Value innovation is what creates blue oceans

Key takeaways

  1. Finding and creating a blue ocean market (a business that turns non-customers into customers, rather than competing for the same customer) is about creating a new value proposition, not technological innovation.
  2. Technology is not why Uber and Starbucks are now worth billions, they created offerings that appealed to non-customers (people not using taxis or people not going to retailers for coffee).
  3. You thus cannot rely on your technology or R&D group to create new opportunities, instead you need to find a new value proposition.

Value innovation is what creates blue oceans

I have written and spoken many times about Blue Ocean strategy, which is effectively turning non-customers into customers, rather than competing for the same customer. One problem many companies often make, though, is confusing product innovation for creating a blue ocean. A recent post, Confusing Technology Innovation with Market-Creating Strategies, highlights why R&D is not synonymous with market creation.

The success of two companies highlight how you can create a blue ocean without creating a product innovation. The first example is Starbucks. Starbucks was able to take a commodity business, selling coffee, and create a new industry by focusing on the customer experience. The post also points to “JCDecaux, which unlocked a blue ocean in outdoor advertising by providing and maintaining “street furniture” for municipalities in exchange for prime stationary downtown locations for ad displays. These strategic moves opened new markets without any bleeding-edge technology.”

Even technology companies that have created blue oceans have not necessarily done it by creating cutting-edge technology. Bleeding edge technology did not make Uber into a multi-billion technology company, instead it was applying relatively straightforward technology to traditional industry and using it to appeal to new customers. Same can be said for Wikipedia, which put information online but did not need new technology to do it but by combining existing technology with a traditional business, it created a product for a new range of customers.

The post points out that value innovation creates compelling new markets, not technology innovation. “Successful new products or services open market spaces by offering a leap in productivity, simplicity, ease of use, convenience, fun and fashion, or environmental friendliness.” Thus, you need to look at your business, your customers and non-customers and create value for them, rather than relying on your tech team to come up with a game changing innovation.

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