Saturday, June 9, 2007

Value Innovation

Basic principles of economics and marketing teach us that companies are successful because they satisfy their customers’ needs. Those companies that do not satisfy these needs eventually perish. Others may still contend with competition. Thus, to survive in a completive environment, companies need to make the best offers to keep and attract customers. One could therefore ask - How does a company effectively compete in the marketplace? How does it make better offers? While the answers are complex, the author believes that to compete effectively, companies need to differentiate themselves. Differentiation pressures generally cause companies to innovate their products as well as business models. In order to innovate, which is difficult to do in a vacuum, companies need to stay close to their customers and practice market orientation. Unfortunately, market orientation does have its limits. Namely, market oriented firms are generally unable to innovate outside of customers’ value systems [5]. To free themselves from these limits, companies practice value innovation in addition to market orientation.
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