05Aug '07

Designing the Value Curve for Your Next Innovation

Proceedings of PICMET 2007 Conference

Theme: Incorporating financial implications of value factors on a strategy canvas for creating blue ocean strategy.

Summary: This paper presents a method to help designers remain aware of the financial implications of their decisions as they attempt to value innovate and create a blue ocean strategy. The author suggests that the effective cost of a value innovation can be calculated by first finding the unit cost increase for raised and created factors, and the cost savings for those factors that are reduced and eliminated. The budget required for the new offering is then calculated as the difference in the increased cost and the total savings. Whereas normally a designer would not have noticed the need for additional budget, the author suggests that incorporating these financial implications on a strategy canvas provides immediate visual feedback, encouraging designers to make more realistic decisions. The author shows that a number of techniques can be used for allocating budget to the factors being manipulated, for example, prioritizing allocation based on assigned weights to the various value factors. The author illustrates the effectiveness of the model by applying it to the example of hotel chain Formule 1’s blue ocean strategy.

Reference: Narasimhalu, Arcot Desai. “Designing the Value Curve for Your Next Innovation.” In Proceedings of PICMET 2007 Conference. Portland, August 5–9, 2007.
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