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Value Innovation Moid Siddiqui,
Managing Director, Intellects Biz
(Extract from ‘The Smart Crow Never Goes Thirsty’, authored by Moid Siddiqui)

A New Paradigm!

Most of the time a dealer in apples follows the beaten track by polishing the rotten apples and managing his business by dealing with his same limited customers. Sometimes he makes more money by enlarging his business through addition of new customers. These are but the beaten tracks of business. However, the innovative trend begins with innovative products and innovative services. He seems quite happy and content with such new products and services. But this is not enough. He has to create new markets. ‘Value Innovation’ is all about the ‘South-East’ quadrant of the following diagram.

It is a sign of hopelessness when an entrepreneur deals only with his current customers and current products and services. Locating new customers for his old product is again not innovative. It is only when he creates new products and new services for his existing customers, the ‘innovative trend’ begins. ‘Value innovation’ is akin to innovative products and services not only for the customers in hand, but also for the new customers. Innovation in products and services should trigger the emergence of new markets.

Value innovation takes place only when we innovate the products and services as well as discover new markets.

Blue Ocean Strategies!

W. Chan Kim, the Boston Consulting Group & Chair Professor of Strategic & Innovation Management at INSEAD Business School, and his associate Renee Mauborgne, while conducting the ‘value innovation’ campaign worldwide based on their 15 years of research, came out with their book, Blue Ocean Strategies in mid-2005. The book is considered a milestone in ‘Value Innovation’.

“Business is not entirely about gaining the ‘competitive advantage’ – don’t compare; don’t compete.” This is the sort of bold message you get from their research book. “Our research which spans over 15 years finds that competition has come to play a central role in defining strategy.” But business strategies must take us beyond competition.

“High growth companies pay little attention to their rivals. They create the uncontested space,” says W. Chan Kim when speaking of the concept of ‘Value Innovation’ – how to create the blue oceans? We create our own boundaries in a competitive market. However, the duo Kim and Mauborgne plead:

“Your job is to play with the boundaries rather than the boundaries that we create!”

Business is not about cloning and looking exactly like our competitors, so don’t match! Business is not fighting a battle with your competitors, so don’t compete. Business is about creating a new ‘uncontested space’! It has no place for comparison or competition. Stop copying or comparing with your rivals; think for yourself. The latent message one gets from the concept of ‘Value Innovation’ is, “Competition in over-crowded industries is no way to sustain high performance. The real opportunity is to create uncontested market space.”

‘Value Innovation’ is not something that Chan Kim or Renee Mauborgne invented – one can find it even more than a 100 years ago. Ford’s ‘Model-T’ car is a historical example of value innovation.

To my understanding, value innovation is but a fusion, which is guided by our lateral thinking on how to find a forced relationship between two industries or products or services, which apparently don’t jell. For instance, a tonga is a cart pulled by a horse, whereas a car is run by a petrol engine.

When the cart pulled by a horse, was provided with an engine, it turned out into what is popularly known as Ford’s Model-T car. So simple, yet so innovative!

‘Red Ocean’ and ‘Blue Ocean’ Strategies

Below is an attempt to draw five major differences between the ‘red ocean’ and ‘blue ocean’ strategies at a glance as discovered by Chan Kim:

  1. Compete in the existing market space (Red ocean)
    Create an ‘uncontested’ market space. (Blue ocean)
  2. Beat the competition (Red ocean)
    Make the competition irrelevant. (Blue ocean)
  3. Exploit the existing demand (Red ocean)
    Create and capture new demands. (Blue ocean)
  4. Mark the value/cost trade-off (Red ocean)
    Break the value/cost trade-off. (Blue ocean)
  5. Align whole system/activities with its strategic choice of ‘differentiation’ OR ‘low cost’ (Red ocean)
    Align the whole system/activities in pursuit of ‘differentiation’ AND ‘low cost’. (Blue ocean)

So, don’t match – Benchmarking is not akin to ‘Value Innovation’. Business is not about ‘cloning’ so as to look like your competitor!

Don’t compete! Business is not in fighting a battle with your competitors. Business is all about creating a new ‘uncontested space’.

Business world thrives only when new ‘uncontested space’ is created through ‘Blue Ocean Strategies’. For instance, none of the following industries were known just 120 years ago; they were innovated within a century’s time:

  • Automobiles
  • Music recording
  • Petrochemicals
  • Pharmaceuticals
  • IT, hardware and software, Internet
  • Management consulting
  • Motor-power airplanes
  • Modern film industry
  • Nuclear fission

The following are some industries that are known today but were unknown in the early 70s; they came into existence in just 4 decades time:

  • Mutual funds
  • Cellular phones
  • Biotechnology
  • KM, data-farming, data-mining, content writing
  • Express package delivery
  • Coffee beans
  • Megaplex cinema with 25 screens
  • Home videos
  • Gas-fired electricity plants
  • Laptops, CDs, DVDs
  • Snow houses, bungee jumping, roller coasters

“If history is any predictor of the future,” says Chan Kim, “lots of new business opportunities must be waiting in the ‘uncontested space’.”

Likewise, the products and services which are unknown today are likely to surface during the next two decades or so. The cyclical pattern is absolutely clear!

Discover New Horizons

What prevents us from doing what we should be doing? “Our own inhibitions and limitations” is the answer. Some of the inhibitions that can be included are:

  • Someone will innovate, why should I?
  • The idea is vague
  • What happens to me?
  • Will I get credit?
  • What will happen if the idea is ridiculed?
  • What, if the idea doesn’t work?
  • Fear of failure

Those who are caught in a ‘squirrel’s cage’ can never acquire the ‘squirrel’s spirit’. Value innovation deals with intangibles! The process makes you look at what you eliminate and reduce before you look at what you create. So, first eliminate the old before you create the new.

Four Important Steps for Creating ‘Blue Ocean’ (Chan Kim Model)

Ask yourself the following questions:

  • Which of the factors, that your industry assumes as standard, could be eliminated?
  • Which factors should be reduced well below the industry’s standards?
  • Which factors should be raised well above the industry’s standards?
  • Which factors should be created that the industry has never offered?

This can be understood clearly through the following diagram:

The thought process is simple. First of all eliminate completely certain factors or services which are no longer relevant. Reduce certain factors or services below the industry’s standards, which are not fully irrelevant. By carrying out this exercise, you can make huge savings. Now think, which factors or services you can raise well above the industry’s standards. Lastly, create some new features or newer ways of serving the customers, which the industry could never have offered before!

The problem is not how to get innovative thoughts into your mind.
The problem might actually be on how to get old thoughts out of your mind,
says Chan Kim

Is it the old ways of thinking that stops us from moving forward? If so, empty the cup of your mind first.

“The future of your business depends not on doing the same as everyone else but on being different,” says Chan Kim. “Wealth is not gained from perfecting the known, but rather from perfecting the unknown.

The unknown territory is the constituency of ‘Value Innovation’. So, perfect the unknown! No doubt, it is a great challenge. But, if you want to ‘value innovate’ you have no option than to face the challenge boldly and confidently.

Note: Moid Siddiqui the author of ‘The Smart Crow Never Goes Thirsty’ holds the right of the book.

 
 
 

Quick Links

 

New Book "The Acrobatics of Change" Released - For more Details Click Here !!

"The Acrobatics of Change" - Book Review, Business Line (The Hindu) - For more details Click Here !!

9th book "Smart Crow Never Goes Thirsty" Released - For more Details Click Here !!

Moid Siddiqui's Interview (The Hindu Newspaper) on his book "Corporate Soul"- For more details Click Here !!

 
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