Volume 17, Number 2 Article by M J Xavier, R Krishnan and Norm Borin June, 2005
An Integrated Model of Collaborative Value Creation for Strategic Innovation: The Case of Retail Automation in India :
Business strategy literature is witnessing a marked shift from the competition paradigm to collaborative value creation models. The convergence can be seen in game theoretic models, network models, business ecology models and e-business models. While these approaches are appropriate for studying the existing collaborative constellations, they do not provide normative guidelines for the building of new networks. Further, while the components of the supply side or operations ecosystem have been studied extensively, the demand side market ecosystem and its value creation potential have not been well understood. An attempt has been made to fill this gap in this article by integrating all the approaches under a Collaborative Value Creation Model for strategic innovation. The use of this model is demonstrated through a retail automation case study.
The Indian retail sector is one of the biggest industries in the country. However, only a $5 billion segment of this $180 billion market is in the organised sector. Against this background, TVS Electronics designed a low cost point-of-sale terminal for small and medium sized grocery stores. However, the product acceptance was very slow, and it became apparent that there was a need to rediscover the value of this product by either lowering its price or offering more benefits. Using the market ecosystem framework, the task force identified several revenue streams that would help the organisation subsidise its product, including the sale of transaction data. The company had to choose between building an ecosystem and sticking to their core competency, viz. 'electronic box making'. While the new model places a high premium on collaborative value creation as opposed to the traditional conflict and competitive models, it requires patience and investment in relationships for it to yield rewards.
Reprint No 05202
