Disruptiv and Value Innovation
Many companies allow their competitors to set guidelines of their strategic thinking. They compare their strengths and weaknesses with strengths and weaknesses of their competitors. After, they begin to focus on building products that are better than the original products. This type of thinking opens the door for disruptive innovation. Disruptive innovation has proven time after time to have an advantage in developing creatively through the theories of innovation. Disruptive innovation created an advantage over the competition when a plan was developed correctly.
Companies are developed with the goal of success in mind. In order to do so, these same companies must be willing to adhere to its main focus and not focus on its competitors. “One of the most striking findings of our research is that despite the profound impact of a company’s strategic logic, that logic is often not articulated. And because it goes unstated and unexamined, a company does not necessarily apply a consistent strategic logic across its businesses” (Kim & Mauborgne, 2004). Companies often lose focus of their overall goal causing failure. In today’s times, companies need to develop a strategy that keeps focus on themselves and not the competitor. Due to shared innovation, disruptive innovation has opened many doors of many different areas of strategic thinking.
Another area of strategic thinking is value innovation. Value innovation dwells on the importance of worth. Value innovation has been demonstrated in “Blue Ocean Strategy: From Theory to Practice” (W. and Mauborgne, 2005). Value innovation focuses strictly on finding the wants and needs of its customers and improving the market they have instead of the competitors and what they are presently doing, what will be done in the future, or what they have done. In order to complete this method of innovation, a company must be knowledgeable of their customers. A customer only buys what is needed and the company will need to ensure that what the customer needs is what that company produces. A company that demonstrates this theory is Proctor and Gamble.
Disruptive innovation is one of the most important innovation theories. The main purpose of disruptive innovation is to take a service or product and progress into different way that the market it not expecting. Through disruptive innovation, the created new product that is within its market will eventually replace the original product. Disruptive innovations aim to capture large shares the well-known market. This theory was originally introduced by Clayton Christensen in his book titled “The Innovator’s Dilemma” (Christensen, 1997). In this book, Christensen described disruptive innovation as an innovation that is created to help the current market but eventually proceeds to disrupting the existing market of what was previously developed (Christensen, 1997).
Another form of this type of strategic innovation is value innovation. Value innovation targets a large amount of shareholders with the understanding that they may lose some of their customers. They then turn to the focus of key commodities and solutions that goes beyond their traditional offerings. (Kim and Mauborgne, 2004). Value innovation is simply defined as the immediate search of greater value for its customers while obtaining a lower costs for the company. Value innovation allows companies to search for ways of making their competitor a non-factor. (Kim and Mauborgne, 2004).
To do this, the companies will need to create a jump in the worthiness for the customer and the companies by opening a totally new market and also by creating the same jump in value for the buyers and also for the companies through opening up a new and unbiased market. For this same reason, the customer’s worth derives from the contributions subtracted by its price, the definite assessment of the company is produced from the contribution’s price subtracted by its total cost. When a system of value, price, and cost are all united and working together, value innovation is completed and the main goal of the company is achieved. According to Kim and Mauborgne (2004), there are three stages that can take place within value innovation. The stages are product, service and delivery.
Comparison and Contrasting of Disruptive and Value Innovation
The term disruptive innovation is used in the world of business to describe innovations that can improve a service or product in other ways that the market believes should be used. It is designed for a new set of customers and it will eventually cause the original product decrease in sales and cost. Disruptive innovation can harm the businesses that are successful, well-managed, have the ability to be responsive to their customers and have excellent researching skills. Because of this, companies must stay close to their customers, listen to their customers, and most importantly focus on their computers. The competitor will need to develop a new idea that will also benefit the market but that will also provide the company as well as the customers great investments that can result into growth. This should be the ultimate goal of the business.
Value Innovation is merely looked upon as the foundation of a blue ocean strategy. Blue Ocean strategies are strategies that are searched by markets spaces that are empty. Value innovation is responsible for overseeing the value curves that can prevent a business from resulting into an innovation where there is currently a large turnover to be gained from its existing contributions. If the value curve of a business is different from the rest of the market, as well as the difference is opened and approved by a reasonable amount of customers, then and only then should the companies push away from innovation (Kim & Mauborgne, 2004). Value innovations opens a number of opportunities due to blue oceans. Companies must learn to protect themselves from their competitors, so that they cannot be copied/mimicked. This earns them a place in the market.
Case Study for Proctor and Gamble
Proctor and Gamble is a company that has created a place in the market for itself by display in disruptive and massive innovation techniques in the field of retail goods. Proctor and Gamble is the leading consumer in retail goods that is superior in quality and value to all customers around the world. Proctor and Gamble’s products are sold in more than 180 countries. Their products are sold in massive qualities to merchandisers, grocery stores, membership club stores, salons, and drug stores (Proctor and Gamble, 2012).
Proctor and Gamble is among the Fortune 1000, taking its place at number 27 on the listen. Proctor and Gamble spans a large range of product categories such as household care, grooming, beauty, and personal healthcare. Proctor and Gamble has partnered with companies such as Pampers, Gillette, Ariel, Tide, Downy, Pantene, Head and Shoulders, Olay, Oral-B, Crest Dawn, Fairy, and also Always. Proctor and Gamble is consider to have three times more in billion dollar brans than its largest competitor. This is due to disruptive and value innovation. y. Since its beginning, the company’s products have provoked a revolution in retail goods and consumer packed goods. (Proctor and Gamble, 2012).
Due to innovation, Proctor and Gamble developed a closed business model. There was a joke that Proctor and Gamble invented the “not invented here”. This joke came about as Proctor and Gamble being known as the largest consumer brands company that filed thousands of patients and only using an estimated 10 percent of them. The analyst employed by Proctor and Gamble voiced their complaints regarding their research and development expenses were higher in a sales than their competitors. In 2000, Proctor and Gamble’s share price began to decrease, causing them to lose well over $110 dollars per share.
Proctor and Gamble analyzed their situation and found they were not producing enough new brands and the only option they to do so was to develop new brands by being open more to the market. Proctor and Gamble had drastic changes in 2001. They adopted disruptive innovation and became more open to the market. Opening a new market, provided Proctor and Gamble a new open business model, which allowed growth and more successful business plan (Witchalls, 2007).
By adding more products and features to their market, Proctor and Gamble was able to successfully capture more customers in higher levels of their market. Proctor and Gamble scored a huge hit when they partnered with companies for household products. This took them to an ultimate high, simply because house hold items are needed and the cheaper the better if it achieves the same quality of work. Household products alone increased their sales nearly 35% with baby care and family care at 19%. (Proctor and Gamble, 2012).
According to Harris (2008), there is a large amount of companies looking to contribute to solutions that can be used to set customer relations and maintain a business that continue to profit from its products. Household goods, health care, baby care, and family care, which Proctor and Gamble has successfully pushed throughout the world – by the creation of affordable brands, where it clones the original product and forces the competitor to compete for customers, due to distructive innovation. This has become the new normal in many markets. Many customers have become dependent upon Proctor and Gamble and their products, that using originally made products are not even looked upon. Conclusion
When a new market is created by disruptive innovation, it allows a diverse amount of values to take over the existing market. A serious element used in defining the long-term success of a company does not only answer to financial improvements, instead be willing to tolerate a similar effort in the creation of the end results. Because of this, the company will take improve its risks, grow revenue and also gain a higher market.
Deciding to agree with disruptive innovation or value innovation of a new product can affect its current market drastically. Through the development of a new value that offers a unique value its customers by giving them more of what they need at a much lesser price is always a better deal and also a very good example of value innovation. To gain a highly constant and profitable growth, many companies must get away from groups of the competitive markets. It would be in a companies’ best interest to create value innovation with their markets.
The knowledge acquired and the ideas developed are economic goods that can produce growing returns through a highly promised efficient use (Kim ; Mauborgne, 2004) such as the one illustrated within Proctor and Gamble. Proctor and Gamble have become the most innovative successful company of today’s time in the ability to create retail goods. Even though, Proctor and Gamble has to this point been successful, they will need to produce a more resourceful idea to keep them top of this competitive market. Proctor and Gamble will need to continue to build on their market plan that will continue to keep them on top.