Page 211 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

90 VALUE INNOVATION

When firms compete, they tend to become locked in a cycle of
incrementally improving a combination of costs, product, and
service. Value innovators break free from the pack by staking out a
new market, developing products or services for which there are no
direct competitors.

The idea

Pioneered by W. Chan Kim and Renée Mauborgne, value innovation
is the concept of challenging and defying conventional logic to
either redefine or create a market. For example, for many years,
American TV networks used the same format for news programs:
they aired at the same time, and they competed on the popularity
and professionalism of their presenters and their ability to report
and analyze events. This changed in 1980, when CNN launched
real-time 24-hour news from around the world for only 20 percent
of the cost of the networks.
Similarly, in 1984 Virgin defied convention when it decided to
eliminate its first-class service. Prevailing logic suggested that
growth relied on focusing on more, not fewer, market segments,
but Virgin focused on business-class passengers. It used the money
saved from first class to provide a range of popular innovations,
from better and different lounges to improved in-flight amenities.
This approach was later applied to its other businesses, such as
retailing and music.

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