Why Value Innovation?

Concept source: "Value innovation: The Strategic logic of high growth", W. Chan Kim and Renee Mauborgne

Why do some companies achieve sustained high growth in both revenues and profits? In a five-year study of high-growth companies and their less successful competitors, researches found that the answer lies in the way each group approach strategy. The difference in approach was not a matter of managers choosing one analytical tool or planning model over another. The difference was in the companies' fundamental, implicit assumptions about strategy. The less successful companies took a conventional approach: their strategic thinking was dominated by the idea of staying ahead of the competition. In stark contrast, the high-growth companies paid little attention to matching or beating their rivals. Instead, they sought to make their competitors irrelevant through a strategic logic called value innovation.

What is Value Innovation?

The value innovation concept provides a relevant support for questioning product/market strategies as well as underlying assumptions. You must examine radically what constitutes real value for customers by asking fundamental questions: what value offering need to be introduced or increased to meet customer needs? what value offerings can be reduced or eliminated, because they do not constitute real value for customers?

Value Innovation in the Digital Economy

How and where companies should compete is rapidly changing in an eEconomy that has compelled organizations worldwide to re-think how best to deliver value to customers. Evolving, innovative value propositions can drive growth and create distinct competitive advantages – positions of cost leadership, differentiation, or both. At the heart of new value creation is the customer, and understanding the five customer interactions – buying, using, selling/transferring, co-creating, and integrating – is the starting point to achieving customer value innovation.

Case in Point: Charles Schwab

Charles Schwab, the founder of the US leading discounted stock brokerage company, has talked about his effort to assume the perspective of his customer. "I am like a chief. I like to taste the food. If it tastes bad, I don't serve it. I'm constantly monitoring what we do, and I'm always looking for better ways we can provide financial services, ways that would make me happy if I were a client."