Journal Article | MIT Sloan Management Review | 40 | January 1999
Strategy, Value Innovation, and the Knowledge Economy
For the last 20 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.