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

May 30, 2013 Leave a comment

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

Felipe A. Csaszar University of Michigan – Stephen M. Ross School of Business

Daniel Levinthal University of Pennsylvania – Management Department

May 20, 2013

Abstract: 
Managers’ mental representations affect the perceived payoffs and alternatives that managers consider. Thus, mental representation must affect how managers search for profitable strategies and the quality of the strategies that they discover. Yet, the strategy literature has been mostly silent about how mental representation and search interact. The main objective of this paper is to understand under what conditions it is better to emphasize searching for the right policies rather than searching for the right mental representation, and vice versa. We show that the balance between these two types of search processes is contingent on the cognitive capacity of managers and on environmental factors (i.e., technological complexity, relative relevance of product attributes, and time horizon). To capture managers’ mental representation we develop a simulation of a popular management technique, Blue Ocean Strategy (BOS). We illustrate the usefulness of our enriched view of search by examining BOS in novel ways. In particular, we ask under what conditions BOS is more likely to be successful and how much risk firms incur by using BOS.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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