Sunday, January 4, 2009

"Value Innovation"

[Excerpts from Blue Ocean Strategy, Chapter 1]

"Value Innovation" is the cornerstone of Blue Ocean Strategy (read more on Blue Ocean Strategy). Value innovation places equal emphasis on "value" and "innovation". Innovation without value tends to be technology-driven, market pioneering or even futuristic - shooting beyond what buyers are willing to accept and pay for. At the same time, value without innovation tends to focus on value creation on an incremental scale - something that creates value but it fails to make you stand out in the marketplace.

Value innovation is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers.

Cost savings are made by eliminating and reducing the factors that industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. (read more on this in The Four Actions Framework). Value Innovation breaks the value-cost trade-off and enable companies to pursue differentiation and low cost, simultaneously.

Value innovation enable companies in the simultaneous pursuit of differentiation and low cost. By focusing on alternatives instead of just competition and by targeting non-customers (beyond existing customers), companies will create new marketplace and make the competition irrelevant.

RECOMMENDED READING: Blue Ocean Strategy by Kim and Mauborgne. To get the best deals on shipping, Canadian readers purchase this book from; International and US residents should use

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