BUSINESS MANAGERS who use conventional logic are often thinking of how they can catch up and stay ahead of their competition. They focus on building competitive advantages aimed at beating competitors. They pay attention to retaining and expanding their customer base through further segmentation and customization. They make sure that their organizations leverage their existing assets and capabilities.
Moreover, they allow their industries' traditional boundaries to determine their firm's product and service offerings. While all these efforts are sound business measures, management research have indicated that this conventional logic have often resulted in less successful organizations as compared to organizations who use a different kind of logic, the value innovation logic.
More than a decade ago, Professors W. Chan Kim and W Renee Mauborgne of Insead completed a five-year study of more than 30 companies around the world. They found out that organizations that use conventional logic were less successful that those firms that use what they termed as the value innovation logic.
The latter group exhibited high growth, and focus less on matching or beating their competitors. Instead, they seek to make their adversaries irrelevant.
Dimensions of strategy
The study identified that the difference between conventional strategic logic and value innovation logic lie along the five basic dimensions of strategy.
The first dimension of strategy is in terms of industry assumptions. Many organizations take their industry's conditions as given. Value innovators, on the other hand, believe and think that industry conditions can be shaped and greatly influenced.
The second dimension is on strategic focus. Unlike conventional logic firms which focus on beating competition head on, value innovators do not use competition as the benchmark but instead pursue a quantum leap in value to dominate the markets that they are in.
The third dimension of strategy is about customers. Value innovators target the mass of buyers and willingly lets some existing customers go, instead of constantly performing expensive customization in order to serve different customer segments as what conventional logic dictates.
The fourth dimension of strategy is all about assets and capabilities. While conventional logic tells business managers to constantly make the most of their firm's existing assets and capabilities, value innovators do not allow themselves to be constrained by what they already have. Instead, they frequently ask what would they do if they were starting anew.
This mentality gives these firms fresh and new perspectives in dealing with the market opportunities and challenges that they face, rather than allowing their current assets and capabilities to restrict their actions.
Finally, the fifth dimension is about product and service offerings. While conventional logic's view is to "stick to our comfort zones" and confine themselves to what their industry traditional offers, value innovators demonstrate willingness to go beyond its industry's traditional product and service offerings, driven by their desire to offer total customer solution that their customers seek and want.
By thinking out-of-the-box, or getting out of their industry comfort zones, value innovators often capture more market share, or develop new market shares that lead to higher growth than those who use conventional logic. Value innovators not only listen to their customers better, but they also are able to "hear" what their customers are not saying or articulating.
Some of these unarticulated customer needs, once "heard" and addressed, often result in innovative products and services that gets rewarded tremendously by the markets they serve.
When you take a scan of various products and services, the likes of the Nokia's convergence phones (cell phones with camera, MMS and now TV), Apple's iPod, Pizza Hut's 911-11-11 call center, Dell's efficient PC Delivery and Fulfillment Centers and Southwest Airlines air services fit the value innovation profile.
So, what kind of business logic is your management team using?
(This article reflects the personal opinion of the author and not the official position of the Management Association of the Philippines. The author is member of MAP ICT Committee and general manager of Amadeus-Philippines. Amadeus is the chosen technology partner for providers, sellers and buyers of travel, serving more than 500 airlines, 90,000 travel agencies and more than 27,170 airline sales offices in 217 markets worldwide. One of the first professional industrial engineers in the Philippines, he teaches Strategic Information Systems Planning at De La Salle Professional Schools Ramon V. del Rosario Sr. Graduate School of Business. Feedback at map@globelines.com.ph. For previous articles, please visit .)
