Finding Innovative Solutions to Strategic Challenges.
Most companies face three main strategic challenges:
- How to achieve competitive advantage over rivals, or how to avoid competition altogether
- How to expand the existing business
- How to find and establish new businesses outside the core for future growth.
“Strategic Innovation”,offers new tools, new processes and a new way of thinking strategically to find innovative solutions to these challenges.
This is a framework for thinking about strategy with the objective to achieve competitive advantage and new growth through the creation of
- New value propositions for the customer
- New markets, either by creating new ones or reshaping existing ones
- New business models.
New Value Propositions
A value proposition is a combination of a customer’s problem and the solution you offer to solve this problem. Often new solutions can be found by thinking about which attributes of the current offering, be it a product or a service, are really valuable to the customer. Consider for example the Nintendo Wii: a less expensive and less complicated to use game console that attracted new buyers, precisely because it had less features than a more expensive Xbox or Playstation.
Maybe the solution lies with offering the customer a bundle of products and services, which she needs anyways. Consider airlines offering not only the flight but car rental and hotel deals along the way.
Instead of focusing on the product, you might also want to focus on the circumstances when your product is being used, asking what is really to job to be done here? Watch this video for an excellence explanation of the job-to-be-done approach:
To find ideas for unmet needs you might also want to look across the customer’s experience from becoming aware of his need, to find a solution, buying it, financing it, and even disposing off it.
New Markets
Identifying new markets, either by creating new ones or reshaping existing ones, is the second element of strategic innovation. Kim and Mauborgne, authors of “Blue Ocean Strategy”, suggest three tiers of non-customer to look at for new market opportunities:
- The first tier consists of what they call “soon-to-be” non-customers, who minimally use the current offering, but are constantly searching for something better and ready to switch easily. They are closest to the existing customers.
- The second tier are the “refusing” non-customers, “…people who either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means”(Kim and Mauborgne 2005) or too complicated to use. The key here is that these customers are willing to buy, but not at the current terms.
- The third tier of “unexplored” non-customers is the farthest away from the existing market. Typically they are being ignored completely as potential customers by the industry, either because they have always been assumed to belong to another industry or are not being considered worth the effort.
Besides looking at non-customers, you can also use the tactics below to discover new markets. Which customers do you currently focus on?
Each one of these tactics might offer opportunities for new growth, if you can either offer a new value proposition or a new business model to serve these customers better.
New Business Models
Your company’s business model is the way it does business, how it creates value, the activities that it performs and for what and how it gets paid (See this article of an overview of core elements of the business model)
Consider Amazon: the innovation in Amazon’s business model was to leave behind the traditional retail model, and instead of building book stores, to only sell through the internet.
Start with describing your existing business model and the dominant models in your industry. Ask what would happen, if you were to do things differently.
How to find innovative answers to your strategic challenges?
The capabilities needed for strategic innovation include the ability to discover new opportunities, design the new strategy, and transform the organization and build the necessary skills for executing the new strategy.
Start by looking into unconventional places, for example the 3 tiers of non-customer, challenge the conventional logic of your industry by playing around with “what if…” questions and do not let yourself be constraint by your existing assets and capabilities, but ask instead,what if we started anew? Do not start with what you have, but think about what you would like to achieve first, and then look at what you need and how you can obtain the necessary assets and capabilities.
