High Growth Strategies and Value Innovations

1. Business Strategy Session 9
Strategic Logic of High Growth
<Adopted based on Article from Harvard Business Review, January-Feb 1997, Value Innovation: The
Strategic Logic of High Growth by W. Chan Kim and Renee Mauborgne>
Instructor: Anik Saha
© Anik Saha

2. 2
Strategic Logic of High Growth
Why do only some companies achieve High Growth?
© Anik Saha
Conventional strategies
High Growth (Value Innovation) strategies
• Stay ahead of competition
• Focuses on competition
• Value Innovation
• Less focus to
competition
• Make competition
irrelevant

3. 3
Conventional (C ) Logic vs. Value Innovation (VI) Strategy
Differs on 5 Dimensions of Strategy
Industry Assumption Strategic Focus
Customers
Assets & CapabilitiesProduct & Services
Offerings
• C: assumes industry condition as given/
unchangeable
• VI : changes industry shape; generate big shift
• C: Competitors set the tone of strategic thinking;
compare SWOT against competition
• Compete on incremental GP or market share
• VI: don’t consider competition as benchmark;
actions not response to competition
• builds own competitive advantage, not
follow competition
• leverages resource to identify new sources
of value; not to follow competition
• C: follow segmentation; captures or retains
customers; finds different customer needs
• VI : unites customer’s on core & bigger needs
• Ignores set of customers for core market
with increased value
• C: defined boundary by products/services
industry offers
• VI : focuses on customer’s pain points; open to
cross boundaries for overall solution
• C: How best current assets can be leveraged?
• VI : Ignores current asset as a concern for high
growth; open to start afresh
• Assesses business opportunities above assets
• Draws insights on value and drives execution
towards it
© Anik Saha

4. 4
Creating New Value Curve: The Important 4 Questions
Which of the factors that our industry takes for granted should be eliminated?
Which factors should be reduced well below the industry’s standard?
Which factors should be raised well above the industry’s standard?
Which factors should be created that the industry has never offered?
• Identify the factors on which companies compete each other
• Do customers really perceive that as ‘value’?
• Companies may not be capturing the shift in value perception
• The product / services designed to match or exceed only competition?
• Is it getting offered because market/competition does so?
• Uncover and eliminate compromises that industry forces customers to make
• Dissolve industry’s standard boundaries to uncover new sources of value
© Anik Saha

5. 5
Creating New Value Curve: Example Forumle 1 hotels from Accor
Value Innovation curve only focuses on parameters that customer truly appreciates
Hotel 1 Hotel 2 Formule 1
Low
Medium
High
ValueGenerated
Copyright Kim & Mauborgne

6. 6
The Trap of Competing and The Necessity of Repeating
A company creates
new Value Curve
The new value
innovation generates
Profit & Market Share
Competition
Follows your value
curve
The Value innovator’s
growth under attack by
competition
The Value
innovator makes
counter attack to
competition
Respond to
Attack?
Competition and
Value Innovator
fight on feature/
Technology etc.
Both Ignores
customer’s value
perception and
perishes; cost goes up
The Value
Innovator ignores
and builds new
value curve
© Anik Saha
yes No

7. 7
Avoid Trap of Competing by Continuous Value Creation with Volume
Monitoring value curve necessary for continuous value innovation
In fast emerging industries, frequent innovation is mandatory
Volume advantages with Value Innovation makes imitation difficult
Value Innovation creates unprecedented value; neither Technology or Competence nor FMA
Value Innovation with Geo Expansion, Operational Improvements, Economy of Scale/ Market
Coverage discourages Imitation
© Anik Saha

8. 8
The Three Platforms to Create Value Innovations
Successful Value Innovation Companies leverage
‘ALL’ Three Platforms
ProductProduct ServicesServices DeliveryDelivery
• Logistics
• Channels
• Maintenance
• Support
• Professional Services
• Enablement
• Product Features
• Technology innovations
• User Experience

9. 9
Compaq’s Continuous Value Innovation to Stay at Top (Server Industry)
© Anik Saha
Value Innovators continuously upgrade strategies to drive Sustainable Competitive Advantage

10. 10
Driving the Company for High Growth: Responsibilities for Business Managers
Identify & Articulate
prevailing strategies
Challenge Prevailing
strategies to build value
innovations
Ignore assumptions,
industry benchmarks,
competition, Assets,
Given conditions
Ask the important 4
questions for profitable
Growth
Identify promising
possibilities for Growth
across portfolio
Be a Pioneer of Value
Innovations; Not ‘just’
technology leader

11. 11
Testing Growth Potential of a Portfolio of Business
High Growth Strategies Lead to Value Innovations and drives Settlers and Migrators to Move
up to Pioneer Status

12. 12
Acknowledgement
Article from Harvard Business Review, January-Feb 1997,
Value Innovation: The Strategic Logic of High Growth by
W. Chan Kim and Renee Mauborgne
https://hbr.org/2004/07/value-innovation-the-strategic-logic-of-high-growth
© Anik Saha