The purpose of this article is to discuss what separates high-growth companies from the rest of

their industry. Based on Kim and Mauborgne's research in 30 companies around the world in
approximately 30 industries, the main difference between companies with high growth and other
companies is in how they view the five dimensions of strategy. These differences are presented
in the table below adapted from their illustration on page 106. As indicated in the table, value
innovators view strategy in an entirely differ way than companies using the conventional
strategic logic.

Two Types of Strategic Logic

Five
Dimensions Conventional Logic Value Innovation Logic
of Strategy
Industry Industry's conditions can be
Industry's conditions are given.
assumptions shaped.
The competition is not the
A company should build
benchmark. A company should
Strategic focus competitive advantages. The aim is
pursue a quantum leap in value to
to beat the competition.
dominate the market.
A company should retain and
A value innovator targets the mass
expand its customer base through
of buyers and willingly lets some
further segmentation and
Customers existing customers go. It focuses
customization. It should focus on
on the key commonalities in what
the differences in what customers
customers value.
value.
A company must not be
Assets & A company should leverage its constrained by what it already has.
capabilities existing assets and capabilities. It must ask, What would we do if
we were starting anew?
An industry's traditional boundaries A value innovator thinks in terms
Product & determine the products and services of the total solution customers
service a company offers. The goal is to seek, even if that takes the
offerings maximize the value of those company beyond its industry's
offerings. traditional offerings.

How to Promote Value Innovation

Value innovation is defined as "the simultaneous pursuit of radically superior value for buyers
and lower costs for companies" (p. 112). To promote value innovation, a company must do the
following.

1. Identify and articulate the company's prevailing strategic logic.

2. Challenge it.

3. Think about the industry's assumptions, the company's strategic focus, and offerings that are
taken as given.
4. Reframe the company's strategic logic around value innovation, and ask the following four
questions.

Which of the competitive factors our industry takes for granted should be eliminated?

Which factors should be reduced well below the industry's standard?

Which factors should be increased well above the industry's standard?

Which factors should be created that the industry has never offered?

The Value Curve

Value innovators create a new Value Curve defined as "a graphic depiction of a company's
relative performance across its industry's key success factors" (p. 108). Several examples are
discussed in the article including Kinepolis, a Belgian company that operates cinemas, CNN
news, SAP business applications software, Virgin Group's chain of music stores, Accor's
Formule 1 line of budget hotels, Compaq's servers and Virgin Atlantic Airways. For example,
the value curve for Accor's Formule 1 Budget hotels is illustrated below.
Accor's Formule 1 Hotels are based on a new concept where standard hotel features are
eliminated (e.g., restaurants, lounges and receptionists except for peak check-in and check-out
times). They use automated tellers instead of receptionist for customers to check-in and check-
out. Their rooms are small and include a bed and only the bare necessities. The rooms are
modular blocks that are economical to build and provide good sound insulation. This new
concept cut the average cost of building a room by 50% and staff costs dropped from 25-35% of
sales to 20-23%. The company captured a large percentage of the budget hotel business and
expanded the market to people that would not otherwise have stayed in a hotel. For example,
truck drivers who previously slept in their trucks and business people who needed only a few
hours of rest.

The most successful companies were those that used value innovation in all the platforms where
innovation can take place including product, service and delivery. Compaq's innovations in the
computer server industry are used to illustrate the idea. To avoid what Kim and Mauborgne refer
to as "the trap of competing", Compaq focused on creating customer value, rather than what their
competitors were doing.
_____________________________________________

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