Value-based Strategy

HOV Model 2

Global markets are in the midst of an historic restructuring shaped by globalized competition, super-intelligent machines, resource scarcity and seismic demographic shifts.  The new market reality has created a paradox that is confounding even the most capable executives.  The pace of technological change is forcing companies to create new value for customers and bring it to market faster than ever before.  At the same time, it is more difficult to get paid for that value as powerful customers and aggressive competitors drive down prices relentlessly.  This growth paradox is the defining market dynamic of our times.

Solving the growth paradox requires a new approach to understanding markets and managing the process of creating and capturing value.  This value-based approach to strategy is captured in the House of Value – a conceptual model for how to execute a value-based approach to strategy.

Explore the House of Value

  • Customer Value Database

    Customer Value Data is the foundation for the House of Value. Customer value is defined as the quantified worth of benefits customers receive from a product or service. But customer value is more than just a number. Understanding customer value requires identifying all of the ways products and services drive value for customers (i.e., their value drivers). It requires mapping each feature of your offering to the relevant value drivers to understand how products create value with precision. Finally, understanding customer value requires systematically managing the customer value data and making it available to managers across the organization.

  • Enablers

    One of the fundamental challenges facing managers is how to get consistent strategy execution across the company. Several conditions must be met in order to get effective execution. First, functional area managers (e.g., marketing and sales) must understand the strategic choices they are responsible for and have the tools and data to make the right choices.

    Value management tools specify the choices clearly and provide the frameworks and examples to help make even the most difficult decisions. Second, business processes must be defined and require outputs consistent with the decision-support tools. Finally, it requires aligning incentives to ensure individual managers are rewarded for making choices that are in the best long-term interest of the company. In short, the right tools, processes, training and incentives must be in place to enable successful growth strategies

  • The Value Disciplines

    There are several fundamental activities that any company must perform in order to go-to-market. At a minimum, it must create product offerings (Development), select market opportunities (Strategic Marketing), set prices (Pricing), communicate the offers to the market (Product Marketing) and sell the offers to customers (Sales).

    In most companies, these activities are performed without a clear understanding of the value being created for customers and, as a result, opportunities to create or capture more value in the process leak away. These value and price leaks undercut sales volume and margins and are a primary reason why companies underperform. Value Management transforms these functional activities into Value Disciplines designed to eliminate leaks and maximize value creation and capture.

  • Growth Strategies

    The advent of game-changing technologies, globalized markets and demographic shifts has impacted the structure of every market. While these structural shifts are broadly documented, their impact on how companies create and capture value is less well understood. The focus of competition in the new market reality is shifting from products and services to business models built around integrated solutions. The top level of the House of Value focuses on identifying new value creation and capture opportunities created by shifting market structures. Typical issues addressed include:

    -- How do we understand the business implications of the structural shifts in our market?

    -- What are the new opportunities for creating value profitably for customers?

    -- How do we innovate new business and pricing models to fit the new market reality?

    -- How do we migrate from a product-based company to one focused on delivering solutions?