Airasia: Innovation Paths and Value Creation

AirAsia: innovation paths and value creation

We will now analyse AirAsia’s innovation approach by using the Blue Ocean Strategy concept, developed by Kim and Mauborgne. According to this model, the distinction between successful and less successful companies is their strategic positioning from the very beginning of their operations. Kim and Mauborgne use the metaphor of “red and blue oceans” to describe the market universe. A red ocean refers to a market that is currently very competitive. A blue ocean, in contrast, refers to the unknown or unexplored market space, which has the potential for rapid growth. The cornerstone of the Blue Ocean Strategy is ‘value innovation’, occurs when a company successfully combines innovation with utility, price and cost positioning.

Similarly to the approach adopted by Southwest Airlines in the United States, and Ryanair in Europe, AirAsia in Malaysia changed public’s perception of air travel. Through the Blue Ocean methodology, the chart below shows the landscape of the people transportation industry in Malaysia—two in air transport and one in land transport.

We also examined how AirAsia configured its business within Kim and Mauborgne’s “Six Paths Framework”, which categorises six basic approaches to redefining market boundaries. The six paths are listed below:

1. Look Across Alternative Industries

2. Look Across Strategic Groups Within Industries

3. Look Across the Chain of Buyers

4. Look Across Complementary Product and Service Offerings

5. Look Across Functional or Emotional Appeal to Buyers

6. Look Across Time

AirAsia redefined the transportation industry in Malaysia (and the rest of Southeast Asia) by mainly by choosing a path that looked across the chain of buyers and users (Path 3). By adopting adopting this path, a company focuses on exploring who is paying for the product, who is using the product and who is influencing the use of the product.

AirAsia targeted potential...