is the central
connection between your value
proposition and if it's modeled in
time. Those fundamental tenets have
stood the test of time quite well.
What is new is that we have a much
deeper understanding of the value
discipline around customer
intimacy and total solution. Over
the years we have come to develop a
much deeper and clearer
understanding of what that really
means.
Another element is that in the past
13 years technology has changed.
Organizations have created new
operating capabilities and there are
all kinds of ways that people can
extend out further their operating
model or design. So what we have
seen is an ever-increasing
performance against all the
dimensions of value that are taking
place simply because innovation
opens up all sorts of new ways of
delivering value in ever-more
effective fashions.
It's one thing to choose one of these
three disciplines and operating on that
platform. It's quite a different thing to bring
about innovation in each one of these
disciplines. What is the best way to have a balance between the value discipline
chosen and the innovation desired?
In the past few years we have
actually made enormous headway
studying the connection point
between the value that's chosen and
the kinds of innovation needed to
create. What we have learned is that
it starts with a much clearer
understanding of what is
innovation. In the past, if you
listened to people talk about
innovation and you tried to find the
real definition, it remained a very
loose concept in most people's
minds. It just seemed to have
something to do with being different
or better, changed or with more
variety.
Let me give you a definition of
innovation that is actually central to
progressing. Innovation is a
significant improvement along the
main parameters of customer value.
By example, let's say we are in the
breakfast cereal business. The way
breakfast cereal folks tend to
innovate is they take some
combination of oats, wheat and
corn; they grind it up, make it either
into a flake or chunk, and paint it
any color in the rainbow. They can
add no sugar, some sugar or a lot of
sugar. They can place in tried fruit
or marshmallow. They put it all in
the liner, box it up and charge five
dollars. And they call that
innovation. Now, if you then apply
the definition I gave you, which is
innovation is significant
improvement along the main
parameters of customer value, the
starting point instead becomes not
the components of the product or
different ways to put things
together, but identifying what are
the main parameters of value. In the
breakfast cereal business there are
three: taste, nutrition and price. All
the products in that market are
bought because they either taste better, they are better for you or they
are less expensive.
By applying this definition you
radically reduce the number of
things you are working on to only
those things that can significantly
improve taste, nutrition or price.
That is how you create a connection
between value leadership and
innovation. Now, that example
happens to be where the company's
value proposition would be product
leadership so what we were talking
about with taste, nutrition and
price two of those three
dimensions, taste and nutrition
are really aligned with the kinds of
things that product leaders improve.
In another market, where the
parameters of value are different, it
might be that what innovation
means to you is significant
movement along a total solution or
significant movement along hasslefree
service. The same definition
applies no matter what the value is.
