Wednesday, February 11, 2015

Red Ocean Traps: Mental Models That Undermine Market-Creating Strategies

KIM W. Chan, MAUBORGNE Renée
Red Ocean Traps: Mental Models That Undermine Market-Creating Strategies Harvard Business Review (forthcoming)



As established markets become less profitable, companies increasingly need to find ways to create and capture new markets. Despite much investment and commitment, most firms struggle to do this. What, exactly, is getting in their way?

The authors of the best-selling Blue Ocean Strategy have spent over a decade exploring that question. They have seen that the trouble lies in managers’ mental models—ingrained assumptions and theories about the way the world works. Though these models may work perfectly well in mature markets, they undermine executives’ attempts to discover uncontested new spaces with ample potential (blue oceans) and keep companies firmly anchored in existing spaces where competition is bloody (red oceans).

This article describes how to break free of these red ocean traps. To do that, managers need to:

·         focus on attracting new customers, not pleasing current customers

·         worry less about segmentation and more about what different segments have in common

·      understand that market creation is not synonymous with either technological innovation or creative destruction

·         stop focusing on premium versus low-cost strategies