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Value Innovation Concept and Approaches

May 22, 2015

Organization which seeking to achieve superior profits and get the highest market share must innovate. when we go to innovation, its not a matter of product and good, many innovated efforts nowadays go to process, procedures, customer satisfaction and similar ‘values’.

The “creative destruction” term used at first time by Schumpeter to demonstrate that innovations can create new market spaces and provide new/innovated products and services. For example, with the growth of the Internet, companies would be able to create a Web page and raise the quality of its services by save time and cost (e.g. the airlines issue electronic tickets instead of printed ones). At the same time, the internet service enables a number of companies to provide new industries and businesses such as deliver social and electronic marketing, publishing eBook, delivering distance education service.

The “creative destruction” term has been use to categorized innovations to five types, two types: new production methods and unique supplying sources are classified as process innovations, three other types are: targeting a new market, product innovations, and a new industry structure are identified as the destruction or creation of a monopoly position. Indeed, the ‘creative destruction’ lead to a new term that has been called “value innovation”.

Although the value innovation term is still very much a developing field. The most widely known approaches underpinning it are the blue ocean strategy, disruptive innovation, and experience innovation, the next section will address some details for each approach. 

Blue Ocean Strategy

The blue ocean strategy founded by Kim and Mauborgne in 2004, to change the old western firms’ culture, which had been focused on the beating competitions and working only in attractive industries, to be focusing more on customers and delivering real values that customers seeking for. Thereby, they highlighted that in Blue Ocean, demand is created rather than fought over. So, the blue ocean emerged to create new market spaces which keep competition irrelevant.

Through one of two ways they suggested to create blue oceans, they mentioned to  that companies can create a completely new industries and  blue ocean is emerged from within an existing  red ocean when a new company alters the boundaries of one of an existing industry. Creating blue oceans does not necessarily created by a new company e.g. Chrysler was incumbent when produced a minivan car at 1984 whereas the Ford was a new entrant when produced Model T at 1908. In similar, blue oceans do not necessarily depends on technological innovation, instead of that company can provide value pioneering e.g. Apple generated Apple II at 1978 using the same existing technology that used to produce All-in-one home computer. In addition, the blue ocean strategy fits in any non-existent, unattractive or attractive industries e.g. at 1905, Nickelodeon founded in non-existent industry to present short-films targeting workers. Also, in the mid-1990s DELL presented a new purchasing model for an unattractive industry when had announced Build-to-Order computer. In Similar, the Palace Theatres at 1914, present an opera-like environment for cinema shows as example of Blue Ocean for attractive industry.

Disruptive Innovation

The disruptive innovation usually made by the small start-up players who do not have enough capabilities to compete with incumbents. The essence behind the disruptive innovation is serving a specific market that is not being effectively served by existing incumbents with new products, usually they serving price-sensitive customers. This strategy helps them to differentiate and “enable them to establish a foothold in the industry”. Over time, the start-up stage shifts toward the organization resources and capabilities. Thus, these disruptive innovators be ready to compete in the wider scale, and the new innovative product first get through the low end of the existing market and then spread upward

Experience Innovation

Important economics we are experienced a hundred years long shift from an agricultural age, through an industrial age, then a service age, now to an experience age.

The focus on delivering valuable experiences is totally distinction with the traditional product delivery. In the traditional approach, consumers did not have a clear role in the value creation process or what Prahalad and Ramaswamy at 2000 called “Co-creating of value”, they defined creating experience value from the customers’ point of view as “Consumers now seek to exercise their influence in every part of the business system […], Consumers want to interact with firms and thereby co-create value.”

The essence of co-creation experience is individuals, firms can create nothing of value without individual involvement. Nowadays, there are many companies known as an experience innovation provider as a result of the interactions of their products/services and their customers. Examples of experience innovations are varying with the same essence, from individual co-creation value, e.g. such tourism firms who provide customized programs that match with particular group or even individuals, through experience products, as luxury car manufactories which deliver special edition of cars with changes on technical specs to improve consuming car experience. Even the Nordic walking which present a commercial success market in many European countries, In Finland, the Nordic walking practioners growth from zero to more than 450000 in few years. The concept of this commercial walking type was developed and promoted by stick manufactory with sport institutes and the walkers themselves.