- Zakaria Dalil
The Lean Product: Customer Value Innovation
Updated: Jan 25, 2021
Throughout history, businesses have always focused on competing in existing markets either by matching or beating their rivals’ products or services. Consequently, their strategies have always ended up taking on similar perspectives, either by focusing on differentiating themselves regardless of the cost, or by adopting a low-cost strategy compromising quality. What if those businesses embraced a model where they would deliver high quality products or services whilst maintaining a low-cost operation?
Every business leader has a tendency for innovation, that their staff should "think outside the box" and "stretch the envelope", etc.; however, nobody tells them how to do it. In today’s business world and especially during these rough times of COVID, customers are constantly demanding innovation from their vendors, who very much want to deliver. The question remains: how are they going to deliver?
“If you always do what you always did, you will always get what you always got.”
It takes originality, inspiration, and influence to build something innovative, especially in this age of fast-paced modernity. Designing and creating new things is what will attract today’s consumers. They want disruption, more uniqueness, and more variations.
The authors of the book Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne extensively studied how innovative companies break out from the norms by betting on new market spaces—that is, by designing products or services with no direct competitors.
"To win 100 battles is not the height of skill, to subdue the enemy without fighting is."
Sun Tzu, The Art of War
TAPPING INTO OTHER INDUSTRIES TO INNOVATE VALUE
The route to innovate value entails a distinctive business model, an unconventional approach, and an efficient way of pursuing opportunities. That is to say, instead of searching within the traditional boundaries of industry competition, businesses can look systematically across those boundaries to discover untapped territories and adopt them within their industry in order to innovate value for the customer. Value innovation is a method in which a business gets inspired from other industries to create new concepts that are designed to achieve high product quality at low cost.
“Innovation is change that unlocks new value”
Value Innovation is the simultaneous activity of creating buyer value and low cost. The Eliminate-Reduce-Raise-Create (ERRC) Grid is an important tool that helps businesses create value innovation in their products or services. It is a simple tool that drives companies to focus on eliminating and reducing unnecessary features that the industry competes on; and at the same time concentrate on raising and creating features in a product or service that the industry has never offered.
Value innovation, therefore, does not necessarily mean the creation of a completely new product or service.
It could simply mean improvement on existing offerings:
Which factors that the industry has long competed on should be eliminated?
Which factors should be reduced well below the industry’s standards?
Which factors should be created that the industry has never offered?
Which factors should be raised well above the industry standards?
PUTTING THE CONCEPTS INTO PERSPECTIVE: THE FORD MODEL T CASE STUDY
Ford’s Model T, introduced in 1908, is an example of a pure value innovation move that challenged the conventional automotive industry back then. Henry Ford simply made the automobile accessible to the masses.
Back in 1893, the Duryea brothers created the first automobile. Regardless Of their unreliability, they still cost around $1,500. In 1908, over 500 American automakers existed, but only Henry Ford was able to crack the code by creating a standardized mass-produced automobile, the Model T. He called it the car ‘for the great multitude, constructed of the best materials.’
The Model T was durable, reliable, and easy to fix. It was priced so that the majority of Americans could afford one. The first Model T cost $850, half the price of existing automobiles. In 1909, it dropped to $609. A sales brochure proclaimed, ‘Watch the Ford Go By, High-Priced Quality in a Low-Priced Car.’ By 1924, it was down to $240.
Ford’s success was backed by a very profitable business model. Ford cars remained highly standardized, offered limited options and interchangeable spare parts. Introduced in 1913, the Ford’s revolutionary assembly line replaced skilled craftsmen with unskilled laborers who worked one small task faster and more efficiently, increasing productivity by 60 percent. With lower costs, Ford was able to charge a price that was afforded by the mass market.
As a result, sales of the Model T burst! Ford’s market share rose from 9 percent in 1908 to 61 percent in 1921. So great was the value innovation Ford created that the Model T replaced the horse-cart carriage as the primary means of transport.
In a nutshell, value innovation has become one of the most fundamental tools businesses are using today to ensure they are delivering value to the consumer while maintaining low-cost operations; however, value innovation alone is not enough to ensure a successful business. Good strategy, timing, choosing the right team, customer experience, and networking are all factors that businesses have to consider in order for their products and services to be a success.