Most companies focus on matching and beating their rivals. As a result, their strategies tend to take on similar dimensions. What ensues is head-to-head competition based largely on incremental improvements in cost, quality, or both. The authors have studied how innovative companies break free from the competitive pack by staking out fundamentally new market space--that is, by creating products or services for which there are no direct competitors.

This path to value innovation requires a different competitive mind-set and a systematic way of looking for opportunities. Instead of looking within the conventional boundaries that define how an industry competes, managers can look methodically across them. By so doing, they can find unoccupied territory that represents real value innovation.

Rather than looking at competitors within their own industry, for example, managers can ask why customers make the trade-off between substitute products or services. Home Depot, for example, looked across the substitutes serving home improvement needs. Intuit looked across the substitutes available to individuals managing their personal finances. In both cases, powerful insights were derived from looking at familiar data from a new perspective.

Similar insights can be gleaned by looking across strategic groups within an industry; across buyer groups; across complementary product and service offerings; across the functional-emotional orientation of an industry; and even across time. To help readers explore new market space systematically, the authors developed a tool, the value curve that can be used to represent visually a range of value propositions.

Key ConceptsEdit

Analyzes how to create new markets by going somewhere different and ultimately making competition irrelevant. Six Approaches. This article is positioned in a way that explains how managers are supposed to stretch the traditional accepted boundaries of their respective industries to find unoccupied territory that will provide a real breakthrough in value. It talks about looking across these boundaries in a systematic way. Six approaches that in encompasses are:

  1. Looking Across Substitute Industries → take into consideration how consumers make trade-offs across substitutes; Analysis of marketing tactics result in responses from rivals within the industry however, the same actions in a substitute industry can result in the same consumer reactions however go unnoticed from companies within the initial industry. The space between substitute industries lies an exploitable opportunity for value innovation. (Also, if there is more than one substitute, it is smart to evaluate the ones with greatest volume usage and dollar value)
  2. Looking Across Strategic Groups Within Industries → strategic group refers to a group of companies within an industry that pursue a similar strategy and are usually ranked in a hierarchical order within an industry. Key is to understand what factors determine buyers’ decisions to trade up or down from one group to another.
  3. Looking Across the Chain of Buyers → Need to identify the chain of “customers” who are directly or indirectly involved in the buying decision (purchasers vs. users vs. influencers); Industries typically converge on a single buyer group – but challenging this conventional buyer group to target can lead to the discovery of new market space – insights into how to redesign their value curve to focus on overlooked customers.
  4. Looking Across Complementary Product and Service Offerings → Consider what happens before, during, and after your product is used to define the total solution buyers seeks when they choose your product or service. 
  5. Looking Across Functional or Emotional Appeal to Buyers → Companies often find new market space when they are willing to challenge the functional-emotional orientation of their industry
  6. Looking Across Time → Instead of focusing on adapting to external treads as they occur in the industry, looking across time requires participation in shaping those external trends over time – do this by finding insight in trends that are observable today

Value Curve. Graphic depiction of the way a company or an industry configures its offering to customers. Uses the KSF of an industry or category within an industry and plots the performance of the offering relative to other alternatives based on those KSFs. (see page 4 of PDF for detailed description)


Can differentiation be created in a new market space? Why?

Differentiation can be created in a new market space through the innovative value it has to offer. By finding a new market space for your company to operate in, the competitive factors that you were once competing on with rivals for market share in the industry become irrelevant, as you are able to offer value in an untouched portion of the market. 


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