TOCICO

Great businesses are built around the idea of delivering exceptional value. The question is, how do we know what exceptional value is? The answer is that this kind of value is created by removing a significant limitation to the customer in a way that was not possible before, and to the extent that no significant competitor can compete with. Companies thrive in the periods they are able to do exactly this. Prominent examples are companies such as Walmart, IKEA, Google, and Apple. For Walmart, the concept of an “everyday low price” enabled many families to stretch their family budget. IKEA was the first to offer contemporary furniture at very affordable price points. Google considerably improved our access to information and advertisers’ access to their target audiences. Apple used tight integration between software and hardware and its ability to cooperate with media providers to simplify the way we consume digital entertainment. When assessing value we have to be careful not to put too much emphasis on market surveys. Most often, customers take limitation as part of reality. They don’t foresee a reality without limitation, and therefore are not in the best position to evaluate new possibilities. Traditional strategic thinking focuses on analyzing the competitive landscape (known as “Porter analysis”). This forces us to focus on the competitive position too soon. When we do this, we “put the cart before the horse”. We must first and exclusively strive to understand the value we plan to deliver, rather than think about how to protect our business. When we start with competitive analysis, the main focus is on how to limit the competition using vertical integration and high switching cost. We are less likely to come up with a vision of exceptional value. Moreover, it is the quest to deliver value that generates the assets that then create the competitive edge. There are four major layers of protection that are created in the pursuit to deliver value: paradigm shift, leadership position, unique processes, and benefits of scale. This presentation highlights the importance of the arguments stated above as well as a demonstration of a TOC-based methodology for business innovation techniques to identify clients/market limitations, and design a business model around a value proposition to remove them.