For many business owners, competition is exhausting. You lower prices, add new features, and spend more on marketing, only to find yourself stuck in the same battle for customers.
But what if there was a better way? What if, instead of competing, you could create a new market where you are the leader by default?
This is the essence of Value Innovation, a core principle of Blue Ocean Strategy. Instead of fighting for space in a crowded, cutthroat market (a red ocean), you step into a blue ocean—an untapped market space where competition is irrelevant.
Let’s explore how value innovation works, why it’s so powerful, and how you can apply it to your business today.
What Is Value Innovation?
Value innovation is the process of increasing value for customers while simultaneously reducing costs for your business. Unlike traditional strategies that force a choice between differentiation (offering premium value) and cost leadership (cutting costs to compete on price), value innovation allows you to achieve both.
Instead of simply offering a slightly better or cheaper version of what already exists, businesses that embrace value innovation create something entirely new—meeting customer needs in a way competitors never considered.
Why Is It So Powerful?
Because value innovation focuses on creating new demand, rather than stealing market share, it allows businesses to.
- Escape price wars by offering something unique
- Increase profit margins by eliminating unnecessary costs
- Attract new customers who weren’t even considering existing solutions
- Future-proof their business by staying ahead of industry shifts
A great Australian example is Canva. Instead of competing with complex design software like Adobe, Canva eliminated the need for professional design skills, reduced the learning curve, and created an easy-to-use, affordable platform. The result? A billion-dollar company that transformed the way people create graphics.
Another local example is Afterpay, which reinvented consumer finance by eliminating credit card interest, reducing financial barriers, and creating a “buy now, pay later” model that has disrupted traditional banking.
How To Balance Lowering Costs While Increasing Value
Many businesses assume that offering more value means spending more money. But value innovation flips this logic by using a powerful ERRC framework.
The Eliminate-Reduce-Raise-Create (ERRC) Grid
This tool helps businesses rethink their offerings and identify where they can cut costs and increase value simultaneously.
- Eliminate – Remove costly elements that add no real value to customers
- Reduce – Cut back on over-delivered features that customers don’t care about
- Raise – Enhance the factors that truly matter to customers
- Create – Introduce entirely new value propositions that never existed before
Real-World Example – Atlassian
Sydney-based Atlassian, the company behind Jira and Trello, revolutionised the software industry with value innovation.
Eliminated – Expensive sales teams and traditional advertising
Reduced – Complex pricing models and rigid contracts
Raised – Customer-driven product development and team collaboration features
Created – A self-service, scalable software model that allows businesses to buy directly
By doing this, Atlassian increased its value while lowering costs, growing into a global tech powerhouse with millions of users.
How To Apply Value Innovation To Your Business
Every business has the potential to create its blue ocean and break free from competition. Here’s how you can do it
1. Identify What to Eliminate
Look at your industry and ask – What are we doing just because everyone else does it? Many businesses waste money on features that customers don’t actually value.
Example – Koala (the Australian mattress company) eliminated physical stores, cutting high retail costs and passing savings to customers through direct-to-consumer sales.
2. Find Areas to Reduce
Are there parts of your business where you’re over-delivering without a clear return?
Example – Boost Juice reduced its reliance on traditional fast-food marketing by focusing on community engagement and customer experience, creating a strong brand presence without expensive advertising.
3. Raise What Truly Matters
What do customers really value? Instead of spreading resources across many features, focus on what makes the biggest impact.
Example – Xero raised the bar in accounting software by simplifying financial management for small businesses, making bookkeeping accessible without requiring deep accounting knowledge.
4. Create New Value That Never Existed
Look at unmet customer needs and create solutions no one else is offering.
Example – Go1, an Australian online learning platform, created a new way for businesses to upskill employees by providing a single subscription for thousands of courses from multiple providers.
The Risks And Rewards Of Value Innovation
While value innovation is a powerful strategy, it comes with risks.
⚠️ Market Education – If your idea is new, customers may need time to understand its value.
⚠️ Execution Challenges – Breaking away from industry norms requires bold decisions and strong leadership.
⚠️ Copycat Competition – If your idea succeeds, competitors may follow. The key is to continuously innovate.
However, the rewards far outweigh the risks.
✅ Higher Profit Margins – Without direct competition, you can price based on value, not industry standards.
✅ Brand Loyalty – Customers will see your business as the only choice for their needs.
✅ Long-Term Growth – A blue ocean strategy future-proofs your business by keeping you ahead of the curve.
Your Next Step – Start Thinking Differently
If you feel stuck competing on price, overwhelmed by industry norms, or struggling to differentiate, value innovation could be the solution.
Start by asking
- What can I eliminate that isn’t adding value?
- Where am I overspending on features that customers don’t care about?
- What do customers truly value that I can enhance?
- Is there a new way to solve customer problems that my industry has never considered?
By shifting your focus from competition to innovation, you position your business not just to survive—but to thrive.
Are you ready to stop competing and start leading? Let’s talk about how you can create your blue ocean and unlock new growth opportunities.
Thank you for being a part of our Business Life community. If you have any other topic you’d like us to explore in future newsletters, don’t hesitate to reach out. We’re here to help you succeed, every step of the way.
Live with purpose,
Kristian Livolsi and the Business Growth Mindset Team
