Strategic Innovation is Accessible to All

Bertrand Moingeon, Professor of Strategy and Business Policy - April 15th, 2010
Lehmann et Moingeon - les ampules - L'innovation Stratégique

L’innovation stratégique n’est pas forcément synonyme de start-up née d’une avancée technologique. Les entreprises existantes peuvent inventer avec profit de nouveaux business models dans leur secteur d’activité, à condition de s’astreindre à penser vraiment différemment, et d’accepter d’expérimenter à petite échelle leur nouvelle manière de “faire des affaires”. Les cas de l’entreprise de transport de fonds Valtis et de la joint venture entre Grameen Bank et Danone en témoignent. 

Bertrand Moingeon ©HEC Paris

Bertrand Moingeon is professor of strategic management at HEC Paris since 1992. Moingeon is a former visiting professor at Harvard Business School and served as deputy dean of HEC (...)

See CV

REWRITE THE RULES OF THE GAME…

Strategic innovation refers to an inclusive approach to innovation, where you focus simultaneously on a product, a technology, and a process. It implies making up new rules for an established industry and introducing radical innovation in one or several of the three areas that compose a business model.

• The value proposal, which describes the strengths of the product and/or service offer and defines the target group.

• The value architecture, which indicates how the company uses its resources to produce and deliver its value proposal to prospective customers. It consists of an internal value chain (what the company does itself) and an external value chain (suppliers, subcontractors, distributors, etc.).

• The profit equation, which shows how the company generates revenue (the value proposal) as well as its cost and capital structure (a result of choices related to its value architecture). 

… WITHOUT NECESSARILY RELYING ON NEWTECHNOLOGIES

Moingeon and Lehmann-Ortega have focused their research on strategic innovation realized not in start-ups, but rather in established companies that have achieved renewal without getting involved in new technologies. They drew on approximately twenty extensive case studies to show that it is possible— though difficult—for companies to create new business models; it requires altering mindsets and predominant thought processes. This is  a huge challenge, especially for historically successful firms. Instead of engaging in a “single” learning curve, where business fundamentals are not actually called into question, they must tackle a “double” learning curve, which implies radically revising habitual industry practices and rules. The case of Valtis offers an excellent illustration of this phenomenon. 

VALTIS: DISARMING INNOVATION…

Philippe Régnier is the managing director of Valtis, a secure transportation company, where, like every other firm in the sector, a team of armed guards transport cash and valuables in armored vehicles. Deeply disturbed by the death of a guard during a truck hold up, Regnier vowed to come up with a better, attack-deterring system. Instead of looking for ways to protect vehicle content, he focused in on eliminating the temptation triggered by the sight of an armored truck. The result was a straightforward scheme called Axytrans, where unarmed guards transport suitcases of cash or valuables in unmarked cars. If a suitcase is perceived to deviate from the foreseen itinerary, a computerized system inside of the suitcase releases red ink, staining the currency and essentially destroying it a fraction of a second.

 … IMMEDIATELY POPULAR AMONG CUSTOMERS

In addition to the innovative “ink-emitting GSP” system, Axytrans unquestionably involves a new  business model, for the original value proposal and architecture have both been deeply modified. The revised value architecture is built upon computerized transport itineraries and no longer entails armored vehicles, arms, and numerous guards. As a result, service price has decreased. Moreover, Valtis customers (banks and large retail stores) appreciate the absence of arms in populated places. Nevertheless, the new business model has encountered considerable resistance from lobbies led by the firm’s competitors. Brinks stands at the head of the pack, claiming to defend safe, “American style” money transport on cultural grounds. Given its heavy investments in a large fleet of armored vehicles, Brinks’ resistance is hardly surprising. Its position has received strong support from transport guards; they want to keep their jobs, despite the high risks involved. 

GRAMEEN AND DANONE: FIGHT POVERTY AND IMPROVE HEALTH…

The joint venture between Danone and the Grameen Group, pioneer of the microcredit, offers a second enlightening example. Both of these organizations have declared commitments to “fighting poverty in Bangladesh through a new type of business that brings healthier food to the country’s poorest people on a daily basis.” This goal could never be achieved by simply duplicating Danone’s usual business model, involving upmarket positioning, a large retail sales network, mass marketing, centralized production, and an uninterrupted cold chain. Conditions are radically different in Bangladesh from what the corporation is used to, so Danone had to come up with a new set of business rules and a new business model. 

… BY PROVOKING NEWEATING HABITS

Danone’s response to this business challenge was  Shoktidoi (“the yogurt that makes you strong”), a nutritious yogurt destined for children and sold at a price (approximately 6 euro centimes) that makes it accessible to even the poorest Bangladeshi families. Tomake the product, milk is collected in local micro-farms and then processed in a small factory using an extremely simplified, non-automatic production process. Every day, “Grameen Ladies” sell the yogurt door-to-door. They are paid on commission and are also responsible for explaining the virtues of their product and teaching Bangladeshi people new eating habits. This study enabled Moingeon and Lehmann-Ortega to illustrate the contrast between “traditional” strategic innovation and the creation of a new social business model. It is the subject of their recently published article in Long Range Planning, co-authore with Nobel Prize winner and Grameen founder Muhammad Yunus. 

Based on an interview with Bertrand Moingeon and Laurence Lehmann-Ortega and on their articles, “Valtis, une innovation stratégique désarmante” (Valtis: a disarming strategic innovation ) (Centrale des Cas et Moyens Pédagogiques, 2008) and “Building social Business Models: Lessons fromthe Grameen Experience” (Long Range Planning , May 2010), co-authored with Muhammad Yunus.  

 VALTIS: A PRIZE-WINNING CASE
VALTIS: A PRIZE-WINNING CASE

Valtis received the 2010 FNEGE and Ariane Competency prize for the best case from a small or medium-size company or industry. Moingeon and Lehmann-Ortega have also used the Valtis case for a forthcoming research article on the conception and implementation of a new business model. In particular, they highlight the mutually beneficial relationship between research and teaching.  

THE ADVANTAGES OF COLLABORATIVE DEVELOPMENT AND TESTING
THE ADVANTAGES OF COLLABORATIVE DEVELOPMENT AND TESTING

Successful strategic innovation in established businesses calls for two complementary, habit-changing actions. First, seeking out partners with complementary competencies and striving to generate mutually beneficial synergies greatly increases the likelihood of successful innovation. In short, neither Grameen nor Danone could have succeeded alone. Second of all, companies have to experiment. Before launching a new business model, it should be tested and honed either locally or with a specific target group. For example, Valtis first tested its new business model in generally trouble-free rural areas. Moingeon and Lehmann- Ortega’s research shows that when these two conditions are met, strategic innovation is accessible to established businesses and constitutes a stimulating and profitable source of growth.