red ocean traps. mental models that undermine market-creating strategies
TRANSCRIPT
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RED OCEAN TRAPSMental Models that Undermine Market-Creating Strategies
© Kim & Mauborgneblueoceanstrategy.com
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
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what can keep you anchored in RED OCEANS?As you set sail towards creating BLUE OCEANS of new market space,
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An important factor is the RED OCEAN TRAPS
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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
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Seeing Market-Creating Strategies
as
Customer-Oriented Approaches
TRAP ONE
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The mind-set that….
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The mind-set that….
…leads you to focus on making customers happier.
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But NONCUSTOMERS, not customers, hold the key to creating new markets.
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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.
© Kim & Mauborgneblueoceanstrategy.com
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.
© Kim & Mauborgneblueoceanstrategy.com
TRAP TWO
Treating Market-Creating Strategies
as
Niche Strategies
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Creating new markets is not about uncovering a niche in an existing market.
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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.
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It’s DESEGMENTION that creates new markets by focusing on commonalities across buyer groups rather than differences among them.
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It’s DESEGMENTION that creates new markets by focusing on commonalities across buyer groups rather than differences among them.
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TRAP THREE
Confusing Market-Creating Strategies
with
Technology Innovation
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Why did it fail to find a wide customer base?
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Because it didn’t link technology to buyer value.
Why did it fail to find a wide customer base?
© Kim & Mauborgneblueoceanstrategy.com
Why did it fail to find a wide customer base?
Because it didn’t link technology to buyer value.
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While technology innovation can win you accolades, it does not necessarily create new market space.
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While technology innovation can win you accolades, it does not necessarily create new market space.
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It’s, in fact, VALUE INNOVATION that launches commercially
compelling new markets by tying technology innovation to value.
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TRAP FOUR
Equating Market-Creating Strategies
with
Creative Destruction
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The theory of creative destruction conditions you to assume that the new always destroys and replaces the old.
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The theory of creative destruction conditions you to assume that the new always destroys and replaces the old.
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Like Viagra!
Like Microfinance!
But new markets can also involve NONDESTRUCTIVE CREATION.
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Nondestructive creation happens when new solutions are created where none previously existed.
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Nondestructive creation happens when new solutions are created where none previously existed.
It creates new demand without displacing existing products and services.
© Kim & Mauborgneblueoceanstrategy.com
Nondestructive creation happens when new solutions are created where none previously existed.
It creates new demand without displacing existing products and services.
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TRAPS FIVE
Equating Market-Creating Strategies
with
Differentiation
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To position yourself well on the productivity frontier you are conditioned to accept value-cost trade-offs.
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To position yourself well on the productivity frontier you are conditioned to accept value-cost trade-offs.
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Differentiation comes with high prices for customers and high costs for your company.
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Differentiation comes with high prices for customers and high costs for your company.
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But to create new markets, differentiated value for buyers must be accompanied with lower costs for your company.
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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.
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TRAPS SIX
Equating Market-Creating Strategies
with
Low-Cost Strategies
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With a low cost strategy, you compromise on value.
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To create new markets you should pursue differentiation AND low-cost.
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.
To create new markets you should pursue differentiation AND low-cost.
Otherwise you risk becoming just another low-cost player in an existing market.
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Differentiated offerings must come with lower costs,
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Differentiated offerings must come with lower costs, and low-cost offerings must be clearly differentiated in buyers’ eyes.
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So, will you avoid the traps?
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So, will you avoid the traps?
Or will you get stuck in red oceans?
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• 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
© Kim & Mauborgneblueoceanstrategy.com
• 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
© Kim & Mauborgneblueoceanstrategy.com
© Kim & Mauborgneblueoceanstrategy.com
To learn how to avoid RED OCEAN TRAPS
get the Expanded Edition of
BLUE OCEAN STRATEGY.
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