Monday, September 8, 2008

Value Innovation: The Strategic Logic of High Growth

The difference about growth and less successful companies lies in their way approached about strategy. The less successful companies took a conventional approach, dominated by the idea of staying ahead of the competition. The high-growth companies, in contrast, paid a little attention to matching or beating their rivals. They sought to make their competitors irrelevant, through value innovation.

Conventional logic and the logic of value innovation differ in five basic dimensions of strategy:

1. Industry assumption. Conventional logic assumed that conditions are given. But value innovators don’t. They assumed that industry conditions can be shaped.

2. Strategic focus. Conventional logic thought that company should build competitive advantage and beat the competition. Value innovators viewed competition isn’t the benchmark, and company should pursue a quantum leap in value.

3. Customers. Conventional approach view that the customer should be retained, expanded through further segmentation and customization. It focuses on the differences in what customers value. Value innovator targets the mass of buyers and willingly lets some existing customers go. It focuses on the key commonalities.

4. Assets and capabilities. Conventional logic view the business opportunities by leverage its existing assets and capabilities. Value innovators not be constrained by what companies already have.

5. Product and service offerings. An industry’s traditional boundaries determine the products and services a company offers. A value innovators often cross the boundaries.

In creating a value innovation, managers should focus on three platforms: product, service, and delivery. Product platform is the physical products; service platform is support such as maintenance and customer service; and delivery platform includes logistics and the channel used to deliver the product to customers.

Value innovation is the simultaneous pursuit of radically superior value of buyers and lower costs for companies. To become a value innovators, companies should become pioneers, the business that offer unprecedented value. Thus, managers must stop and think about the industry assumptions, the company’s strategic focus, and the approaches-to customers, assets and capabilities, and product and service offerings-that are taken as given.

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