Red Ocean Traps. Mental Models that Undermine Market-Creating Strategies

© Kim & Mauborgneblueoceanstrategy.com
RED OCEAN TRAPS
Mental Models that Undermine Market-Creating Strategies

CREATING BLUE OCEANS
• Companies increasingly recognize the value of creating and capturing
new markets
• Many attempt to make market-creating strategic moves, dedicating
significant resources and efforts to do so
• Yet, our research found that few seem to crack the code

what can keep you anchored in RED OCEANS?
As you set sail towards creating BLUE OCEANS of new market space,

An important factor is the RED OCEAN TRAPS

RED OCEAN TRAPS
Red Ocean Traps refer to managers’ mental models
• These are managers’ ingrained assumptions and theories about how
the business world works
• They help managers navigate existing market space, yet they can
prevent organizations from entering blue oceans
• There are six salient ones

Seeing Market-Creating Strategies
as
Customer-Oriented Approaches
TRAP ONE

The mind-set that….

The mind-set that….
…leads you to focus on making customers happier.

But NONCUSTOMERS, not customers, hold the key to creating new markets.

But NONCUSTOMERS, not customers, hold the key to creating new markets.
They provide the greatest insights into the pain points that limit the size of
your industry.

TRAP TWO
Treating Market-Creating Strategies
as
Niche Strategies

Creating new markets is not about uncovering a niche in an existing market.

Creating new markets is not about uncovering a niche in an existing market.
Segmentation only divides up the existing market into smaller and smaller
slices by focusing on differences among customer groups.

It’s DESEGMENTION that creates new markets by focusing on
commonalities across buyer groups rather than differences among
them.

TRAP THREE
Confusing Market-Creating Strategies
with
Technology Innovation

Why did it fail to find a wide customer base?

Because it didn’t link technology to buyer value.

While technology innovation can win you accolades, it does not necessarily
create new market space.

It’s, in fact, VALUE INNOVATION that launches commercially
compelling new markets by tying technology innovation to value.

TRAP FOUR
Equating Market-Creating Strategies
with
Creative Destruction

The theory of creative destruction conditions you to assume that the
new always destroys and replaces the old.

Like Viagra!
Like Microfinance!
But new markets can also involve NONDESTRUCTIVE CREATION.

Nondestructive creation happens when new solutions are created where
none previously existed.

Nondestructive creation happens when new solutions are created where
none previously existed.
It creates new demand without displacing existing products and services.

TRAPS FIVE
with
Differentiation

To position yourself well on the productivity frontier you are conditioned
to accept value-cost trade-offs.

Differentiation comes with high prices for customers
and high costs for your company.

But to create new markets, differentiated value for buyers must be
accompanied with lower costs for your company.

But to create new markets, differentiated value for buyers must be
accompanied with lower costs for your company.
It’s about breaking the
value-cost trade-off.

TRAPS SIX
with
Low-Cost Strategies

With a low cost strategy, you compromise on value.

To create new markets you should pursue differentiation AND low-cost.

.
To create new markets you should pursue differentiation AND low-cost.
Otherwise you risk becoming
just another low-cost player
in an existing market.

Differentiated offerings must come with lower costs,

Differentiated offerings must come with lower costs,
and low-cost offerings must be clearly differentiated in buyers’ eyes.

So, will you avoid the traps?

So, will you avoid the traps?
Or will you get stuck
in red oceans?

• Be sure to check your mental models, as you go for creating
BLUE OCEANS of new market space.
ALIGNING YOUR MENTAL MODELS WITH
MARKET-CREATING STRATEGIES

• Be sure to check your mental models, as you go for creating
BLUE OCEANS of new market space.
• If they are misaligned with your intended strategic purpose of new
market creation, you need to challenge, question, and reframe them.
ALIGNING YOUR MENTAL MODELS WITH
MARKET-CREATING STRATEGIES

To learn how to avoid
RED OCEAN TRAPS
get the Expanded Edition of
BLUE OCEAN STRATEGY.

Red Ocean Traps. Mental Models that Undermine Market-Creating Strategies

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