredible find in the Klondike, a discovery that promised untold riches. For John, this was a once-in-a-lifetime opportunity to strike it rich, and he was determined to seize it.

He sold all his belongings, a gamble that left him with nothing but hope and determination. With his savings in hand, he boarded a steamer bound for Alaska, embarking on a journey that spanned approximately 1,600 miles (2,575 kilometers).

The steamer ride was far from a pleasure cruise. Sutter faced cramped conditions, seasickness, and the ever-present threat of storms. The journey, which lasted several weeks, tested his resolve. Yet, the thought of gold kept his spirits high.

Upon arriving at the port of Skagway, Sutter was greeted by a bustling hub of activity. He quickly realized that the journey had only just begun. From Skagway, he traveled by train, covering another 100 miles (160 kilometers) to Bennett Lake.

From there, he faced the daunting task of traveling the final 600 miles (965 kilometers) on foot, accompanied by his trusty steed, Blaze.

The Canadian Mounties were strict, ensuring every prospector had enough supplies to survive the harsh conditions. Sutter packed his gear meticulously, knowing that any oversight could mean the difference between life and death. On his journey, he met a local Native American named Tlingit from the Tlingit tribe. Tlingit was a mysterious yet knowledgeable figure, well-versed in the territory and its unpredictable weather.

Realizing the advantage of traveling together, Sutter and Tlingit formed a partnership. Before setting off, they performed a traditional ritual, which included a hallucinogenic experience intended to bond them and prepare their spirits for the challenges ahead.

Traversing the Chilkoot Pass was a grueling ordeal. The path was treacherous, filled with deep crevasses, and the constant threat of avalanches loomed. One particularly harrowing day, an avalanche struck, burying Sutter under a mountain of snow. It was Tlingit who dug him out, saving his life and solidifying their friendship.

As they neared the summit, the extreme cold took its toll. Tlingit nearly succumbed to hypothermia, but Sutter managed to start a fire and cooked a rabbit they had shot earlier. This act of survival was a testament to their growing bond and determination.

After weeks of hardship, they finally descended into the Klondike Valley. The sight of the town, with its numerous huts and bustling activity, was a bittersweet moment. The valley was packed with prospectors, and finding an unclaimed spot to stake was nearly impossible.

Sutter and Tlingit ended up panning for gold in a creek, scraping together just enough to survive. Their small finds were enough to keep them fed but far from the riches they had imagined.

As larger corporations moved in with industrial-scale operations, Sutter and Tlingit found work as dirt shovelers on a machine they nicknamed Ol’ Faithful. The pay was minimal, just enough for a bed in a boarding house, a set of clothes, and the occasional beer. It became clear that the real fortunes were being made by those who supplied the prospectors, like the Klondike trading companies.

Sutter realized that while he had not struck it rich, he had gained invaluable experiences and a lifelong friend in Tlingit. Together, they decided to become guides for new prospectors, sharing their hard-earned wisdom and helping others navigate the perilous journey.

A look at the numbers

The Klondike Gold Rush saw over 100,000 people embark on the treacherous journey, yet only about 30,000 reached the Klondike. Of those, only a few hundred struck it rich. Many, like Sutter, ended up working for others or returning home empty-handed. Tragically, an estimated 4,000 people died in the attempt, and countless others were left destitute. The only ones who really made a fortune were the trading companies.

In percentage terms:

- 10% reached the Klondike.

- 0.3% struck it rich.

- 4% died.

- 85.7% were fodder for the factories or returned home with little to show.

The Klondike gold rush delivers a harsh lesson about the true cost of an venture on that scale.

And this is but the prelude to the real story — bear with me please — I’ll get to the point!

The gold rush of business strategy

During the Gold Rush, gold prospectors searched for a promising location that wasn’t yet occupied by their rivals. Companies are like these prospectors. They seek out market zones or niches with many customers and few competitors.

But this is a flawed strategy. Why you say:

AI is the new gold

Just as John Sutter faced the brutal realities of the Klondike, modern-day entrepreneurs are navigating the treacherous waters of the AI gold rush. Today’s tech visionaries, much like Sutter, are driven by the promise of incredible wealth and revolutionary breakthroughs. Armed with advanced algorithms and data-driven insights, they embark on their own perilous journeys, hoping to stake their claim in the burgeoning field of artificial intelligence.

Many have read “Blue Ocean Strategy” and are convinced that success lies in uncharted waters, far from the crowded, competitive markets — the so-called “red oceans.” The idea is to find a unique niche, a fresh market untouched by rivals, and set up camp. However, the glittering promise of a blue ocean can often be more illusion than reality.

The concept of a blue ocean is seductive. Who wouldn’t want to be the lone wolf in a new, untapped market, free from competition? But the harsh truth is that venturing into uncharted waters can be fraught with peril. Just as Sutter discovered that the Klondike was already overrun with hopeful prospectors, today’s AI pioneers may find that their blue ocean is either too shallow or teeming with hidden dangers.

Let’s take a few examples

Prospecting for cash

During the Klondike Gold Rush, prospectors scoured the landscape, searching for unclaimed spots to strike it rich. Similarly, companies today hunt for market zones or niches with plenty of customers and few competitors. But much like the gold seekers of old, this strategy can often be flawed.

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A new kind of circus

Take the example of a traditional circuses. Adults rarely go without their kids (if they go at all these days). But then came Cirque du Soleil, which turned the industry on its head. Chan Kim and Renée Mauborgne go into this approach in their famous book, Blue Ocean Strategy, published in 2004.

CDS’s approach was simple yet revolutionary:

• The circus market was overcrowded, a ‘red ocean’ filled with competition.
• Creating another typical circus was pointless.
• Adults without young children were non-customers.

So, CDS founders crafted a new type of circus for adults and ditched the animals. They created a ‘blue ocean,’ a fresh market niche with lots of potential customers and no competition. And they struck gold, becoming fabulously wealthy.

It’s like being the only fisherman in a well-stocked pond — profitable indeed. This approach worked for CDS and Australian wine [yellow tail], cases studied in the book.

But it can also narrow your vision and make you miss other opportunities.

The ice cream gamble

Imagine you’re in the ice cream business. You know that 60% of people in your country regularly enjoy ice cream, 20% occasionally indulge, 15% avoid it due to dieting, and 5% can’t afford it. The real world is more complex, but this simplifies things.

The competition is stiff, so you look for new opportunities. It makes sense to target non-customers — maybe a diet-friendly ice cream or a budget version. This might work, in theory. But if your competitors see the same opportunity, they might have already tried and failed.

An obvious, simple solution in a competitive market is likely flawed. Doing what others don’t isn’t always a strategy — it’s like playing Russian roulette. There’s often a better way.

The market isn’t an ocean

Peter Drucker famously said, “The purpose of a business is to create a customer.” In reality, there are no ‘red oceans.’

When Kim and Mauborgne wrote Blue Ocean Strategy in 2004, Uber and the iPhone didn’t exist yet. Uber didn’t target non-customers but offered a new way to meet existing needs. Same with the iPhone.

The Blue Ocean Strategy suggests there are two markets: the current ‘red ocean’ and a hypothetical ‘blue ocean.’ But the market is a human-made concept without clear boundaries. When Red Bull launched its energy drinks in 1984, it didn’t create a new market; it created new customers.

Consumers have needs, and they often don’t know they belong to a ‘market.’ They just liked Uber and Red Bull and started using them. Innovation can also mean creating something new for existing customers.

Finding the blue ocean nearby

The market, a human-created concept, can be redefined. Philip Kotler’s definition is useful: A market is need or utility, target consumers, a place, time, situation, and experience. By tweaking one of these components, we can find new customers.

In 2007, a company was selling tea in colorful tins. Initially sold in supermarkets, they later placed them in gift shops. Sales quadrupled. Did thye create a ‘blue ocean’? Not exactly. They found new customers — gift buyers. Without his tins, they might have chosen something else.

In Dubai, you can call a fueling vehicle to refuel your car right in your parking spot. By changing only the place component, these businesspeople found success.

Changing market dynamics

Changing when or how people consume can also be powerful. Online marketplaces don’t just deliver; they let you shop any time. Sneakers used to be for sports only. Now, brands like Adidas and Nike have made them everyday wear.

Coffee was once just a hot drink. Today, Starbucks and Nespresso have turned it into an experience, with everything from latte art to TikTok challenges. An ice cream maker might think outside the box too:

• Ice cream for lunch?
• Selling ice cream in traffic jams?
• Delivering ice cream by drone to beaches?

These ideas might seem wild, but they show possible new directions.

Where to play and how to win

Roger Martin and Alan Lafley’s strategy concept focuses on two questions:

• Where to play?
• How to win?

This implies there’s a suitable market somewhere. In their book, Playing to Win, they describe Procter & Gamble’s Oil of Olay brand’s revitalization. The strategy involved finding the right market and customers.

Picture top executives examining a giant map of market niches. P&G found a perfect spot for Oil of Olay within the existing market. But to create new customers, one must look beyond the map.

The Klondike Gold Rush, much like the hunt for new markets, teaches us that innovation often means redefining the existing landscape rather than seeking completely uncharted territory. By understanding the nuances of market components — place, time, situation, and experience — companies can create new opportunities and customers, much like prospectors striking it rich by looking where others hadn’t thought to.

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