Author: Asif Khan
Watching Shark Tank over the last few seasons has taught me a lot about business. For those of you who do not know what Shark Tank is, it’s a reality show in where aspiring entrepreneurs present their business ideas to business moguls (known as "the sharks") in the hopes of landing an investment is great to watch. Like 'Dragon's Den' in the UK. I mean, what’s not to like? A group of venture capitalists on steroids being presented with great ideas and some not-so-great ideas; where dreams are not only made or broken but where great advice is also given. So, after 8 seasons what I as an aspiring British entrepreneur learnt so far?
- Be different, be unique
- Don’t emulate but innovate
- Add value to the end User/Consumer
And if you dare …….
Go against Convention
These four simple principles can take you a long way providing the ‘execution’ is right. These four principles are nothing new but it did beg the question to me as to “Why do some organisations still to this day aim to replicate what is happening in their industry and competition rather than think what new thing can we try and bring to market that has value to the end user?” Now, I don’t have a succinct answer for this but I did find some research carried out by W. Chan Kim and Renee Mauborgne who found that “the less successful companies take a conventional approach and don’t challenge their companies’ strategic logic". In their findings they state that “their strategic thinking was dominated by the idea of staying ahead of the competition. In stark contrast, the high-growth companies paid little attention to matching or beating their rivals. Instead, they sought to make their competitors irrelevant through a strategic logic we call value innovation” 1.
So, what is value innovation? Well it goes back to my four principles of which were the emerging themes week in week out. Value innovation as given by Chan Kim and Renée Mauborgne is the simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and the company. A great example of this construct is their Case Study findings on Kinepolis which was world's first Cinema megaplex, with 25 screens and 7,600 seats. Bert Claeys the CEO of Kinepolis shifted from the conventional mindset and focused on offering moviegoers a radically “superior experience”. The outcome speaks for itself - Kinepolis won 50% of the market in Brussels in its first year and expanded the market by about 40%. 2.
So how did Bert achieve this? Firstly, he challenged the industry's conventional wisdom about location. Now, we have all heard that phrase “location, location, location”. Yes, location is key especially in some industries where setting up shop in a prime location has a direct effect on revenues being generated. But, what Bert did is look at it from a different angle and did the exact opposite of his competitors. Instead he located Kinepolis off a ring road circling Brussels, 15 minutes from downtown. But, what he did address in his strategy of location is the cost to offer customers FREE Parking as well as the build costs of constructing Kinepolis itself.
Moving to the inside, Bert changed the setup of his cinema complex by installing oversized seats with individual armrests and designed a steep slope in the floor to ensure everyone had an unobstructed view of the screen.
To Bert, his competition seemed irrelevant. Instead he simply wanted to give moviegoers a package they would value highly while simultaneously reducing its costs (Location) and that's the logic behind value innovation.
Value Innovation is the cornerstone of Blue Ocean Strategy If you haven’t come across Blue Ocean Strategy before you may want to check out www.blueoceanstrategy.com They have some great information and tools on there to help your Organization.
“Value Innovation is the simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and the company. Because value to buyers comes from the offering’s utility minus its price, and because value to the company is generated from the offering’s price minus its cost, value innovation is achieved only when the whole system of utility, price, and cost is aligned.” 3.
To help you begin to think differently about your industry and help create a new organizational value curve Blueoceanstrategy.com provide a simple matrix-like tool developed by W. Chan Kim and Renée Mauborgne to break the value-cost trade-off:
In the meantime, here’s a top tip in reducing your procurement costs and finding new sales opportunities. Check out innovo-network.com which is unlike any other purchasing or Sales platform you have seen.
1 W. Chan Kim and Renee Mauborgne. (1997). Value Innovation: The Strategic Logic of High Growth. Harvard Business Review. January-February, 103.
2 W. Chan Kim and Renee Mauborgne. (1997). Value Innovation: The Strategic Logic of High Growth. Harvard Business Review. January-February, 104.
3 W. Chan Kim and Renee Mauborgne. (1997). Value Innovation: The Strategic Logic of High Growth. Available: https://www.blueoceanstrategy.com/tools/value-innovation/.
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