Value Innovation: The strategic Logic of High Growth

Topics: Hotel, Innovation, Hotel Formule 1 Pages: 31 (6654 words) Published: April 5, 2014
Value Innovation:
The Strategic Logic of
High Growth
by W. Chan Kim and Renée Mauborgne

Harvard Business Review
Reprint 97108

What separates high-growth companies from the pack is the way managers make sense of how they do business.

Value Innovation:
The Strategic Logic of High Growth
by W. Chan Kim and Renée Mauborgne
After a decade of downsizing and increasingly intense competition, profitable growth is a tremendous challenge many companies face. Why do some companies achieve sustained high growth in both
revenues and profits? In a five-year study of highgrowth companies and their less successful competitors, we found that the answer lies in the way each group approached strategy. The difference in

approach was not a matter of managers choosing
one analytical tool or planning model over another.
The difference was in the companies’ fundamental,
implicit assumptions about strategy. The less successful companies took a conventional approach: their strategic thinking was dominated by the idea
of staying ahead of the competition. In stark contrast, the high-growth companies paid little attention to matching or beating their rivals. Instead, they sought to make their competitors irrelevant

through a strategic logic we call value innovation.
Consider Bert Claeys, a Belgian company that
operates movie theaters. From the 1960s to the
1980s, the movie theater industry in Belgium was
declining steadily. With the spread of videocassette
recorders and satellite and cable television, the average Belgian’s moviegoing dropped from eight to two times per year. By the 1980s, many cinema operators (COs) were forced to shut down. The COs that remained found themselves competing head-to-head for a shrinking market. All DRAWING BY HAROLD LEE MILLER

took similar actions. They turned cinemas into
multiplexes with as many as ten screens, broadened their film offerings to attract all customer segments, expanded their food and drink services, and increased showing times.
Those attempts to leverage existing assets became irrelevant in 1988, when Bert Claeys created Kinepolis. Neither an ordinary cinema nor a multiplex, Kinepolis is the world’s first megaplex, with 25 screens and 7,600 seats. By offering moviegoers

a radically superior experience, Kinepolis won 50%
of the market in Brussels in its first year and expanded the market by about 40%. Today many Belgians refer not to a night at the movies but to an evening at Kinepolis.
Consider the differences between Kinepolis and
other Belgian movie theaters. The typical Belgian
multiplex has small viewing rooms that often have
no more than 100 seats, screens that measure 7 meters by 5 meters, and 35-millimeter projection equipment. Viewing rooms at Kinepolis have up to
700 seats, and there is so much legroom that viewers do not have to move when someone passes by. W. Chan Kim is the Boston Consulting Group Bruce D.
Henderson Professor of International Management at
INSEAD in Fontainebleau, France. Renée Mauborgne is
a senior research fellow in strategy and international
management at INSEAD. Their previous HBR article
was “Parables of Leadership” (July-August 1992).

Copyright © 1996 by the President and Fellows of Harvard College. All rights reserved.

Researching the Roots of High Growth
Over the last five years, we studied more than 30
companies around the world in approximately 30 industries. We looked at companies with high growth in both revenues and profits and companies with less
successful performance records. In an effort to explain the difference in performance between the two groups of companies, we interviewed hundreds of
managers, analysts, and researchers. We built strategic, organizational, and performance profiles. We looked for industry or organizational patterns. And
we compared the two groups of companies along dimensions that are often thought to be related to a company’s potential for growth. Did private companies grow more...
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