Perspective # 19 – Value Innovation

Value Innovation: ☺ Nowadays you will be almost ridiculed if you have not read the strategy book Blue Ocean Strategy (BOS) by INSEAD professors Kim and Mauborgne!! Don’t get caught surprised if your boss says, “Let us do a BOS session”! Though there are thousands of strategy books, this one is selling like hot cake and is already translated into some 40 languages! The blue ocean/ read ocean metaphor itself is a great ‘innovation’ – though the concept itself is not new the powerful metaphor made it a great success.

Another reason was that the theory turned the traditional trusted Porter strategy framework which portrays that successful business are either low-cost providers or niche-players upside down. Pundits who hail the 'benchmarking' tool hate this book though!

The heart of blue ocean strategy is the value innovation concept. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. As per Kim and Mauborge “Value innovation is a strategic move that allows a company to create a blue ocean. Typically, companies in the red ocean pursue incremental improvements for customers through either low cost or differentiation. Value innovation helps companies make giant leaps in the value provided to customers through the simultaneous pursuit of differentiation and low cost. It shouldn’t be a trade off between the two; exceptional value and innovation should be inseparable. Offer buyers a huge leap in value, and that will give rise to new markets. That’s how you make the competition irrelevant.”

Famous examples are Red Bull energy drink, Cirque du Soleil, Swatch and Starbucks. Interestingly many Indian firms are practicing Blue Ocean Strategy for long! Reva electric car who stayed away from the rat race is an example. In the crowded Indian FMCG red ocean, which is dominated by MNCs like P&G, Unilever etc. we have few who ventured into the blue ocean by 'value innovation' – Paras Pharma (Dermicool, Livon, Moov etc.) and Cavincare’s 50-paisa shampoo sachet are examples.