Value innovation to create blue oceans

We can distinguish two fundamental concepts of the relationship between the structure of the sector of activity and the strategic efforts of its actors.

1. The structuralist conception

2. The reconstructionist conception

1- The structuralist conception finds its roots in the school of industrial organization, which postulates the existence of a causal relation leading from the structure to the conduct and, beyond, to the performance. The structure of the market, dictated by the conditions of supply and demand, orients the conduct of sellers and buyers, which in turn determines final performance. System-wide changes are induced by exogenous factors such as major macroeconomic changes or technological breakthroughs.

2- The reconstructionist conception takes as its point of departure the theory of endogenous growth. This goes back to Joseph A. Schumpeter’s intuition: the forces that disrupt economic structures and industrial landscapes can arise from within the system. Innovation can arise endogenously, its main source being the creative entrepreneur. It is according to the entrepreneur’s vision that we cannot reproduce systematically since it depends on the genius of the individual.

Reconstructionist design seeks to analyze the way in which ideas and knowledge are deployed in the creation stage to ensure the growth of the company. In particular, the whole company is capable of such creativity at all times as long as it carries out a cognitive and radically new reconstruction of existing data and market elements.

The choice between these two conceptions, either structuralist and reconstructionist, has important consequences. Structuralism often leads to an emphasis on the competitive struggle. It encourages the company to take a defensible position in a market whose contours are supposed to be immutable. For the strategist, therefore, it is above all a matter of acquiring competitive advantages, most often by studying what his rivals are doing and then trying to do it even better. The conquest of market share comes down, in this vision, to a zero-sum game: one never wins more than what the other has lost. Competition, the supply side of the equation, thus becomes the determining variable of the strategy.

Those who adhere to this view tend to divide the economy into attractive and unattractive sectors and then orient their activities accordingly. Once their choice is made, they opt for the position, in terms of costs or differentiation, which best corresponds to the internal systems of the company and to its strengths in the face of the competition. According to this vision, we can privilege the domination by the costs to the detriment of the value of the offer, and vice versa. And since we consider that the profitability of the sector as a whole also depends on structural factors, the actors focus above all on capturing existing wealth rather than creating new ones. They are fighting, in short, for a share of a red ocean where growth prospects are increasingly limited.

A completely different conception of the strategic challenge offered by the reconstructionists, the structure of the markets and the borders separating them only exist in the minds of the leaders, they refuse to let themselves be locked into it. They feel that there is a latent demand somewhere that needs to be revealed and exploited. This will only be possible if the center of gravity shifts from supply to demand, from competition according to innovation / value: new value must be created which gives rise to new demand. To achieve this, the company must embark on a journey of discovery that involves the systematic exploration of alternatives, beyond the boundaries between markets, and the rearrangement of existing elements to found a new strategic space that arouses its own demand.

The followers of this vision think that it does not make much sense to speak of attractive sectors per se, since the attractiveness of each sector evolves under the effect of the patient reconstruction efforts made by the actors. These efforts are gradually changing the structure of the market and the criteria defining the practices to be adopted. In the resulting new game, the competition rules specific to the previous game no longer apply. the innovation / value strategy, because it acts on demand, enlarges existing markets and creates new ones. This obtains a jump in value offered to customers thanks to the creation of wealth and not by the weakening of competitors, as in the traditional scheme. a strategy of this type therefore leads to a situation which no longer has much to do with zero-sum gambling and which can pay off big.

The practice of reconstruction offers as an example, among others, by the Cirque du Soleil which stands out for its work of combination and recombination. Innovation takes place according to a new combination of productive resources. The example of the cirque du soleil shows us a focus on the demand side of the equation, while recombination, which aims to organize different technologies or existing means of production, often gives priority to the supply side. . At the heart of the reconstruction are elements of value for the buyer that transcend the boundaries between sectors.

Through its concern for supply, the recombination approach seeks an innovative solution to an existing problem. The followers of reconstruction, they ignore the cognitive limits imposed by the rules of the traditional game. Cirque du Soleil has not set itself the objective of offering a better circus thanks to the recomposition of techniques or knowledge specific to the usual acts. It owes its success to a reconstruction of elements of value to the buyer, reconstruction whose aim was to create a new category of spectacle which combines the fun and excitement of the traditional circus and the artistic refinement of the theater. it is often the redefinition of the problem that allows you to reinvent your activity and therefore your strategy, while the recombination rather directs you towards solutions which concern specific aspects of your activity and which ultimately reinforce your existing strategic orientation.

Rebuilding means redrawing the boundaries of your processes and redesigning the structure of a market; it means making the best use of technological possibilities to arrive at innovative solutions.