Value Innovation and Toyota’s Crown glory

Blue Ocean Strategy Articles : Value Innovation and Toyota’s Crown glory

"What consistently separated winners from losers in creating blue oceans was their approach to strategy. The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy" (from page 12 of the book Blue Ocean Strategy, co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Last week Toyota revealed the newest iteration of its Crown sedan, the first car created under its Value Innovation (VI) program. Toyota is focusing its strategy, aimed at saving the car maker over US$ 2.8 billion per year, on Value Innovation—the core ingredient in any Blue Ocean Strategy.

As Yahoo! news reports:

Toyota began work three years ago on the ambitious plan, called "VI" for Value Innovation, which seeks to lump some of the tens of thousands of car components together to form modules and systems. Analysts have been keen to see the fruits of the scheme for hints to its impact on the car's price, features and eventually the competitiveness of parts suppliers.

The 13th incarnation of the high-end Crown series features many examples of cost-cutting measures under the VI plan, enabling Toyota to cap the car's price while packing more safety and other features compared with the previous generation, the company said.

"We were able to enhance the car's cost performance through the VI efforts," President Katsuaki Watanabe told a news conference.

The VI plan will be built into each new model that Toyota rolls out going forward, and Watanabe has said he expects it to help the company achieve annual savings of at least 300 billion yen (US$ 2.8 billion) from the business year starting in April.

Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/02/value-innovatio.html