Summary and Explanation of the Assumptions for the Tool
The value curve is a powerful tool that is often utilized when comparing the value proposition of a business against its competitors in a given industry or market. It is often used in “extremely mature product categories where functionality increases and prices decrease” (Lecture Session 7, Slide 11). Similarly, the value curve helps visualize new and profitable market spaces by demonstrating the unique form a product or service can take in a highly competitive environment.
Exploring Possibilities Beyond Existing Norms
Moreover, there are five assumptions (guidelines) for the value curve. Firstly, the process of creating a value curve requires one to think like an entrepreneur with a focus on exploring possibilities beyond existing norms and limitations. For instance, Tesla challenged conventional automakers by adopting the direct-to-consumer (D2C) model.
Moving Beyond Fixed Industry Limits
The second assumption is where the focus is on shaping industry conditions as opposed to accepting them as fixed. A good example to illustrate this is Airbnb – it has reshaped the hospitality industry. Homeowners have an opportunity to rent out their space rooms.
Avoiding Mature Market Competition
The third assumption cautions against focusing on competition in the mature market. As explicated in Lecture Session 7, companies should, instead, seek quantum leaps in value by dominating the market (Slide 16). For example, Netflix’s journey started with tapping into streaming technology as opposed to jumping into mature DVD rental services.
Meeting the Needs of the Majority
The fourth assumption revolves around the need for companies to provide a type of solution sought by the majority of customers. The aim is to form meta-markets by identifying and addressing unmet markets such as the case of Amazon’s decision to start an online bookstore – it later evolved into a one-stop-shop for various products.
Valuing Customer Similarities Over Differences
The last assumption encourages companies to focus on commonalities in what customers value instead of concentrating on the differences. The aim here is to think across segments like the way Apple did through designing products that appeal to customers across different demographics.
Procedure for Creating a Value Curve
Selecting the Mass Market and Defining Key Segments
Many companies around the world have shifted the focus to using a value curve to retain the competitive approach. Before focusing on an example of a company utilizing a value curve, it is imperative to highlight the steps of creating a value curve. In the first step, which involves selecting the mass market, companies are required to define the two largest segments based on a combination of dollar volume and segment size. Here, the aim is to identify customer segment providers who will be the primary competitors in the market.
At this point, companies are advised to explore various sources to find reliable solution providers. These sources include looking across substitute industries, strategic groups within industries, the chain of buyers, and complements (Lecture Session 7, Slide 21). Despite the selection being made based on customer segments, the ultimate objective is to choose solution providers –they directly impact the competition. Overall, this step plays an important role in driving the rest of the steps because the choice of segments impacts the choice of competitors.
Identifying Competitive Factors in the Mass Market
The second step of the value curve involves identifying the factors of competition that the mass market receives from existing solution providers. The critical questions that inform this step, as explicated in Lecture Session 7, relate to what the mass market receives from existing solutions and factors that the existing solution providers currently invest in (Slide 23).
In essence, the step involves conducting an in-depth examination of what current solution providers invest in and offer to the customers. It is by analyzing these factors of competition that companies gain valuable insights into the aspects that are essential for customers and those that require improving or eliminating. This is crucial when it comes to creating a new and distinct value curve. Overall, companies can devise a winning value proposition by understanding the current offerings and how they impact customer interests and preferences.
Mapping Performance Levels of Existing Solution Providers
The third step in the value curve exists to guide companies in mapping the performance level of existing solution providers on a 2-dimensional graph. The graph is designed to highlight the relative performance of the two critical competitors in the market, those identified in Step 1. In simpler terms, the two-dimensional graph highlights the relative performance of the two critical competitors (Session 7, Slide 25).
The x-axis represents all the important features, while the y-axis shows the relative performance of the two sets of solution providers. Through the use of “High and “Low” levels of performance to map all the essential performance, the value curve emphasizes the need to focus on improving or eliminating weaknesses in organizational performance. Most importantly, the analysis acts as the foundation for reshaping the value curve by highlighting the strengths and weaknesses of existing competitors and identifying opportunities for differentiation and improvement in the market.
Creating a New Value
Lastly, creating a new value curve is the most crucial step in the value curve. The aim here is to design a new value curve to attract customers to trade between one set of solution providers and another. Achieving this requires companies to strategically address certain factors. Firstly, companies should identify those factors they need to rise above the industry standards – “those that make the mass market trade between two sets of solution providers” (Session 7, Slide 29). These factors ensure companies develop the ability to create a compelling proposition, attracting the mass market to choose one set of solution providers over others.
Secondly, there are those factors that need to be created from scratch to trigger market shifts and attract customers. They include the elements or products that currently do not exist in the market but have the potential to revolutionize the industry and capture the attention of the mass market. For example, companies may opt to introduce new innovative solutions that can disrupt the existing competitive landscape. Other critical factors include those below industry standards and those that need to be eliminated from the value curve.
Communicability of the new value market is also an important component of this step. Companies are encouraged to craft simple taglines and concise statements that describe the new position in the market. The created tagline acts as a litmus test; they are used to gauge how effectively the value proposition can be conveyed to the target audience.
It is important to ensure the value curve can easily be understood by the customers who are the majority. An effective tagline can create a lasting impression in the minds of consumers and become a powerful marketing tool for the company. Overall, profitability is the overriding goal of any business strategy. It occurs after the company has eliminated certain performance aspects that do not add significant value to the customer’s experience, leading to lower costs. It can also be achieved once the company raises performance in critical areas, translating to high revenues.
Apple Inc.
Apple is one of the many companies that have successfully utilized the value curve. Specifically, Apple relied on the value curve in creating a blue ocean strategy which helped transform its business and guarantee its dominance in the market. The strategy was informed by Apple’s “Think Different” campaign, launched in 1997 (Mupeti, para 4). As explicated further, the campaign aimed at celebrating innovators and free-thinkers and, in the process, setting the tone company’s approach to value innovation.
From a critical point of view, the company utilized the steps highlighted above to create its strategy. Firstly, the company identified its mass market after recognizing the need for a disruptive and innovative approach to technology. The company targeted customers looking for products that were simple and user-friendly.
In line with the above, Apple capitalized on step two of the value curve by examining the existing solutions offered by competitors in the technology industry. The company was aware that the customers were looking for a wide range of applications and high-quality design which were not adequately met by the existing solutions at the time.
In mapping the performance level, Apple utilized a two-dimensional graph to understand its relative strengths and weaknesses. This helped them identify areas where they could excel and differentiate themselves from the competition. Finally, the company ended up creating products such as iPod, iTunes, and the iPhone. These products offered superior user experiences, ease of use, and a vast ecosystem of apps, transforming the way people interacted with technology. Overall, Apple’s innovative products are a clear demonstration of how they reshaped industry boundaries by providing exceptional buyer value.
Works Cited
Mupeti, Leslie. “The Legacy of ‘Think Different’: How Apple’s Campaign Continues to Inspire Creatives.” Web.
Lecture, Session 7: Creating and Leveraging New Market Space by Developing a Value Curve.