Value Innovation and Blue Oceans

As the founder of an Internet software company, I spend a lot of time considering how to create, maintain and extend competitive advantage through innovation. Of course, innovation can take many forms, including technological innovation, process innovation and value innovation. In North America and Europe, the first two types of innovation are quickly becoming commoditized due to the proliferation of open source software and free or very cheap Web collaboration, tracking and reporting tools. While technology and process improvements remain necessary building blocks for most any business, they are no longer the key drivers of competitive advantage. Rather, and as detailed in the brilliant book Blue Ocean Strategy, the pendulum of competitive advantage has now swung decisively towards value innovation.

At its core, value innovation is a customer oriented strategy that does not use competitors as benchmarks and largely ignores existing industry conditions. Instead, value innovators create competitive advantage by focusing on differentiation, customer needs and by creating uncontested market space ("blue oceans"). Consider how Starbucks, Cirque de Soleil and Ikea have come to dominate their industries by fundamentally redefining the coffee shop, circus and funiture store.

So, as you consider your own company or business think about how you are going about creating competitive advantage. Is it through a conventional strategy of focusing on technological, process and cost improvements -- which are unlikely to be sustainable over the long term -- or, is it through a commitment to value innovation and blue ocean strategy? As for me, I am hoping that in a few years I will be writing this blog on the sandy beach of a very blue ocean.

Aloha.