160  Growth Developing new products or services that are so innovative as to create en- tirely new product categories has the highest value-creating potential. The stronger the competitive advantage a company can establish in the new-prod- uct category, the higher will be its ROIC and the value created. For example, the coronary stent commercialized in the early 1990s reduced the need for heart surgery, lowering both the risk and cost of treating cardiac problems. Owing to this innovation’s overwhelming competitive advantage over tradi- tional treatments, as well as over subsequent products entering the market,6 neither type of competitor could retaliate, so the innovators created large amounts of value. (As the stent market became highly competitive over the past decade, however, returns on capital have declined considerably.) Sim- ilarly, traditional music retailers have been all but competed away, first by online music sales giants such as iTunes and Amazon, and more recently as consumers have taken up online streaming services for mobile devices offered by Spotify, Amazon Music, Apple Music, and others. However, competition in the new digital-entertainment category is itself fierce, so the value created per dollar of revenue in this sector is unlikely to reach the levels that coronary stents once generated. Next in the pecking order of value-creating growth tactics comes persuad- ing existing customers to buy more of a product or related products. For example, if Procter & Gamble convinces customers to wash their hands more frequently, 6 Products that entered the market at a later stage were less successful because of high switching costs for customers (see Chapter 8). Exhibit 9.3  Value of Major Types of Growth Value created1 Type of growth Rationale Above average • Create new markets through new products • No established competitors; diverts customer spending • Convince existing customers to buy more of a product • All competitors benefit; low risk of retaliation • Attract new customers to the market • All competitors benefit; low risk of retaliation Average • Gain market share in fast-growing market • Competitors can still grow despite losing share; moderate risk of retaliation • Make bolt-on acquisitions to accelerate product growth • Modest acquisition premium relative to upside potential Below average • Gain share from rivals through incremental innovation • Competitors can replicate and take back customers • Gain share from rivals through product promotion and pricing • Competitors can retaliate quickly • Make large acquisitions • High premium to pay; most value diverted to selling shareholders • Increase prices • Unless demand has low price elasticity; customers likely to reduce or divert consumption 1 Per dollar of revenue.