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
Identifies 6 traps that keep managers thinking in red oceans.
Trap One: Seeing Market-Creating Strategies as Customer-Oriented Approaches – examples used: Sony Portable Reader System and Amazon Kindle
Trap Two: Treating Market-Creating Strategies as Niche Strategies – example used: Delta’s Song subsidiary and Pret a Manger
Trap Three: Confusing Technology Innovation with Market-Creating Strategies – example used: Segway
Trap Four: Equating Creative Destruction with Market Creation – example used: Viagra
Trap Five: Equating Market-Creating Strategies with Differentiation – example used: BMW C1
Trap Six: Equating Market-Creating Strategies with Low-Cost Strategies – example use Ouya game console