A successful business model is dependent on the appropriate level of value capture. Value creation and value delivery result in value capture. Thus the focus should always be on value creation otherwise the cart will be placed before the horse. When a company focuses primarily on value capture (revenue gained) they’ll find that their efforts are self-defeating. However, in the course of creating and delivering value care must be given to value captured in order to ensure long term viability. Following are keys to developing a sound value capture strategy:
- Understand the Relationship Between Value Provided and Captured – Value provided should be based on the customer’s perception of desired outcomes. Each enhancement to value provided will bring with it an associated cost. And in the customer’s mind there is a threshold beyond which the value remunerated exceeds the benefits derived from services provided. So the most important element of value capture strategy is to realize a fair return.
- Focus Primarily on Value Creation – If value is provided – profits (value captured) will be realized. If a company’s primary focus becomes value capture decline will result. Focusing on value creation will result in greater revenue and profit margins.
- Always Create More Value than you Capture – Equitability hinges on providing more value than you capture. Capturing more value than you provide may be a good short term solution but will adversely affect long term growth.
- Value Captured Must Support Long Term Objectives – Business modeling is based on value created, value delivered and value captured. Correct levels of value capture allow for continued investment in value creation. The entire premise of value creation and capture is to achieve sustainability.