Red Ocean Traps:

The mental models that undermine

market-creating strategies

Trap 1: Seeing market-creating

strategies as customer-oriented
approaches
1. Strong belief amongst managers that customer is king. Hence focus
on existing customers.
2. Focus primarily on solving existing customers problems. Unlikely to
create new market.
3. To create new markets, companies must find out why noncustomers do not use the product.
4. By offering better solutions to existing customers, company stays
moored in red ocean.
E.g.: Sony vs. Amazon

Trap 2: Treating market-creating

strategies as niche strategies
1. Finding niche in existing market space is not equivalent to new
market space.
2. Successful market creating strategies de-segment markets and find
commonalities among different buyer groups.
3. Use commonalities to create broader demand.
E.g.:

Song Airlines vs. Pret A Manger

Trap 3: Confusing technology innovation

with market creating strategies
1. Managers believe that R&D and technology innovation will lead to
discovery of new markets.
2. Technology innovation not necessarily a cause of new markets. New
markets may arise due to simplicity of use, productivity and fun as
well.
3. Value innovation leads to launch of commercially compelling new
markets.
4. Companies push for product innovation which often lacks need.
E.g.: Segway

Trap 4: Equating creative destruction with

market creation
1. Creative destruction occurs when an new technology replaces an
old one.
2. Market creation involves creating new demand without displacing
earlier products. They offer solutions where none previously
existed.
3. People in established companies dislike creative destruction as it
may disturb status quo. Hence they create barriers to companys
market creating efforts.
E.g.: Nintendo Wii

Trap 5: Equating market creating

strategies with differentiation
1. Companies position themselves on productivity frontier. This leads
to a trade-off between value and cost.
2. Managers believe creating new markets involves high costs as well
as high value.
3. Market creation involves finding low cost and differentiation.
4. Companies must focus on both reducing cost and innovating. If
they do one they become premium competitors in existing industry.
E.g.: Yellow Tail Wine vs. BMW

Trap 6: Equating market-creating

strategies with low cost strategies
1. Managers assume a new market can be created by only reducing
cost. Focus on reducing and eliminating rather than innovating to
increase value.
2. Pricing should not aim at competing within industry. It should focus
on pricing against substitutes and alternatives that noncustomers
use.
3. Strategies need to be both differentiated and low cost.
E.g.: Ouya video-game console, Southwest Airlines, Swatch

THANK YOU!
Presentation by:
Ayushi Mukherjee
Amey Hardikar
Esha Nakhasi
Varsha S.
Sayantan Bose