Searching for Blue Oceans: Mental Representation and the Discovery of New Strategies

Abstract

This paper studies how managers come up with new strategies by reinterpreting a popular management tool, Blue Ocean Strategy (BOS), from the perspective of theories of mental representation and search. We formally explore this issue by developing a parsimonious simulation model of the process of discovery of new products. Our model infuses BOS with cognitive considerations (such as the role of mental representations and search) and BOS infuses previous search models of the Carnegie tradition with managerially meaningful search primitives (the addition and deletion of product/service attributes, and varying attribute levels). The model presented here sheds light on several questions: (i) under what conditions is a method like BOS more likely to be a successful search strategy? (ii) how to improve the chances of discovering valuable strategies? and (iii) how much risk is incurred by searching using a BOS-like heuristic? Additionally, by analyzing the risk and return of strategies, our model also provides ad...