Ikenna M. Okafor
(SmeDoctor)
My “Client Relationship Strategies – An Agile Approach” spoke little on Value Innovation. You may wish to read it if you missed it. However, when you talk about Value Innovation, the first book that comes to mind is the Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne. The main focus of the book is geared towards making the competition irrelevant and How to Create Uncontested Market Space.
There is almost no business that is absent of any form of competition. It is this competition we in the business world call the Red Ocean. Unfortunately, when competition is mentioned in the business world, most people only look at it from the narrow point of view of a direct competitor or someone who does a similar business. However, competition manifests itself in many ways. In the business world, we compete for getting cheaper raw materials, more sales, market leads, more company value, increased goodwill, and even better manpower than others.
In achieving this, drivers and managers of various industries adopt various strategies and techniques. It is on this premise the Value Innovation approach is gotten to form the Blue Ocean that has lesser or no competition and enjoys some form of business lead. A typical example that comes to mind is in the transportation sector where before now, one has to stand on the road to get a cab. The E-hailing companies came in and revolutionized it so that with our smartphones we can get a cab at a cheaper cost that is safe.
These four cardinal principles of the Blue Ocean Strategy used in Value Innovation are;
Raise
Increase
Reduce
Eliminate
RAISE
To differentiate your products or services from others or your competitors, you have to raise the bar across what is conventional. I remembered when I was working in a well-known hotel in Abuja, the cost of spending the night was N25,000.00. We noticed the rooms then were always filled to the extent that there were no rooms for major clients. Thus, the cost of a night was raised to N45,000.00 while few standards were created. Profit moved by over 28% within the first three months.
INCREASE
Innovation could be done in areas of functionalities or extra value being gotten from the products. The aim is to make the products or services more appealing to the customers by offering an increased value. This may come at the same cost or a slight extra cost that is negligible compared to what was existing.
REDUCE
This step looks at auditing and pointing out pain points that act as an unnecessary cost center that affects the prices of goods and services. It identifies areas that drive the cost in the production process that are necessary but could be reduced. For instance in a manufacturing company, one of the ways to reduce costs in a manufacturing firm is to reduce wastage. Therefore, Production Managers, Audit and Internal Control Managers are advised to do an audit of wastages in their various organizations.
ELIMINATE
As the name implies, the aspect of the business that is unnecessary in delivery value should be removed or eliminated. It could be as simple as a migration from using manual machines where you have to employ a large number of workers to use of automated. In the administrative wing, it could be the migration from papers in managing documents to online.
THE STRATEGY
When these audit has been done successfully, then a suitable strategy can be adopted to eliminate the competition which could either be by collaboration, cost reduction, or differentiation. Popular market segmentation has always been the general populace, potential market, and target customers. This is the strategy for almost every business. However, in value innovation, you are to create new demands and target even the non-customers alike.
With the new normal, companies must seek to create and give higher value and lower costs to customers simultaneously. It could also be given higher value at a higher cost simultaneously. It could also be created and gain new demands and lastly to create and maintain the existing demands or market.
In achieving any of these, the organization involved must consider internal and external dynamics. Using the internal dynamics, for instance, are having a standardized corporate governance system in place, hiring qualified and experienced personnel to handle all key areas of business, and having a company reward and performance management system that drives innovation and creativity.
As the year has just started, it’s not late for a strategy session within your organization to draw up a road map for the year.
Human Resource Manager @ Ammasco International Limited
Deputy Registrar @ Integrated Institute of Professional Management
Management Consultant @ Como Consult
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