B2B - Strategy Tools - Part 12

Value creation for customers, employees, partners and shareholders

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Value Innovation is the key to creating "Blue Oceans" as described in a previous post. Arthur D. Little Inc. identified in their book: "The Innovation Premium": 3 primary types of innovation that together in my opinion can create Value Innovation:

• Product/service innovation: The creative development and commercialization of radically new products or services, often grounded in new technology and linked to unmet customer needs.
  
• Process innovation: The development of new ways of producing products or services that lead to advantages in cost or timeliness of delivery.
• Business innovation: The development of new businesses and new ways of conducting business that provides unbeatable competitive advantage.
  

But Value Innovation, be it product/service, process and/or business innovation is not created in isolation, hidden away in the back offices of the company.
According to Arthur D. Little innovative (Blue Ocean?) or "Next Generation Enterprises" create value for customers, employees, partners as well as shareholders:

"Capture the innovation premium for customers

Next generation enterprises typically recognize that their creativity benefits customers by providing valuable new products and services and high levels of customer satisfaction - the reason d'être of any business. And they stretch to excel even further by focusing on specific customers and treating them in innovative ways. They go the extra mile to make it easier and more worthwhile - even exciting - for their customers to do business with them.

Direct customer input is an increasingly valuable resource that is actively sought and leveraged to facilitate both product and process innovation.

Capture the innovation premium for employees

Next generation companies have leading-edge employees. The best and the brightest are drawn to forward thinking, innovative companies because these companies create extraordinary value for their employees. They treat employees as individuals, integrating personal needs and interests with the needs of the business, and they strive to offer meaningful rewards and recognition - using the resources accumulated from successful innovation.

The best and the brightest like the risk taking that goes along with innovation. They like holding exciting jobs in dynamics organisations in which they have high levels of responsibility and a variety of tasks and assignments. They like a continuous learning environment and a supportive atmosphere that encourages creativity without fear of punishment if new ideas don't always pan out.

They know that people are the only assets that appreciate with use, so that, in the long run, companies compete on the basis of people, not technology.

Capture the innovation premium for partners

Partnering is vital to innovative companies. In face of shrinking product-development cycles, rising development costs, rapid technology changes, and increased customer sophistication, innovative companies recognize that they can't go it alone. So they build extended networks of partners, sources, and suppliers to capture emerging opportunities by acquiring and levering competences, both internal and external, and by accelerating technology transfer and the pace of commercialisation.

Strategic alignment is an important consideration, of course, and alliances are usually sought to fill competence gaps and accelerate time-to-market. But unlike most companies, which tend to partner with suppliers in technology ventures and sourcing activities, innovative companies differentiate themselves by partnering up and down the value chain - not just with suppliers, but with customers, competitors, and other industry participants. By stepping outside the usual bounds of collaboration, innovative companies derive value from accelerated commercialisation as well as from venturing and sourcing.

Capture the innovation premium for shareholders

In sum, innovation builds customer satisfaction and brand loyalty, it helps keep employees satisfied and boosts a company's employee-retention rate; it increases partner satisfaction and preference; it wins more share of the market and of the mind - all of which translates into improved investor returns and growing financial health, because the benefit of sustainable innovation leadership is consistently strong financial performance...

Is there a risk involved in committing a company to setting out on the pathways leading to the innovation premium? Of course. Innovation implies risk. But to risk is to dare, and to dare is to seize the opportunity to succeed in previously unimagined ways. When innovation is properly conceived and managed, the reward repays the risk many times over. The consequence of consistent, enterprise-wide growth and the ability to reward all stakeholders with the benefits of the innovation premium make it a risk well worth taking."

Ronald S. Jonash & Tom Sommerlatte- Arthur D. Little, Inc

Peter Sørensen