Strategic Management - Strategy and Innovation

What are Kim and Mauborgne's red ocean space?

- Existing firms fight for market share - Assumes market structures are fixed (only way to grow is to take market share from others) - Dividing demand to try to defend position Market Competing

What are Kim and Mauborgne's blue ocean space?

- Re-defines market - Reconstruction of value - new market space - Focus on value needed by all customers - No unattractive industries Market Creating

What is value innovations four action framework?

ERIC Eliminate taken for granted factors Reduce - below industry standards Increase - above industry standards Create new dimensions

What are the criticisms of the blue ocean approach?

Firms still fail despite having tools to recognise and respond to change There are criticisms of the methodology pointing out that the use of blue ocean in the published examples show its application after the events took place Existing competitive market spaces offer more opportunities than given credit (on average it takes 15 years for a new advantage to be eroded) Being the pioneer in any new market frequently does not deliver success. Value is more often realised by "fast followers" and blue oceans will at some point become red Close studies of firms adopting value innovation suggest that changes are still incremental rather than creating radically new space

What does value innovation focus on?

Focus on great "Strategic Moves" not Activities/Resources

What does the value innovation strategy critize traditional strategies of doing?

Focussing on: Competing in Existing Market Space Beating the Competition Exploiting Existing Demand Making a Value - Cost Trade Off Aligning the whole system to a firms strategic choice of low cost OR differentiation I.E Reinforcing the prevailing perceptions of the industry (status quo)

What is the key to value innovation?

Key is REALLY understanding what customers value and what they don't ..and taking a new perspectives on the market space and its boundaries

What is second stage of value innovation?

Look at industry offering from customers perspective. What are the blockages to customer utility (the "pain points") with the industry's current offering? Draw a buyer utility map

What does Blue ocean theory suggest?

Look methodically across those boundaries to find unoccupied territory that represents real value innovation" Challange Assumptions that industry boundaries are set to appeal to all customers Appeal to commonalities Rather than focusing on a specific target area and defending it redefine Recognise real value step change and match it by redefining industry boundaries

What are the general three steps of Value innovation?

Market Exploration - viewing the as is industry value curve Winning Ideas through structured brainstorming - ERIC grid etc Selecting and validating winning Ideas - how is this adopted in the market?

What does Eliminating and reducing do?

Reduces cost

What does value innovation reject?

Rejects dogma of differentiation vs low cost trade off - combination of actions effect the cost structure and value to buyers*

What are the common criticism of strategy of choice, RBV and economies of scale?

They are too static Increasing complexity and turbulence mean barriers to entry and switching are being relentlessly attacked and competencies tend to lose relevance or uniqueness

What has been created in response and what does it do?

"Value innovation" switches focus from competitors and on to customers and seeks to make competition irrelevant by finding a blank space where no one is. It does not accept industry bounderies, and says that we need to redefine those boundaries.

What is the third step?

3. Looking Across Industry Boundaries to Generate New Value Curves Think about the industry from a different perspective Structured Brainstorming on each path creates partial ERIC grids/value curves that are then combined to number of possible strategies Then create ERIC grid

What is the fourth step?

4. Getting the buy in to new strategy Create lots of a value curves and hold a value curve fair... gain stakeholder views

What is another trade name for the value innovation strategy?

Blue Ocean Strategy

What is the very first step of value innovation?

Current competing factors: First stage in the value innovation process is to recognise where the focus for competition is in an industry Team will identify the key 5 - 10 competing factors in the industry. Absolute price is always included as the first factor Rate 2 or 3 key players/strategic groups against these factors Sort factors by scores of the market leader (or leading group) Plot "As is" value curves for the 2 or 3 players

Describe the main rigidity draw back of traditional strategy?

In seeking advantage (fit, competencies, scale and scope) a firm may become locked in a self reinforcing pattern of development Past choices determine options available and considered in response to new challenges and opportunities Path dependancy and one way of thinking within an industry becomes a cage to innovation.

What does Increasing and creating do?

Increases value

What is a strategic drift?

Strategic drift is the tendency for strategies to develop incrementally on the basis of historical and cultural influences but fail to keep pace with a changing environment and customer needs.

What does value innovation say needs to happen about the process of finding new strategies?

With fair process and simple visualisation to generate action from the managment team and experts within the business to involve the whole business.