Sloan Management Review
Issue Date: Spring
1999, 40:3
Pages: 41-53
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Strategy,
Value Innovation, and the Knowledge Economy
W. Chan Kim and Renée
Mauborgne
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For the last twenty years, competition has
occupied the center of strategic thinking. Indeed, one hardly speaks
of strategy without drawing on the vocabulary of competition - competitive
strategy, competitive benchmarking, competitive advantages, outperforming
the competition. In fact, almost all of the strategic prescriptions
that have been put forth only redefine the ways in which companies build
advantages over the competition. Building advantages over the competition
has been the strategic objective of many firms. Nothing is wrong
with this strategic objective in itself. In the end, a company should
have some advantages over the competition to sustain in the market.
When asked to build competitive advantage, however, managers typically
assess what competitors do, and strive to do it better. Their strategic
thinking thus regresses toward the competition. In the end, companies
expend tremendous effort but often achieve no more than incremental improvement
- imitation, not innovation. Strategy driven by the competition can
be detrimental as it often induces companies into a trap of continuous
competitive improvement over one another, making them play a zero-sum game
within their existing markets. To achieve sustained profitable growth,
companies need to break out of the trap of competing and imitation.
Rather than striving to match or outperform the competition, companies
should strive for value innovation. Emphasis on value places the
buyer, not the competition, at the center of strategic thinking;
emphasis on innovation pushes managers to pursue beyond improvements to
totally new ways of doing things.
| W. Chan Kim is The Boston Consulting Group Bruce D. Henderson Chair
Professor of International Management at INSEAD, France.
Renée Mauborgne is The INSEAD Distinguished
Fellow and a professor of strategy and management at INSEAD, and a Fellow of the World Economic Forum.
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For
a complete list of Professor W. Chan Kim's articles in:
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