S.K. GuptaLast updated: Feb 22, 2020
Model Name : Value Innovation Strategy
Creator : W. Chan Kim and Renée Mauborgne
Year : 2004
Purpose : Value Innovation| Market Strategy| Business Plan | Product Strategy
It takes inspiration, influence, and originality to create something new, especially in this age of modernity. Designing and building new things is the way to attract the consumers of today. They want more change, more brilliance, and more modifications.
Basically, consumers want innovation. This is why it is critical for any business that wishes to thrive on its path to innovate, to get rid of the old and bring in the new and fresh ideas. And make sure to maintain appeal and popularity with its consumer base.
Innovation is hard. It really is. Because most people don’t get it. Remember, the automobile, the airplane, the telephone, these were all considered toys at their introduction because they had no constituency. They were too new.– Nolan Bushnell
What is Blue Ocean Strategy?
The Blue Ocean strategy refers to the creation of a new marketplace that makes competitors irrelevant in order to create new consumer products.
According to Blue ocean, every company can achieve higher value by creating new products and without engaging with the ferocity of the other competitive markets. It is much easier than dealing with the conflicts and the competition within the already existing markets.
Red Oceans Strategy tries to beat rivals by actively engaging with competitors, which only serves to create more risks for the respective brands.
Blue Ocean strategy tries to enter the vacuum created within the market space and create its own demands, in doing so, they have the opportunity for increasing profits and growth.
This basically means that in the Blue Ocean, competition is irrelevant. Followers of Blue Ocean strategy do not use the competition as their go-to strategy but follow a different approach that we know today as the Value Innovation Strategy.
Useful Article : Blue Ocean Strategy
Value Innovation
Value Innovation is a key principle of Blue Ocean strategy which was first coined in a 1997 article in Harvard Business Review by W. Chan Kim and Renée Mauborgne, who would later write the book called ‘Blue Ocean Strategy’ in 2005.
Entrepreneurs are innovative as always, meaning they can have big ideas but have scarce resources. So they have to be efficient and careful in how they spend their limited resources and finances.
Value Innovation is a particularly valuable mindset and tool for understanding a competitor’s pursuits, and what is of value to their customers, thereby enlightening the entrepreneurs on how to compete and where to invest.
It is a process in which a company introduces new technologies or modifications, which the company has never created before in their previous product or model.
These innovations are designed to raise buyer value and save costs by eliminating and reducing the costly factors in their previous product/model.
Pro Tip: Entrepreneurs need to worry about their expenses going to waste again if they follow this strategy.
Examples of Value Innovation
1. Nintendo Wii
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.
This is considered a standout in Blue Ocean strategy which encourages low cost and buyer value being embodied together.
Nintendo got rid of excessive features like the hard disk, DVD function issues and other issues present in game consoles. The point of doing so was to create lower costs.
This enabled the company to offer a wide variety of new features in their new Nintendo Wii that hadn’t been experienced before in the gaming world.
By pursuing Value Innovation, Nintendo rose above and avoided competing against the likes of PlayStation or X-Box in a fiercely competitive gaming market.
- This lead to it being able to open up to a new market of gamers.
The Nintendo Wii, with its innovative features and affordable prices, appealed to an entirely new consumer base and expanded itself in the gaming business which attracted even the nongaming demographics which included the elderly and parents as well.
Image Source: www.gamesrj.com
2. Yellow Tail
Yellow Tail is a new wine brand from Casella Wines, it serves as another example of achieving success through the concept of Value Innovation.
Yellow Tail, within three years of its launch, had become the fastest growing wine brand in the USA market.
Starting and growing a business is as much about the innovation, drive, and determination of the people who do it as it is about the product they sell.
– Elon Musk
Public questions arose as to how this brand became so successful so fast. The answer lied with the brand’s leaders who recognized that most wine brands competed in a Red Ocean strategy where competition for market share was fierce, and Yellow Tail would eventually risk drowning itself in such a volatile ecosystem.
They realized that by reducing and eliminating all the things that the other companies competed on and creating a more unique product, they could attract more new customers.
Yellow Tail leaders created a new drink that proved to be a success and appealed to its already expanding consumers. They introduced new features and characteristics and tweak it in order to create a successful end result through the simple concept of Value Innovation.
3. Cirque de Soleil
Cirque de Soleil is another fantastic example of the Value Innovation strategy. It was founded in Canada, and since then the company has become a hit with over 155 million people. And how they managed to do so should no longer leave you guessing.
All they did was remove the costly factors and increased its value by adding more modifications to it. They got rid off animal acts and invested more time in the theatrics and storylines which became a massive hit with their audiences who came back for more entertaining shows bringing new fans along to witness and enjoy the display.
Cirque de Soleil with its new customer base who were willing to pay even higher prices to cheer on their extraordinary spectacles ended up becoming another highlight for the followers of the Value Innovation strategy.
Useful Article: Open Innovation Strategy
References & more information
Brianna Parker
Add comment