영어신문 사설3호 Value innovation and business (2)

Value innovation and business (2)

 

A former chairman and chief executive officer of Hewlett-Packard, Carly Fiorina who was chosen the most powerful woman in business by the Fortune magazine made a speech in Sanford University Venture Program. She said, “...Most of time people are afraid of is something new. The essence of entrepreneurship is risk taking. The essence of business is risk taking. Taking a risk is all about trying something new... so change is always resisted. Always! ... Even if what they have is not satisfying to them, a lot of people are afraid to venture into unknown...” 

 

Value innovation is all about trying something new because it is starting with challenging to the traditional processes and standard strategies of existing business market. How does company reduce the risks from Changes for value innovation? We all know that the answer is plan which is strategy.

 

The most well-known value innovation is, “Blue Ocean Strategy.” The name "Blue Ocean Strategy" was introduced in the Harvard Business Review article published in October 2004 by W. Chan Kim and Renée Mauborgne. They are professors of Strategy and Management at INSEAD in U.S.A. And than in 2005, they published the book, “Blue Ocean Strategy.”  

The “Blue Ocean” means the new market which bestows a sustaining power to grow in the business and there is less competition. On the contrary there is Red Ocean which means the existing traditional market which has lots of competitions.

 

In order to create “Blue Ocean,” there are four things to consider. The first one is what factor company should create among the factors others competitors don’t have; the second one is what factor company reduce among what it has; the third one is what factor company should raise; lastly, what unnecessary part company should eliminate.

Also company must avoid decentralizing its competitive powers to create “Blue Ocean” and it should have powerful and impressive slogan which is simple and clear like Nike’s “Just Do It” and Adidas’ “Impossible Is Nothing.”  Company makes differences through looking for the alternatives instead of bench-marking competitors. Alternatives are different from substitutes. Substitutes have same purpose but different shapes like note, PDA and computer; their purpose is to record something. In the other hand, alternatives have same purpose but different functions and shapes like theater and restaurant; their purpose is severe people to entertain but theater has totally different function and shape from restaurant.

But one thing company should be careful about is that value innovation is not establishing a new company; when company looks for the alternatives, they are possibly produced in competitive power and capability of the company, not from the outside of company. 

In the market, there are three types of customers. The first type of customers is the people who are already using company’s product and they never hesitate to try better comparative ones; they are the smallest group. The second type of customers is the people who don’t agree with the value of product or don’t have economic power to purchase product; they are middle size of group. And the third type of customers who are out of the focus of company; they are the biggest group. Value innovation should focus the strongest common points of all three types of customers in order to bring them into new market; this is core of value innovation.

 

We can find perfect example of value innovation from the book, “Blue Ocean Strategy.” When other Air Lines focused long distance airlines like between countries or big cities, Southwest Airlines focused short distance airlines. Southwest Airlines built many new airlines among small cities and served them in low price to the customers.  Southwest Airlines aimed new customers who are using cars to travel city to another city; it’s clearly new market for the company. South West Air Line found alternatives; airplane has different function and shape from car but it has same purpose. And the car travelers are not the customers of Air Lines. Besides Southwest Airlines used what company has to create, “Blue Ocean.”

 

The authors of the “Blue Ocean Strategy, Kim & Mauborgne said, “Although the term “Blue Oceans” is new, their existence is not...They are a feature of business life, past and present.” Meaning to say, this value innovation is just systematic analysis of what happened in the business field in the past and present. Although it can be helpful to the company which needs the changes to achieve the success, it doesn’t work for every company. If companies can fin their own way to prosper the businesses, we can consider it as a value innovation. Also, if new market company created has lots of competitors, that is time to do value innovation again.