Value Innovation - The Strategic Logic of High Growth

Why are some companies able to sustain high growth while others are not? To answer that question, Insead professors W. Chan Kim and Renee Mauborgne spent five years studying more than 30 companies around the world. They found that the thinking of less successful organizations is often dominated by the idea of staying ahead of the competition. In stark contrast, high-growth companies pay little attention to matching or beating their rivals.

by Chan Kim,Renée Mauborgne
Last Updated: 23 Jul 2013

Why are some companies able to sustain high growth while others are not? To answer that question, Insead professors W. Chan Kim and Renee Mauborgne spent five years studying more than 30 companies around the world. They found that the thinking of less successful organizations is often dominated by the idea of staying ahead of the competition. In stark contrast, high-growth companies pay little attention to matching or beating their rivals.

Instead, they seek to make their competitors irrelevant through what the authors call "value innovation." Conventional strategic logic and value innovation differ along the basic dimensions of strategy. Many companies take their industry's conditions as given; value innovators don't. Whereas many organizations let their rivals set the parameters of their strategic thinking, value innovators do not use competitors as benchmarks.

Rather than focus on differences between customers, value innovators look for things that customers value in common. Instead of viewing opportunities through a lens of existing assets and capabilities, value innovators ask, "What if we start anew?" In this classic HBR article, first published in 1997, the authors tell the story of the French hotelier Accor, which discarded the notion of what a hotel is supposed to look like in the interest of delivering what customers really want: a good night's sleep at a low price. And Virgin Atlantic challenged airline industry conventions by eliminating first-class service and channeling savings into innovations for business-class passengers.

Those companies didn't set out to build advantages over the competition, but in the end, their innovative practices led them to do just that.

Harvard Business Review, July 2004

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