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7 - The Six Outcomes of Strategic Innovation

Creativity produces little value if it is entirely random: it must be channeled to achieve a specific outcome, and the authors intend to explore six in the present chapter:

  1. Value Innovation: Creating or extending the value chain
  2. Cost Innovation: Shortening the chain
  3. Volume Innovation: Widening the chain
  4. Marketing Innovation: Recasting the chain closer to customers
  5. Boundary Innovation: Blending the chain
  6. Learning Innovation: Adapting the chain through product/service interactions

Generally speaking, this represents a hierarchy of value creation, such that innovation near the top of the list will result in greater profitability than those lower on the list.

Value Innovation

Value innovation is the most dramatic and profitable form, which is readily recognizable because it involves a highly dramatic even: the foundation of a new company, the introduction of a new product, or the creation of an entire industry, that provides to the customers a benefit that they may not have conceived or believed, or provides a radical leap forward in the way in which they are currently meeting their needs..

From here, it gets random:

Cost Innovation

Cost innovation does not seek to create new value, but instead looks to the means by which value is created and attempts to find a way that is more efficient. The simplest method of cost innovation to examine a process and consider whether any steps can be eliminated; a more complex method entails replacing one or more steps with an alternative activity that achieves the same results.

More random stuff:

Volume Innovation

Volume innovation is about discovering ways to sell more products to the marketplace - which may involve finding new customers or selling more to existing customers, or may also address problems with the production and logistics processes that prevent the company from meeting existing demand.

To simply make more or sell more is not necessarily strategic or creative if it merely requires duplicating existing processes (open a second factory the same as the first) or doing them more (dividing into three shifts for round-the-clock operations) or even doing them faster (providing bonuses to workers to increase production, assuming it's mere laziness that prevents efficiency) - to be strategic and creative, it must involve doing things in a different manner than they are currently done.

Bullet time:

Market Innovation

The authors describe this idea in a vague way - changing the way that people think about the product. It seems a vague collection that involves not only the way in which the product is used, but also in the way in which it is paid for and distributed.

Boundary Innovation

The authors are likewise hazy in their definition of this concept - which seems to be another catch-all that involves various ways to create additional value by creative rearrangement of the value chain.

Learning Innovation

The notion of "learning innovation" seems to be tied to the discoveries that are made during the process of implementing other innovations that lead to additional initiatives (rather than modification of the present one). This can occur in the planning, execution, or analysis phase and results from people interacting with one another.

(EN: It is likely worthwhile to consider this as a separate source of innovation, as a method of maintaining focus. Too often, an innovative idea gets sidetracked chasing after other ideas that have arisen during the implementation process. By suggesting this is a separate thing, it can be relegated to a sidebar for separate consideration.)

The author makes a general observation: learning innovation seems to be the demesne of American firms. It's generally a consequence of American culture: people there are eager to try something new, accept that they may not be perfect, and are not shy about sharing their opinions.