Value innovation

Value innovation is when companies create a huge increase in value while simultaneously reducing costs.

Value innovation creates new offerings that are favorable to both the business and its customers.

Value innovation makes competitors irrelevant.

Value innovation is an important part of creating blue oceans. To do so successfully, avoid:

  • Creating value without innovating. Doing so creates incremental gains and is insufficient to exit a red ocean.
  • Innovation without a dramatic increase in value. Doing so means continuing to compete with the existing competitors.

In a red ocean market, competitors typically compete on cost and quality. Value innovation competes on both simultaneously, disrupting the value-cost trade-off - the idea that value and cost move increase or decrease in tandem.

The value-cost trade-off - which plagues competitive red ocean markets - is based on incremental changes:

  • Greater value => greater cost
  • Lower cost => lower value

Try applying value innovation. How could a business you’ve encountered recently leverage value innovation to create a Blue ocean? Write down your ideas - they may become future businesses!

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