This paper is based on an article titled “Creating and Appropriating Value using new Game Strategies”, found in Allan Afuah’s book titled “Strategic Innovation: New Game Strategies for Competitive Advantage.”
The main objectives of the article include increasing the reader’s understanding of the critical determinants of value creation and appropriation, analyzing how much value each member of a value system captures and why, enhancing the reader’s understanding of the contribution of new game and value chain factors to an organization’s competitive advantage, and strengthening the reader’s capacity to think strategically.
The article is clear that the concepts of creating and appropriating value are at the core of any business strategy, thus the need for businesses to come up with products that provide perceived benefits to customers if these firms expect to make money and sustain competitiveness.
In the proposed business of developing cutting-edge anti-aging products targeting baby boomers and the urban affluent, one of the main business ideas is to create value not only by relying on active and natural ingredients but also in using new technologies to ensure that the final products fit customer preferences and experiences.
Consequently, as suggested in the article, value-adding processes must entail research and development (R&D) and sourcing of components, ingredients or materials that will provide the customer with the needed benefits, hence enabling the firm to maintain a competitive advantage.
Owing to the fact that the value created for any particular product or service is the variation between the benefits that consumers perceive and the actual cost of providing these benefits, it therefore follows that value creation is essentially embedded in undertaking value chain activities, with the view to providing customers with something that they distinguish as beneficial to them, and ensuring that the cost of providing such benefits to customers does not surpass the benefits.
In the proposed business, it is expected that the anti-aging products will provide to customers the perceived benefits of performance, quality and aesthetics without exceeding the cost related to the development of these products. The article names several ways through which this can be achieved, but the proposed business will employ innovation by using new knowledge and technologies.
In value appropriation, one point that is salient to the proposed business is that of imitability and substitutability.
The article is clear that the prices and the quantity of products that a firm sells will likely plummet if competitors develop the capability to imitate the value that an organization creates, or if such competitors can provide viable substitute products to customers.
Consequently, one of the ideas in the proposed business has been to partner with other technology firms to come up with prototypes that will be extremely difficult for competitors to imitate.
The article acknowledges that some of the new game factors that firms may consider to remain competitive include (1) taking advantage of new ways that could be used to create and capture value, (2) anticipating and responding to competitor reactions, (3) taking advantage of opportunities created by the new game to develop new resources or translate existing ones into unique value, (4) identifying and taking advantage of opportunities and threats from the macro environment, and (5) taking advantage of first-mover advantages and disadvantages.
These factors have been discussed at length in the article, with the view to demonstrating how they could be incorporated into a firm’s business strategy for growth and competitiveness.
Overall, this article is insightful in issues relating to value creation and appropriation, how innovation could be used to strengthen value creation, and how business strategy can be formulated to achieve competitive advantage. Several ideas in the proposed business have also been discussed in reference to the contents of the article.