Insights on Value Creation


Creating value in large businesses is fundamentally different than creating value for small businesses. In this post, I shed some light on the differences while also giving some insight into similarities in the value chains.

LARGE BUSINESS

In large businesses value creation is more defined in that the value created for shareholders and customers. In this scenario, value capture which follows value creation, is where the business receives payments from customers through obstructing the efforts of competitors to attract those payments. Value capture is fundamental to profitability and sustainability. Priem (2007) asserted that value is created by offering benefits that prompt payments from inclined consumers. Given this context, businesses of any size require the following of customers to create value:

  • Tendency toward paying for an innovative benefit

  • Tendency toward paying more for a perceived benefit

  • Tendency toward paying less for previously available benefit


LEADERS & STRATEGISTS


Business leaders as well as strategists view value creations as innovation that establishes or enhances the customers perception of the valuation of benefits for consumption. Customer-centric value creation is focused on enhancing ​​the use value and reducing the exchange value to increase the perceived value. For consumers their value perceptions are fluid and not linear, in addition to possibly being created alone or with social (comparative) contexts (Häikiö, Koivumäki, 2016).

CONSUMERS

Conversely, the consumers value experience is substantially important to a business, as it is the primary method for increasing the payments received from customers. In order to remain ahead of competition, strategists must plan the allocation of available skills and use them in the execution of the strategic plan for the purpose of alignment with the vision of the business.


Here is a video about the slight differences between creating perceived value for consumers and capturing value for providers

FUNCTIONAL MANAGERS

Human resources play a significant role in influencing value creation and its imperative that managers organize human capital in a future-oriented manner to absorb future talent shortages as well as build a culture of knowledge sharing within a value driven organization (Ganaie, Haque, 2017).


SMALL BUSINESS

In small businesses, where resources are limited and competition is hyperactive, business leaders have to be creative in their approaches to value capture and creation. Small business processes are less defined and in some cases more chaotic because the leaders are undergoing continuous learning from their customers. Consequently, business strategies emerge from the “aim-act-learn-adjust” lifecycle, combined with a high level of focus on customer satisfaction. Further, business leaders seeking to develop value creation capabilities with customers, must ensure they exhibit strong ownership of the overall direction of the multifaceted approach to innovation. To explore current capabilities for existing customers and exploit new and emerging capabilities to attract new customers involves risk and ambiguity. Business leaders in small business must also exhibit a high level of orchestration skills to manage the allocation of resources to maximize value creation opportunities (Chew, 2012).


Ideally, value co-creation occurs in environments where customers are enabled to contribute unique knowledge regarding the use of the service or product within a business innovation process. In knowledge intensive business service firms, where knowledge is the product, the manner in which it creates that knowledge can be innovative and create a competitive advantage. Leaders in small knowledge intensive business service firms have the enviable position of being proximate to their customers and develop in-depth relationships with them. The type of relationships of mutual respect and genuine care that produces innovation.

McKinsey has put together some great information about how data has become integral to the value strategy of many firms while others are still struggling to understand how to use the abundance of data to drive value.

Click here to learn more.

STRATASCENSION was founded on the notion that business is relational and growth is achieved through deepening of all the micro connections between people, process, tools, & performance. We want to help small businesses enhance these connections and leverage them for transformation.

References

Chew, E. (2012). Sustainable value creation through entrepreneurial leadership in SME. Proceedings of the European Conference on Management, Leadership & Governance, (pp. 96-102).

Ganaie, M. U., & Haque, M. I. (2017). Talent management and value creation: A conceptual framework. Academy of Strategic Management Journal, 1-9. Retrieved from https://www.researchgate.net/publication/321026135_Talent_management_and_value_creation_A_conceptual_framework

Häikiö, J., & Koivumäki, T. (2016). Exploring digital service innovation process through value creation. Journal of Innovation Management, 4, 96-124. Retrieved from https://journals.fe.up.pt/index.php/IJMAI

Priem, R. L. (2007). A consumer perspective on value creation. Academy of Management Review, 32(1), 219-235. doi:10.5465/amr.2007.23464055

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