What is the purpose of value innovation?
The purpose of value innovation is to achieve sustainable competitive advantage by looking beyond your current understanding of the industry and reforming your value proposition to stand apart from the competition. Securing new competitive advantage is done by making competition irrelevant, also referred to as the blue ocean.
What is an innovation strategy?
An Innovation Strategy is a detailed plan and common innovation mission that aims to create new values, products, and services that potential customers are willing to pay for. It consists of policies and core values geared towards achieving future organizational growth.
What is the difference between cost savings and value innovation?
Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. © Chan Kim & Renée Mauborgne. All rights reserved. Value innovation places equal emphasis on value and innovation.
What is the difference between conventional strategic logic and value innovation?
Conventional strategic logic and the logic of value innovation differ along the five basic dimensions of strategy. Those differences determine which questions managers ask, what opportunities they see and pursue, and how they understand risk. (See the exhibit “Two Strategic Logics.”) Industry Assumptions.
What is an example of value innovation?
The most common example of Value Innovation strategy comes from Nintendo, the popular computer game, which through the Blue Ocean strategy went on to become Nintendo Wii. The modified Nintendo model called Nintendo Wii was launched in 2006 and is considered the pride of the Value Innovation concept.
What are the 4 types of innovation strategy?
Innovation strategies can be classed as proactive, active, reactive and passive (Dodgson et al.
What is the value innovation framework?
The value innovation framework is based on a reconstructionist view of dynamic markets. According to this view, market boundaries and industry structures could be shuffled and reconstructed by the actions and beliefs of the incumbent industry players.
What is meant by innovation strategy?
An innovation strategy is a common innovation mission and a detailed plan that aims to create new value, for which customers are willing to pay. It includes a set of policies or behaviors geared toward achieving future organizational growth.
What are the 3 innovative strategies?
For any company, in any industry, these three strategies are mandatory: Run your business. Change your business. Reinvent your business.
What are the three 3 strategies in innovation?
Often, innovating involves approaching an existing idea or product from a new perspective with the goal of improving it. Although experts hardly agree on a definitive set of innovation types, there are generally three categories: product, process, and business model innovation.
What is blue ocean strategy value innovation?
BLUE OCEAN STRATEGY is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant.
What is the value of innovation in business?
Innovation is often necessary for companies to adapt and overcome the challenges of change. It fosters growth: Stagnation can be extremely detrimental to your business. Achieving organizational and economic growth through innovation is key to staying afloat in today's highly competitive world.
How does innovation create value?
Value innovation is the simultaneous pursuit of differentiation and low cost. The conventional approach to market differentiation is to choose between higher value and lower cost. But when you successfully combine low cost and high value, you have succeeded at value innovation.
Why is value innovation important in strategic management?
Instead of competing for market share, value innovation is designed to create new markets. The goal of value innovation is to create new demand and change the market enough to render the competition irrelevant in that market.
Why is innovation strategy important?
An explicit innovation strategy helps you design a system to match your specific competitive needs. Finally, without an innovation strategy, different parts of an organization can easily wind up pursuing conflicting priorities—even if there's a clear business strategy.
What are some innovative strategies?
12 types of strategies for innovationIncremental innovation. Incremental innovation entails gradually developing concepts, products, or services in an existing market. ... Disruptive innovation. ... Sustaining innovation. ... Radical innovation. ... Product innovation. ... Service innovation. ... Process innovation. ... Technological innovation.More items...•
What are some innovative strategies?
12 types of strategies for innovationIncremental innovation. Incremental innovation entails gradually developing concepts, products, or services in an existing market. ... Disruptive innovation. ... Sustaining innovation. ... Radical innovation. ... Product innovation. ... Service innovation. ... Process innovation. ... Technological innovation.More items...•
What are the 8 types of innovation?
8 Fields of InnovationProduct & Product Performance Innovation. ... Technology Innovation. ... Business Model Innovation. ... Organizational Innovation. ... Process Innovation. ... Marketing / Sales – New Channel Innovation. ... Network Innovation. ... Customer Engagement / Retention.
What are the types of innovation?
Essentially, there are three types of innovation: radical, incremental, and disruptive. They may vary depending on the niche, market, brand essence, services, and products offered.
How many types of strategy are there?
For better clarification of the term strategy, we should distinguish among three forms of strategy: general strategy, corporate strategy, and competitive strategy.
What is value innovation?
Most companies choose between value and pricing and that’s where they go wrong. If you want to stay ahead of the curve and avoid brutal competition, you need to break the value-cost trade-off. This is what we call value innovation.
Why is value innovation important?
It’s only natural that every company wants to avoid competition. Going outside of their market boundaries is one way to do that.
How to get value innovation right?
If you want to get value innovation right, you reduce costs by eliminating and reducing factors that don’t meet the market standards or are simply unnecessary.
Why do companies keep an eye on the competition?
Highly performant companies keep an eye on the competition to see if they are trying to imitate their value curve. The speed at which others might try to catch up and imitate your value curve depends on the industry. However, it seems inevitable for that to happen.
What is value curve?
A value curve is a graphic depiction of your performance across the industry’s key success factors. This will clarify your position in the market and the touch points to work on.
How to make competition irrelevant?
On a more positive note, if you shift your attention from the race to match competition to creating value for customers, you can make competition irrelevant. This starts with a nuanced understanding of your industry and customers. With the right choices, you can often achieve both differentiation and low cost.
What is the Blue Ocean Strategy?
So, the Blue Ocean Strategy simply refers to creating new demand by developing uncontested market space instead of competing in the crowded red ocean colored by the blood of everyone that swims in it.
What is Innovation Strategy?
Innovation is about creating new value people are willing to use and pay for, whereas strategy is the plan for harnessing for example marketing, operations, finance and R&D to support achieving the competitive goal.
Where did value innovation come from?
Value innovation was first introduced in the HBR article called Blue Ocean Strategy and later in the classic book bearing the same name.
How to make sure innovation remains a strategic priority?
To make sure innovation remains a strategic priority, stay focused on your goals and execute your innovation strategy in a systematic manner.
How to succeed with strategy alignment?
To succeed with strategy alignment, aim for communicating the role of innovation within the entire portfolio to drive innovation across all units in your organization. Ensuring that innovation is fully embedded into an overall business strategy is the only way to allow your organization to innovate in the long term.
How to build innovation in strategy development?
Building innovation into your strategy development process starts with making a deliberate choice of focusing on the best possible way to win as well as justifying the reasons behind that choice.
What is the strategy choice cascade?
One relatively solid framework for making those strategic choices is The Strategy Choice Cascade. The cascade is introduced in a strategy book called Playing to Win, by A.G. Lafley, the former CEO of P&G and Roger L. Martin, Dean of the University of Toronto's Rotman School of Management.
What are the two approaches to innovation?
Typically, there are two different approaches to innovation strategy: business model innovation and leveraging existing business model. Business Model Innovation.
Introduction
In the business world today, organizations aim at gaining a competitive edge against their competitors. In so doing, organizations are pursuing all the possible avenues that would ensure the achievement of the desired edge in business.
Formulating Value Innovation Strategy
In formulating a value innovation strategy using the value innovation concept, an organization should align its innovation on the inclusive corporate strategy. Instead of only formulating marketing and sales strategies, organizations too need to come up with value innovation strategies.
Illustration
With an effective innovation strategy in place, the organization can then aim at using it in achieving a competitive edge against its competitors. This is possible by producing what the competitors does not. The value innovation strategy formulated using the innovation concept can then be used by the organization in the following ways.
Reference List
European Commission. (1995) Green Paper on Innovation. Brussels: European Commission.
What is strategic focus in value innovation?
In value innovation your strategic focus is on making great leaps in value, not on doing what competitors do and only better. The focus is on bringing new sources of value to customers.
Who invented value innovation?
It takes guts and a whole new way of thinking. The concept of value innovation was originally introduced by W. Chan Kim and Renée Mauborgne in a Harvard Business Review article in 1997. They later went on to publish the book you may be more familiar with – Blue Ocean Strategy.
What is innovation game?
A large part of innovation is about staying ahead of the competition and protecting and growing your market. But when you focus on comparing yourself to a competitor’s strengths and weaknesses you lock yourself into a game of cat and mouse and lose sight of delivering value to customers. You’re focused on proving you can do something better than your competitors. This, at best gives you incremental growth in your market.
What are the three factors that make up value creation?
The trick to doing value innovation well is to approach value creation as a balance between three inter-related factors - product , service and delivery. While the meaning of these factors varies across industries, generally you can look at product as the physical product that is offered. The service factor includes things such as maintenance of the product, customer service, warranties, support to distributors or retailers to get your product in the hands of customers. Think of delivery factors as logistics and the channel(s) used to deliver the product to customers.
What is traditional strategy model?
In the traditional strategy model a focus on what competitors are doing creates limits and draws boundaries around how products and services are traditionally perceived or offered.
What is the focus of strategy development?
In traditional strategy development the focus is on managing existing conditions or constraints around assets and capabilities – the natural question is “how can I leverage what I’ve already got to get to where I want to be?”
Is strategy development different from value innovation?
Strategy development is different if value innovation is your game
How does value innovation work?
Value innovation follows a different logic. Instead of focusing on the differences between customers, value innovators build on the powerful commonalities in the features that customers value. In the words of a senior executive at the French hotelier Accor, “We focus on what unites customers. Customers’ differences often prevent you from seeing what’s most important.” Value innovators believe that most people will put their differences aside if they are offered a considerable increase in value. Those companies shoot for the core of the market, even if it means losing some of their customers.
Why is value innovation important?
For managers of diversified corporations, the logic of value innovation can be used to identify the most promising possibilities for growth across a portfolio of businesses. The value innovators we studied all have been pioneers in their industries, not necessarily in developing new technologies but in pushing the value they offer customers to new frontiers. Extending the pioneer metaphor can provide a useful way of talking about the growth potential of current and future businesses.
What happens once a company has created a value curve?
Eventually, however, a value innovator will find its growth and profits under attack. Too often, in an attempt to defend its hard-earned customer base, the company launches offenses. But the imitators often persist, and the value innovator—despite its best intentions—may end up in a race to beat the competition. Obsessed with hanging on to market share, the company may fall into the trap of conventional strategic logic. If the company doesn’t find its way out of the trap, the basic shape of its value curve will begin to look just like those of its rivals.
How can senior executives promote value innovation?
How can senior executives promote value innovation? First, they must identify and articulate the company’s prevailing strategic logic. Then they must challenge it. They must stop and think about the industry’s assumptions, the company’s strategic focus, and the approaches—to customers, assets and capabilities, and product and service offerings—that are taken as given. Having reframed the company’s strategic logic around value innovation, senior executives must ask the four questions that translate that thinking into a new value curve: Which of the factors that our industry takes for granted should be eliminated? Which factors should be reduced well below the industry’s standard? Which should be raised well above the industry’s standard? Which factors should be created that the industry has never offered? Asking the full set of questions—rather than singling out one or two—is necessary for profitable growth. Value innovation is the simultaneous pursuit of radically superior value for buyers and lower costs for companies.
What is the difference between strategic logic and value innovation?
Those differences determine which questions managers ask, what opportunities they see and pursue, and how they understand risk. (See the exhibit “Two Strategic Logics.”)
What were the two main markets of the hotel industry in France in the 1980s?
In the mid-1980s, the budget hotel industry in France had two markets: inexpensive hotels that had poor beds and noise, and pricier hotels that provided upscale amenities and a decent night’s sleep.
What are the most important elements of motivating innovation?
This is consistent with the work of Amabile (1988), who argues that the most important elements of motivating innovation are concise and compelling articulation of the value of innovation, orientation away from the status quo, and activating an offensive leadership strategy aimed at the future, rather than simply trying to protect an organization’s past.
What is nonexcludable innovation?
The extent to which the idea behind a value innovation is nonexcludable affects the strategic price set by the value innovator. As we have argued, while innovative ideas and processes are usually nonexcludable or only partially so, some value innovators have patentable ideas that are excludable for a given time.
What happened in the microwave oven and VCR industries?
As a result of competitive benchmarking, product offerings were nearly mirror images of each other and , from the customer’s perspective, they were overdesigned and overpriced. Most buyers had no use for most of the features and found them confusing and irritating. These companies may have outdone one another, but they missed an opportunity to capture the mass market by offering microwaves and VCRs that were easy to use at accessible prices.
How does competition affect strategy?
These cases illustrate that strategy driven by the competition usually has three latent, unintended effects: 2 1 Imitative, not innovative, approaches to the market. Companies often accept what competitors are doing and simply strive to do it better. 2 Companies act reactively. Time and talent are unconsciously absorbed in responding to daily competitive moves, rather than creating growth opportunities.
When asked to build competitive advantage, what do managers typically assess?
When asked to build competitive advantage, however, managers typically assess what competitors do and strive to do it better. Their strategic thinking thus regresses toward the competition. After expending tremendous effort, companies often achieve no more than incremental improvement —imitation, not innovation. 1.
Who wrote the theory of economic development?
J.A. Schumpeter, The Theory of Economic Development (Cambridge, Massachusetts: Harvard University Press, 1934).
What is Innovation Strategy?
Innovation strategy is a detailed plan and common innovation mission that aims to create new values, products, and services that potential customers are willing to pay for. It consists of policies and core values geared towards achieving future organizational growth.
Why Innovation Strategy is Important
Clarify goals and priorities: An effective innovation strategy outlines the goals and priorities of an organization’s innovation activities and helps focus resources and energy on reaching those goals.
Types of Innovation
For most small businesses, innovations are small improvements on existing products and services. However, innovation can also be seen as a revolutionary technological invention or digital business model that changes activities in the industry.
Importance of an Innovation Strategy
Every business, brand, company, or organization innovates one way or another, but the strategy varies. The only reason why most organizations cannot innovate is that they lack a clear-cut innovation strategy.
How to Develop an Effective Innovation Strategy
The first step to developing an effective innovation strategy is to define your innovation objectives and the strategy behind them. As a principle, your innovation strategy should help support your overall business objectives.
How to Implement an Innovation Strategy
After you’ve put everything in place and picked your strategic approach to innovation, it’s time to put your innovation strategy to work. Your long-term strategic goals give structure and support to your innovation work.
Types of Innovation Strategies
Let’s discuss innovation strategy examples and how leading brands in the world used excellent innovative captive strategies to attain greater heights.
What Is Innovation Strategy?
5 Steps For Developing Your Innovation Strategy
- 1. Determine objectives and strategic approach to innovation
The first step in the strategy choice cascade is to define your winning aspiration. In other words, your innovation objectives and the whybehind your innovation strategy. As any other strategy, the planning process of your innovation strategy starts with defining your objectives: What do you w… - 2. Know Your Market: Customers and Competitors
The second step in the strategy choice cascade is defining the right playing field, as in, the market you’re operating in and the customer segment you’re offering value for. To be able to innovate and to respond to your customers’ needs, you should listen and understand what your customers rea…
Reverse Engineering A Strategy
- Reverse engineering is a technique a part of the strategy canvas that can be used to ensure your strategic choice is sound. Instead of relying on opinions, reverse engineering allows you to design and conduct valid tests in order to make informed choices. It helps you to involve all of the decision makers (VP’s included) to critically assess the viable options and make them committe…
Best Practices – How to Make Your Innovation Strategy Work?
- Pick your focus
After you’ve picked your strategic approach to innovation and mapped all of the most important elements related to it, it’s time to put your innovation strategy to work. To make sure innovation remains a strategic priority, stay focused on your goals and execute your innovation strategy in … - Align innovation strategy with your business goals
As already mentioned, aligning innovation strategy with your overall business goals is one of the most difficult tasks when it comes to succeeding in innovation. So much so that 54%of innovating companies struggle to bridge the gap between innovation strategy and business objectives. Acc…
Conclusions
- Innovation strategy is about making the best educated choice between a number of feasible options. To succeed in developing the best possible innovation strategy for you, you need to identify and map your best possible strategic choices required to win. However, making those choices is only half the battle as it’s equally important to test and validate your approach. For yo…