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 / First Quarter 2002 / Issue 26(originally published by Booz & Company)


W. Chan Kim and Renée Mauborgne: The Thought Leader Interview

S+B: Although your general approach to research seems to look for commonalities across diverse sources and aspects of business performance, you increasingly seem to offer a European perspective on the business world. Is that a fair comment?

Mauborgne: Yes and no. True, we study European companies far more extensively than our American-based colleagues. And true, there are different issues at play, different constraints faced by European companies.

But being educated in the U.S. and then coming to Europe, we saw that what happens in the U.S. business world also happens in Europe. There are universal business phenomena. Outsiders coming to the U.S. see it in a clearer light, and the same applies to us coming to Europe. Moving to Europe brought this universality home to us and gave us the confidence to generalize our theories.

Even so, when we looked at European companies, we found there is a far greater gap between top-performing companies and laggards within the same geographic setting than there is between top-performing European companies and their U.S. equivalents. Striking similarities exist between the strategic perspectives and energy of Nicholas Hayek [the chairman and CEO of SMH/Swatch Group] and Hasso Plattner in Europe and Scott Cook of Intuit or Herb Kelleher of Southwest Airlines in the U.S. All have a strong no-excuses attitude, an obsession with offering buyers leaps in value, and a compelling commitment to create new markets. They are tidal waves of energy. There is a pulse running through these companies that is inspiring.

S+B:  When European and U.S. productivity numbers are compared, Europe usually looks worse. Does your experience confirm that?

Mauborgne: Europeans, on average, still tend to be supplier driven. The classic example in France is the sign on the shop door Entrée Libre. This literally means you are free to enter and a fee will not be charged for the privilege of looking at their goods. In other words, the stores are doing customers a favor rather than customers doing them a favor by potentially buying their goods. This is also manifest in the strong focus on engineering — irrespective of whether customers understand the value in the engineering.

Europeans need to innovate their attitude toward business. There are, however, some signs that this is beginning to occur. In Fontainebleau, for example, in the last few years Entrée Libre signs have been removed from more and more stores. That may sound like a small thing, but it is very telling of a new shift that is occurring.

Kim: Europe is as good as the U.S. in terms of technology. Europe is missing the link between technology and commerce. The reasons Europe is poor at commercializing technology have to do with how Europe creates and drives its innovation and entrepreneurial culture. Americans are very bottom-line oriented and very good at value innovation. Europe needs to create a bridge, to drive innovation from the perspective of value. In Europe, there is no Silicon Valley, a place where young and old, clicks and mortar, come together, a place that is driven by entrepreneurship. European industry can — and needs to — be more unified. There are plenty of think tanks and the like, but no unifying theme. This is why the idea of the Value Innovation Institute is so compelling.

S+B: How do you define value innovation?

Mauborgne: Value innovation is creating an unprecedented set of utilities at a lower cost. It is not about making trade-offs, but about simultaneously pursuing both exceptional value and lower costs. The Value Innovation Institute will be dedicated to helping companies achieve this strategic mission.

S+B: Although you regard yourselves as pure academics, there seems to be a populist slant to your work. You are asking straight, basic business questions rather than posing abstract hypotheses.

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