Tonight, as we continue our discussion of Blue Ocean strategy, I’d like to delve into the concept of Value Innovation. According to Blue Ocean Strategy, value innovation is the “focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.” (p.18) In English, this means that companies focus on finding value through innovation, rather than through technical advances or other means. Products that don’t follow the mantra of value innovation often do so via sustaining innovations or via technological advances.

A sustaining innovation is a minor improvement to an existing product or concept that creates value, but does little to differentiate the product from the other products in the market. An example of a sustaining innovation in the anime market would be FUNimation’s premium editions. For those who don’t know, first runs of many FUNimation titles receive special bonuses, be they a fancy box, a trinket, or some other addition. In this sense, the additions add value to the product, but do little to really cause customers to take notice. Those who were going to purchase the title, or were already on the fence, would be affected, but the greater market remains untouched.

Technological advances are the obvious leaps in technology brought about by time. From VHS to DVD to Blu-Ray, technological advances are quickly adopted by the greater market, and rarely hold a lasting advantage in the larger market. These innovations are often expensive at the outset, due to their use of pioneering tech, and often overshoot the market, to provide more than the average customer needs or even wants in some cases.

With this in mind, Blue Ocean products rarely rely on technological or sustaining innovations. Indeed, many blue ocean products are often fairly low-cost, low-tech produts that merely sidestep the red oceans to pursue greater markets. At first glance, these products are “crappy products, made for crappy customers.” They’re low-cost, low-tech products, after all. However, they are low-priced, and offer incredible utitility to the greater market, which translates to a perception of value from customers.

Now, dear reader, value innovation isn’t an easy task. It’s a strategy that relies on providing an actual jump in value, both to the customer and to the company. Without one of these criteria, the entire process falls to pieces, and winds up in the realm of a simple sustatining innovation. In addition, a value-innovating product needs to tread lightly on the features and technological innovations that are included, as too many will overshoot the customer (falling into the “technical innovation” trap), and too few will make the product seem unremarkable to the customer.

In the anime industry, we could argue that value innovation exists primarily in streaming services, with Crunchyroll being one of the most prominent. Looking at Crunchyroll, we can see that the site is one that can easily be dismissed as a “crappy product” for “crappy consumers.” It’s fairly ugly, the design and title browsing isn’s overly intuitive, and the site only provides low-definition streaming content. The subtitles range from decent works, to products that are rife with spelling and grammatical errors. In addition, dubs are not offered, period. However, the service is free, and it’s cheap to run. This creates a great value for the market, and for Crunchyroll itself as it provides a service outside of mainstream anime distribution that a large subset of anime customers value.

With this in mind, many customers would (and do) overlook the shoddy interface, and the low quality video in order to continue receiving their free product. Customers who pay the $8 subscription fee gain access to more, and more attractive features such as high-definition versions of shows, removal of video advertisements, and early access to new programs. These are features that people value, and they are particularly inexpensive to implement, which increases the value of the product while maintaining the overall value innovation of the service as a whole.

Value Innovation is a cornerstone of the Blue Ocean strategy, and understanding the concept will be vital as we dive deeper into more advanced theories and concepts.