Kaplan Jaroslav Kaplan Research Company Founder of the Business IQ project
Abstract This article defines the influence of innovations on the formation of consumer value of goods or services, identifies the contradiction between significant factors of consumer value of a product or service for the entrepreneur and for the consumer, and highlights the main patterns in the formation of consumer values.
Keywords: Innovation, consumer value, perceived value, formation of consumer value, value approach.
In order to determine the role of innovation in the formation of consumer value, one must first define innovation itself. In science and journalism, innovation is usually discussed in connection with technology, entrepreneurial activity, issues of social, economic development, or policy formulation. Accordingly, there is a wide range of approaches to defining the term "innovation.” At the same time, it is often confused with similar concepts like invention, introduction, improvement, and others. The concepts of "change" and "creativity" are also often used in the meaning of "innovation." This series of words with similar meanings is distinguished by a key connotation - the desire for improvement.
Thus, an innovation involves the creation of a new technical development, an introduction - the development of a new approach or solution, etc. In order to distinguish innovation itself from the concepts listed above, it is necessary to make several essential clarifications. The peculiarity of innovation is that it allows you to create and receive additional value. It also involves implementation. Within the framework of this approach, innovation is not an innovation until it is successfully implemented and begins to bring benefits. The concept of economic innovation was most fully developed by Joseph Schumpeter in his work "The Theory of Economic Development" in 1911 [1].
Within the framework of an alternative approach, related concepts are used as part of the definition of innovation itself. In this case, innovation is understood as any invention or introduction to change the way of life and activities of people. Such an innovation can be a new theory or approach, or a device that facilitates activity, while innovativeness is not related to whether the organizer of the innovation received any benefit and whether it brought a positive effect.
Now let's define what consumer value is. Most often, consumer value is defined as the sum of all the benefits that customers receive from using products - including benefits, quality, value, benefit - in exchange for how much money they pay for it. As a result of such an exchange, customers have a certain attitude towards the brand, entrepreneur or product, and then a certain emotional connection arises with them.
There are different interpretations of what is meant by product value. Based on the person, it can take entirely different meanings: for some people, value lies in low prices, for others - in the quality of goods and services, for others - in the speed of delivery, for the fourth - in reliability, for the fifth - in economy, etc.
Woodruff defines customer value as: "the customer's own preferences regarding the characteristics of the product itself and its action and regarding the consequences of its use, which contribute to (or hinder) the goals and objectives of the customer when using the product, as well as the customer's assessment of all these qualities" [2].
The above definition seems very successful, as it emphasizes two important aspects of consumer value: 1) the desired value (benefit) of the product and 2) the perceived value (benefit) of the product.
Desired value refers to what customers want to get from a specific product or service. For example, when buying a drill, a customer wants to be able to make a hole of a certain size in the wall. If the entire range of drills consisted of one or two models, then the whole value of the drill for the consumer would be reduced to how successfully this or that drill makes holes in the walls. But what should a consumer do when ke is to choose one drill from dozens, hundreds, or sometimes even thousands of models? This is where the next factor comes in - perceived value of the product or service.
Perceived value is any advantage that, according to the client himself, he received from owning and using the product.
Let's assess two important patterns:
Perceived value is subjective: It is determined by customers based on their perception of the usefulness of the offered product. Perceived value is determined by the client individually and can be changed by him at any time.
Value creation depends not only on the entrepreneur and the product but also on the client: This is one of the reasons why broad generalizations should not be allowed and each type of interaction with the consumer should be carefully considered.
The key question when considering the value of a product for a client is to determine which product offering better meets the customer's needs in a particular situation.
Let's define how innovation influences the formation of perceived value by consumers. It was previously noted that innovation is not always an invention. In a broad sense, innovation often means "doing things better." Henry Ford did not invent the automobile. Ford's innovation was just the assembly line, as a result of which the finished Model T car rolled off the line every ninety-three minutes, thereby reducing the total production time of the car by eight times - from 12.5 hours to 93 minutes [3]. By 1914, thanks to streamlined assembly processes, Ford could produce more cars than all other automobile manufacturers combined, and at a much lower cost.
Thus, we can conclude that innovation is not just a new technology but, above all, a rethinking of business.
Innovative development is accelerating. Modernization processes that used to take decades in the automotive market now take place in a few months in consumer electronics sectors, such as the smartphone market.
The speed of change is growing very quickly, and the inability of entrepreneurs to innovate, that is, to do something better, amounts to lost profits and ultimately the collapse of the business.
Some modern economists, such as Nobel laureate Joseph Stiglitz, generally believe that innovation is the only real source of wealth creation for the modern world as a whole [4].
When we look at how the economy has created value over the past hundred years, we see a shift in emphasis from huge mechanical production during the industrial revolution to more creative production in the digital age. Services now dominate the creation of customer value.
To quote a question raised by Jack Hughes in his Harvard Business Review article published by Victor Sowers entitled "What will value creation look like in the future?". "Today, the value of products and services increasingly depends on creativity - new ways of taking advantage of new materials, new technologies, and new processes. Value creation in the past was a function of industrial-scale economies: mass production and high efficiency of repeatable tasks." [5] I believe that value creation in the future will be based on the economies of creativity: mass adaptation, the ability to quickly find solutions to customer problems, and finding new and effective ways to sell and deliver a new product to the market. At the same time, it is necessary to understand how to manage creativity and the creative process.
In my opinion, the vector of the latest business models will continue to strive from orientation on customer needs to co-creation of value.
Jaroslav Kaplan Author of the book "Business Incognita. How to push the boundaries of entrepreneurial thinking". Expert in the field of sustainable development of organizations and discovering new sources of growth. Developer of the methodology of contextual market research. Member of the International Association of Strategic and Competitive Intellect Professionals SCIP (USA).
In this light (yet profound) business fable a very magical and sincerely nice goldfish, Goshio, navigates her aquarium and the seas of the Paraquarian world beyond. The heroine's journey is an allegory of the entrepreneurial world (and of life) – based on the author's own research journey to circumnavigate the fascinating World of Entrepreneurship. www.goshio.com
1. Schumpeter J. A. Theory of Economic Development. Moscow: Progress, 1982.
2. Woodruff R. Value for the customer: the next source of competitive advantage. // Journal of the Academy of Marketing Sciences, 25 (2), 1997, p.139-153.
3. Link S. The Charismatic Corporation: Finance, Administration and Production Management under Henry Ford. [Electronic resource]. URL:http:// harizmaticheskaya-korporatsiya-finansy-administrirovanie-i-upravlenieproizvodstvom-pri-genri-forde.pdf (date of reference: 03.04.2023).
4. Stiglitz Joseph. People, Power, Profit. Progressive Capitalism in the Age of Mass Discontent. M.: Alpina Publishers, 2020.