When it comes to innovation in the business world, the single and most primary element is thinking outside the confinements of the box which is commonly referred to as value creation. The aspect means that the key to maximizing sustainable creative initiatives is through value creation. The customer value proposition is the directive to ultimately acquiring financial payback. Consumer value can be developed by the actual value increased in a new commodity or service once the company finds the balance between the returns, prices, and costs. This essay procures a contrasting perspective from the one provided by Stefan Michel on how to capture more value in innovation.
Both the aspects of capturing and creating value should be confined within the basic postulates of pricing, costs, and returns. The three elements are integral to the dynamic system of creating sustainable and long-term value in corporations. They should also be accorded equal importance. Michel (2014) only mentions the pricing mechanism in his article as a means for innovations whereby the firm sets prices by identifying the production expenses and comparing them to the prices offered by their rivals instead of the appropriate charges for the customers.
Enterprises invest millions in the innovations and R&D procedures. They also institute elaborate product life-cycle and development procedures with the aim of acquiring a high innovation rate. However, the question that emerges is: What creates the lack of conceptualization or comprehension of value amongst companies? For the organization not to fall short of value propositions, they should focus on value management instead of value capture. Value management entails a holistic perspective of the business strategy that creates a strong relationship between three dimensions: value capture, value assessment, and value creation (Brands & Kleinman, 2010).
Value creation, capture, and assessment sustain an unbreakable chain that provides greater revenue levels to the corporation. Many enterprises struggle with value creation consequentially encountering pricing challenges because it is impossible to capture a factor that does not exist. The firms should look towards the differentiation created by the innovation procedure. By doing so, the innovation will create value and differentiation resulting in value excellence. Once the value is created, it is essential to measure and capture it using a value-based pricing mechanism (Brands & Kleinman, 2010).
Innovation, in this case, acts like a wheel turning in a sustainable way. Hence, it is thus imperative for the corporation to have efficient and strong re-investments in innovation and R&D processes. The technique is mostly used by best-in-class creative companies. A particular section of the net revenue is re-invested into the innovative procedure to optimize the long-term value. Here a revitalized perspective from the one provided by Michel (2014) emerges of innovation requires investment to make money instead of innovation is not worth if it does not lead to profits. The ideology indicates that for the company to gain more from the innovation process, it must inject more funds in relevant areas.
However, Michel (2014) still identifies essential steps that can bridge the deviation between value capture and creation. Many companies are stuck in this gap. They have witnessed creativity galvanizing the interests of the buyers and propelling the financial development of an industry. Hence, they invest millions in creating websites, building infrastructures, and in marketing with the assumption that the strategies will attract the interests of customers and enhance growth. Truly, the only valid gauge for value creation is value capture. The key to properly differentiating the three dimensions: value creation, assessment and capture, is highlighting and exploiting the vantage points in the value chain where the revenue resides to sustain a competitive edge. The directive should be to prove the value and feasibility of innovation, maximize the value, and define the laws of the entire game (Brands & Kleinman, 2010).
References
Brands, R. F., & Kleinman, M. J. (2010). Robert's Rules of Innovation: A 10-Step Program for Corporate Survival. John Wiley & Sons.
Michel S. (2014). Capture More Value. Harvard Business Review. Vol. 92 Issue 10, p78-85. 8p. 1 Color Photograph, 1 Chart.
