The Value Innovation Process

Based on a review of the literature, interviews with "innovative companies," and value innovation principles, we developed a process model that translates value innovation into organizational reality. The model is divided into three primary sections, illustrated in Figure 2:

• Providing exceptional value to the most important customer/increasing enterprise value.
• The five-stage value innovation process.
• The key cultural factors influencing the enterprise's ability to value-innovate.

The drivers of the process, providing exceptional value to the most important customer in the value chain, which in turn fuels enterprise value, are shown in the model's lower disk.
Enterprise value is delivered through an iterative business process, based on five stages (shown in the central disk). We visualize the disk as rotating, providing the mechanism to drive value innovation and keep it focused on the result. The stages are:

• Business Intelligence.
• Value Modeling and Analysis.
• Decisions and Prioritization.
• Communications and Implementation.
• Value Validation.

The force in the model is created through the reinvention culture, shown in the upper disk. We visualize this disk as having great weight, which relentlessly drives further value creation when directed correctly through the business process. The ability and effectiveness of an organization to value-innovate is influenced largely by its culture. Hamel has described the ten principles that affect a company's ability to bubble up billion-dollar ideas and provides many examples where companies have been successful (4).

Figure 2.--The Value Innovation Process Model provides a framework a company can use to develop a new product, service or business model that will give a strong boost to the value of the enterprise. The central ring represents the five-stage Value Innovation Process itself. The success, or lack of success, gained from this process is in large measure influenced by the company’s culture of reinvention, which overlays the process as suggested by the two vertical lines. Implement the process without changing the culture and the results are likely to be disappointing.

Based on our experience and findings, there must be:

• An authentic market for new ideas.
• Teams crossing all functions and comfortable with intense, detailed, high-energy debates where the focus is on the most important customer and the business environment.
• Systems thinking permeating all planning.
• Recognition of the difficulty of managing risk for economic outcomes and quantitative tools used to evaluate a broad range of ideas and scenarios.
• Trust, honesty and candor throughout the organization.

Consider Whirlpool, for example. In 1999, Whirlpool re-assigned 75 people and tasked them with answering the question, "What other rooms in the home can Whirlpool bring value to?" The company installed a new innovation system that defined innovation as a creative idea focused on a customer touch point (21). This customer-centric focus, supported by 350 Innovation Mentors, has led to the introduction of 25 new products over the past three years. In 2003, Whirlpool unveiled the Family Studio™ (a complete fabric-care and family activity center for today's home), the Personal Valet Clothes Vitalizing System™ (for the closet) and Gladiator Garage Works™ (a set of garage storage solutions). Whirlpool's launch rate of new products has doubled and its COO projects revenues of $0.5 billion each year for the next three years from new products (22).

The Five Stages

The five stages are described below, and their objectives, top-level tasks, and "best practices" and instruments to be used listed in Table 1.

Stage 1.--Business Intelligence. The first stage of the Value Innovation Process (VIP) calls for the identification of new business models and opportunities that will create exceptional value for the most important customer. This high-level ideation process captures inputs from multiple sources and builds on core competencies to generate value propositions from which the most important customer will perceive high value in the product, service or delivery. Inputs to the VIP can come from multiple sources, including: the company ideation process, innovation mentoring (21), alliance partners, customers, vendors, and the general public.

Stage 2.--Value Modeling and Analysis. This stage requires that the value propositions developed in Stage 1 be validated through discussions with key customers.
Risks and uncertainties are identified and "killer issues" surfaced.

Stage 3.--Decisions and Prioritization. Here, the risks and uncertainties identified in Stage 2 are quantified using focused market research and testing in the hands of the ultimate customer. A series of instruments are available to help the team with its decisions.

Stage 4.--Communication/Implementation. After a "Go" decision following Stage 3, project teams are assembled for each value proposition and move into action. To maximize project success, the best project leaders (future general managers) are selected, every team member is an "A" player, and each project is championed by members of the senior management team. For each project, the business opportunity is described fully and communicated; the path forward is clearly articulated.

Stage 5.--Value Validation. This is the last stage before the new business is launched. Only when it is clear that the new business opportunity or model, or the new product opportunity, creates exceptional value for a key customer and that success will increase the company's value, will the new business be launched.