Thursday, December 11, 2014

Red Ocean Traps

KIM W. Chan, MAUBORGNE Renee
Red Ocean Traps Harvard Business Review (forthcoming)

In this article, Kim and Mauborgne explore the importance of mental models and how managers' ingrained assumptions often undermine their efforts to develop and execute market-creating strategies. These mental models, which are grounded in knowledge acquired in classrooms and from years of practical business experience, work well to help managers respond to competitive challenges. But the mental models that managers rely on - often unconsciously - to negotiate their existing market space also undermine their ability to make market-creating strategic moves. Here Kim and Mauborgne highlight the six especially salient assumptions which they call Red Ocean Traps, because they effectively anchor managers in the competitive market space or red ocean that managers are so used to. Of the six Red Ocean Traps, two stem from the marketing discipline and include customer orientation and niche strategies, two stem from lessons in economics on technology innovation and creative destruction, and the two stem from the principles of competitive strategy that regard differentiation and low cost as mutually exclusive choices. Surfacing and checking the mental models and assumptions of the people who are central to executing market-creating strategies are key. If they are not aligned with the intended strategic purpose of new market creation, misdirected investments and even failed initiatives can result.