Red Ocean Traps

by W. Chan Kim, Renée Mauborgne

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? World-renowned professors W. Chan Kim and Renee Mauborgne, the authors of the best-selling book 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). In this bound version of their bestselling Harvard Business Review classic article, they describe how to break free of these red ocean traps. To do that, managers need (1) Focus on attracting new customers, not pleasing current customers; (2) Worry less about segmentation and more about what different segments have in common; (3) Understand that market creation is not synonymous with either technological innovation or creative destruction; and (3) Stop focusing on premium versus low-cost strategies. The Harvard Business Review Classics series offers you the opportunity to make seminal Harvard Business Review articles a part of your permanent management library. Each highly readable volume contains a groundbreaking idea that continues to shape best practices and inspire countless managers around the world--and will have a direct impact on you today and for years to come.

Genres: Business

50 pages, Paperback

Published June 20, 2017

About the author

W. Chan Kim is the Co-Director of the INSEAD Blue Ocean Strategy Institute and a Chair Professor of Strategy and International Management at INSEAD. His book Blue Ocean Strategy, co-authored with Renée Mauborgne, has sold 3.6 million copies and is recognized as one of the most iconic and impactful strategy books ever written. It is being published in a record-breaking 44 languages and is a bestseller across five continents.
Kim is ranked in the top 3 management gurus in the world in the Thinkers50 listing of the World’s Top Management Gurus. He was selected for the 2011 Leadership Hall of Fame by Fast Company magazine and was named among the world's top 5 best business school professors by MBA Rankings. He also received the Nobels Colloquia Prize for Leadership on Business and Economic Thinking. He is a Fellow of the World Economic Forum and an advisory member for the European Union. He also serves as an advisor to several countries.

Reviews

[Fahasa · Rating 4 out of 5]

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? World-renowned professors W. Chan Kim and Renee Mauborgne, the authors of the best-selling book 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). In this bound version of their bestselling Harvard Business Review classic article, they describe how to break free of these red ocean traps. To do that, managers need to: (1) Focus on attracting new customers, not pleasing current customers; (2) Worry less about segmentation and more about what different segments have in common; (3) Understand that market creation is not synonymous with either technological innovation or creative destruction; and (3) Stop focusing on premium versus low-cost strategies.

https://www.fahasa.com/

[Josie Estevez · Rating 5 out of 5]

Piggy backing from the blue ocean strategy book, the addition for the 10 most common mistakes people make when trying to move from a red ocean to a blue one is significantly more helpful than the list for how to systematically make a blue ocean. I say it's more helpful since these are patterns you can easily acknowledge of the actions you are doing when trying to move along your ne market strategy. In my review of the blue ocean strategy book, I highlight the immense complexity of moving towards a blue ocean, regardless of whether you have a list to guide you along or not. This book on the other hand, doesn´t tell you how to create the blue ocean, but how to catch those changes that aren´t leading you towards the blue ocean. I leave below the 10 traps explained in the book as a summary for myself.

1. Blue ocean strategy is customer-led and focuses on existing customers.
2. You must leave your core business to create a blue ocean.
3. Blue ocean strategy requires new technologies.
4. You must be first to market to succeed.
5. Blue ocean strategy is the same as differentiation.
6. Blue ocean strategies are low-cost strategies that price low.
7. Blue ocean strategy is about marketing.
8. Blue ocean strategy is about finding and dominating niches.
9. Blue ocean strategy sees competition as bad.
10. Blue ocean strategy is the same as creative destruction or disruption.

[Héctor Iván Patricio Moreno · Rating 4 out of 5]

Me gustó, sobre todo si estás pensando en hacer un negocio. Te pone a pensar en cómo librarte de la competición y como varias cosas que pensamos que pueden ser algo para librarte de ella en realidad no lo son aunque no sean malas por sí mismas.

Las trampas que menciona tienen que ver con no distinguirse lo suficiente para de verdad atender a nuevos clientes en nuevos mercados.

Recomendado si estás estudiando negocios o quieres aprender a ser mejor estratega de negocios en general.

[Nick Hernandez · Rating 2 out of 5]

Would have been best to be just a 5-10 page HBS paper.

[Victor Volpe · Rating 3 out of 5]

Short and interesting. Better appreciated if you already read Blue Ocean Strategy.

[cypher · Rating 5 out of 5]

The book is giving an overview, with examples, of the theory "blue ocean strategy”, that W. Chan Kim and Renee Mauborgne produced about a decade ago, theory around behaviours that already exist in the market, intuitively or mindfully, by singling them out and organising the principles.
This is part of the collection “Blue Ocean Classics, which includes “Blue Ocean Strategy” (condensed), “Red Ocean Traps”, “Blue Ocean Leadership”. This is a review for the entire collection.

Concepts
Red oceans: the entire market space, which turns bloody red because of the competition.

Blue oceans: the unknown market space, where there is no competition currently, here there is opportunity for growth that is rapid and ample. (example: eBay creating a new online auction industry)
Blue oceans are often formed from within red oceans, when a company innovates something in the industry. In time, blue oceans can turn red.
With more blue oceans, some red oceans turn blue.

Good open questions:
Should a new company jump into a red ocean?
What strategies exist around protecting blue oceans?

According to the research, blue oceans are often in: transport to work, work/productivity, after-work entertainment. A company brand can benefit for decades from blue ocean creation.
Successful starting strategies: differentiation and low cost combined, benchmarked against other players.

“Red Ocean Traps” (article):
managers trained with theories of the red oceans environment, often get stuck thinking in a blue ocean mindset, since it is comfortable following already established, common, less innovative principles. This will keep the company operating in red oceans.
Common principles: benchmarking against competition only, having a customer lead business, doing just customer lead development and research, expecting R&D investment to lead to new market creation instead of user research investment, new market are made my making old markets obsolete (destructive and disruptive strategies can reach strong residence), focusing on low cost solely (can lead to quality sacrifice), focusing on differentiation and low cost on specific axis in isolation (can lead to making the business a competitor).
(Example of success: Amazon launching Kindle - Kindle Suite and breaking the market by refusing to follow customer feedback around bigger laptop/mobile screens for reading)

“Blue Ocean Leadership” (article):
Here is where the book and I disagree a bit, I was not aware that modern leadership practices were theorised or conceptually invented by W. Chan Kim and Renee Mauborgne. The type of leadership described was already common, for example in big tech companies, before the book was first published, but yes, linking successful leadership tactics with the Blue Ocean Strategy makes sense to make any attempt more efficient at putting a company on the Blue Ocean Strategy track. The book is proposing some specific techniques to investigate leadership performance that are interesting to consider.
Main concepts to apply: authentic/empathetic leadership, flexibility, removal of redundant leadership layers (flattening the org, lean company org), employee/customer feedback driven leadership, distributed leadership, workshop driven engagement with leadership (brainstorming), individual engagement with reports (1:1 culture), connecting cross-layer, building trust, transparency.

Overall, I don’t regret spending time on this book. It was informative, and the blue-red ocean concept brought on a new perspective on the market.
Unfortunately, I believe it will be difficult to break the patterns of Red Oceans, especially since the current market has more and more well established mastodon-companies, which will only grow more, covering more areas of influence, and they aligned themselves in an almost-permanent competition with each other. A potential way to look at it will be to big companies creating small pools of Blue Oceans, here and there, temporarily, until the other giants pick up on it and offer an alternative.