EUROPEAN BUSINESS JOURNAL
An integrated approach to strategy innovation
Richard Schoenberg There have been some striking examples of strategy innovation in recent years – consider companies such as easyJet, Direct Line Insurance or the retailer Zara – and a growing body of academic literature has emerged on the topic. This article attempts to distil a number of the major insights offered to date, with the aim of providing executives with an integrated approach to strategy innovation. It includes techniques which can be used to reflect on novel strategic positionings for a given business or, more generally, to think about the opportunities for ‘changing the rules of the game’ within an industry. The article begins by looking at the drivers for strategy innovation. It then illustrates how concepts including value gap analysis can be used to aid the development of innovative strategies. Finally it emphasises that any attempt to create a new business model must be consistent with the organisation’s underlying core competences. fully challenged the high service, high cost formula of the European airline industry to become one of the fastest growing carriers. It now enjoys a market capitalisation approaching that of British Airways (Lawton, 2002). Similarly, Direct Line Insurance has transformed the UK insurance industry by offering direct underwriting via a telephone call, thereby cutting out the traditional insurance broker or agent and reducing the established cost structure of the industry by 25–40%. Direct Line became one of the top five UK insurers in terms of market share within five years of its formation (Channon, 1996). In the world of fashion retailing the Spanish firm Zara has challenged more mature rivals by applying just-intime techniques to enable it to bring cat-walk fashions to its stores within 15 days of their design. Over the past decade it has grown turnover tenfold yet maintains one of the highest profit margins in the industry (Ferdows et al., 2002). Each of these companies has successfully created a new business model which has ‘changed the rules of the game’ within their industry. As Gary Hamel (1998a: 8) puts it: © European Business Journal 2003
Richard Schoenberg, The Business School, Imperial College London
There have been some striking examples of strategy innovation in recent years. For example, easyJet, the low-cost airline founded in 1995, has successAddress for correspondence: Dr Richard Schoenberg, Senior Lecturer in International Business Strategy, The Business School, Imperial College London, University of London, Exhibition Road, London SW7 2AZ, UK. E-mail: email@example.com
EUROPEAN BUSINESS JOURNAL Strategy innovation is the capacity to reconceive the existing industry model in ways that create new value for customers, wrong-foot competitors, and produce new wealth for all stakeholders. Not surprisingly there has been significant academic interest in the drivers and processes of strategy innovation and a good deal has been written on the topic. This article attempts to distil a number of the major insights offered to date, with the aim of assisting executives to identify innovative strategic positionings and opportunities for changing the rules of the game within an industry. The article begins by looking at the drivers for strategy innovation. It then illustrates how techniques including value gap analysis can be used to aid the development of innovative strategies. Finally it emphasises that any attempt to create a new business model must be consistent with the organisation’s underlying core competences.
96 industry analysis. We need to be constantly asking: who might transform our industry and how might they do it? An understanding of strategy innovation can provide insights into possible non-linear industry transformations.
An interesting feature of today’s business environment is that while some companies are pursuing innovative...