How Innovation Contributes to Competitive Advantage?

From competitive environment, products within the same marketing from each provider are quite similar and difficult for customers to realize the difference. Innovation capability is the key productivity that creates competitive advantage by perceiving or discovering the new or better way to compete in an industry and launch them into the market. One of success factor depends on innovation’s relative advantage. Innovation has become the most important asset that creates competitive advantage for company, and the first mover advantage when getting magnitude of market acceptance. In the long run, maintaining product innovation is the way to sustain competitive advantage and drive the growth of productivity for further competitiveness of the company. However, product innovation always comes along with new process technology.

Around half of the Fortune 500 in 1980s was disappeared from the list in 1990s because of three fundamental forces; wealth, fashion and invention. From this information, it showed that innovation factor is also the cause of disturbance and fluctuation in the market since it is able to create new fashion and invention. Company which often develops product or process innovation would also has good influence to increase overall capacity of firm, and lead to be a sustainable growth for competitive advantage. Regarding to the influence of innovation, the following examples will show how companies apply this worthy strategy to be a competitive advantage and success in the market.

For instance, Apple is one of the innovative companies that different from others in the market. Apple’s products are created with uniquely fashionable style which cause its brand image be impressed in customer’s mind. Research and development team designed the product from integrating internal technology capacity and external consumer’s needs. Not all Apple’s products have been manufactured from invention; they are redesigned with including innovative technology, such as mobile phone and music players. However, Apple did not succeed since the first product launch, but they learn from their failure. After born out the music phone, Apple got competitive advantage from its innovation and sustained by creating new product innovation continuously such as iPhone and iPad. When Apple launches the new product, consumers are excited in new innovation which create buzz in the market. Apple gain customer’s loyalty by its unique style of effective product innovation. This reflexes that innovation can be a competitive advantage for company.

IBM is one of the most innovative companies in hardware and software technologies. There are internal research and labs to develop advance technology that assure improvement on price and performance for customers. One of the conceptual ideas of IBM is “Putting customer first” that was created by Gerstner (IBM’s CEO in 1993-2002). IBM mainframe is one of the innovative ideas that designed to be deployed in various modes for suitability with each company. Moreover, Gerstner applied the plan one step further in IT market as a strategy which advances in competition against other rivals. For example during browser war, IBM invested high amount of money to innovate internet based products, while the competitors struck with this problem. Gerstner believed that internet is not only advertised tool, but also the main factor to drive e-commerce business. IBM innovate virtual computer to share all over all resources and data, in order to save time and cost. From this innovative strategy, IBM gets competitive advantage and has become leading technology company.

In 2004, when Danish maker of interconnecting brick toys had lost money each of the previous six years, its survival as an independent company was in jeopardy. Lego had been harmed by falling birth-rates in many developed countries, by low-cost imitations, and by their many boy customers switching from traditional toys to video games and personal computers. This is very interesting thing when your business will decrease due to birth rate. Because the A poorly-conceived attempt at diversification followed. When Jorgen Knudstorp was appointed CEO, in addition to divesting noncore businesses and cutting costs, he worked to enhance Lego’s competitive advantages. Because of its philosophy of learning through play, Lego had avoided toys about fighting or violence, despite the interest of boys in both. By leveraging Lego’s strong brand name, design capability and quality reputation into products based on Star Wars, Batman, and Ferrari race cars, Lego’s turnaround gained traction. Knudstorp also grew Lego’s Mindstorms buildable, programmable robot line to the point that it and other non-interlocking-brick products exceed 33 percent of sales.

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