Sarah Petersson,
CFO & Co-Founder
sarah.petersson@coarconsulting.se
Bridging the gap between Value Creation and Value Capture to stay ahead in a competitive market
In today’s fast-paced business landscape, companies must do more than just create value, they must also capture it effectively. While many organizations excel at delivering innovative products and services, they often struggle to translate this value into sustainable profitability. Understanding and bridging the gap between value creation and value capture is critical for maintaining a competitive edge.
Understanding Value Creation
Value creation refers to the process of generating novel and meaningful benefits that customers are willing to pay for. Value creation is described as a process that generates innovative and meaningful benefits that exceed what customers currently experience and are willing to invest in. This could involve developing cutting-edge products, improving customer experiences, or enhancing operational efficiencies.
However, simply creating value is not enough. Businesses must also ensure that they are effectively capturing a fair share of this value to remain profitable and competitive.
What is
Value Capture?
Value capture refers to the mechanisms through which businesses retain a portion of the value they create. That solution generates value for multiple stakeholders, emphasizing the need for firms to determine the best ways to secure a portion of this value for themselves. However, firms must also identify how, where, and when to capture their share of that value, which can be particularly challenging as value does not always show in obvious places.
Companies that have successfully implemented value capture strategies do so by identifying and exploiting key ”choke points”, critical areas in the value chain where profit potential is highest. Organizations must continuously assess their business models to find these opportunities and ensure they are not leaving opportunities behind.
Why companies struggle with
Value Capture
Despite significant investments in innovation and operational efficiency, many companies find themselves struggling to achieve profitable growth. Customers, employees, and shareholders all demand more, while competitors are eager to meet these demands. Even organizations that leverage digital transformation and cost efficiencies may still fail to capture sufficient value.
One of the main reasons companies struggle is that they focus too much on value creation without equally prioritizing value capture. The most successful companies, however, take a more strategic approach. They do not merely generate new offerings, they also ensure they are capturing enough value from these innovations by structuring their business models effectively.
The Importance of Bridging the Gap
To stay ahead in a competitive market, companies must integrate both value creation and value capture into their strategic planning. Organizations that strike the right balance will be better positioned to drive sustained growth and profitability. Effective use of knowledge is crucial for taking on greater responsibility and supporting customers in achieving success.
Innovation and Adaptability: Key Drivers of Success
Customer needs are constantly evolving, and companies that fail to adapt will inevitably fall behind. Change is a constant factor, and customer expectations are no exception. To remain competitive, businesses must continually reassess and enhance their offerings; otherwise, customers will turn to alternatives that better meet their evolving needs. To prevent this, organizations must prioritize continuous innovation, both in terms of product development and business models.
However, a one-time innovation is not enough. Competitors can quickly replicate or improve upon existing innovations. To sustain a competitive advantage, businesses must embed innovation into their culture and strategy. This involves aligning innovation efforts with broader business objectives and creating a culture that fosters continuous improvement.
From valuable insights to action
The true potential of innovation is only realized when it is integrated into a business system designed for value capture. Innovation alone does not guarantee success, organizations must also implement systems that channel its disruptive energy into sustainable revenue streams.
A structured innovation strategy involves gathering data for insights, identifying way to outperform competitors, refining concept into viable business offerings and executing the strategy.
How can you prepare?
To help you capture for value, we can help you…
COLLECTING DATA ABOUT YOUR CUSTOMERS AND COMPETITORS
Providing insights that drive growth by gathering data and analyzing customer needs, competitors’ offerings, and market opportunities.
CREATING CREATIVE SOLUTIONS & VALUABLE RECOMMENDATIONS
Offering recommendations on how your business can better meet customer needs and maintain competitiveness.
With these foundations in place, you can then focus on transforming ideas into profitable products and services and implementing the strategy to maximize both value creation and value capture.
BRIDGING THE GAP BETWEEN
Value Capture & Value Capture
Bridging the gap between value creation and value capture is essential for long-term success in a competitive market. Companies that excel at both will not only drive innovation but also ensure they reap the financial rewards of their efforts. By systematically embedding innovation, leveraging key value capture opportunities, and aligning business models with evolving customer expectations, organizations can achieve sustainable growth and profitability. The key is to treat value capture as an equally important part of the business strategy, not just an afterthought.
References
Lepak, et al. (2007). Introduction to Special Topic Value creation and Value capture.
Bowman, C. and Ambrosini, V. (2000). Value Creation Versus Value Capture: Towards a Coherent Definition of Value Strategy.
Germany, R. and Muralidharan, R. (2001). The Three Phases of Value Capture: Finding Competitive Advantage in the Information Age. Strategy+Business.
Lesser, H. (2022). Council Post: The Role of Innovating in Competitive Success and How to Do It. Forbes.
Torsilieri, J.D. and Lucier, C. (2000). Climbing Up the Value Ladder. Strategy+business.
MEET THE AUTHOR
Sarah Petersson, CFO & Co-Founder
sarah.petersson@coarconsulting.se
coarconsulting.se 