The Value Curve Model is a graphical diagram that illustrates where a business is creating value through its products and services e four points that businesses must consider: raise, reduce, eliminate, and create. To plot the available consumer products in a marketplace against the company’s ability to provide value and thus be competitive.
Aspect
Description
Definition
The Value Curve Model is a strategic planning framework developed by W. Chan Kim and Renée Mauborgne. It focuses on creating innovative strategies by examining the key elements of an industry’s value proposition and challenging conventional norms. It helps businesses identify new market spaces and opportunities.
Process
1. Value Proposition Analysis: Evaluate your current value proposition and the factors that matter most to customers. 2. Competitor Analysis: Analyze the value propositions of competitors in your industry. 3. Identify Differentiation: Identify factors where you can differentiate your offering significantly. 4. Value Innovation: Develop a new value proposition by combining differentiated factors in unique ways.
Metrics
Metrics include customer satisfaction, market share, revenue growth, and profitability. Key performance indicators (KPIs) specific to the industry and business goals are also monitored.
– Complexity: The process can be complex and time-consuming. – Resistance to Change: Changing established norms may face resistance. – Market Risk: Entering new market spaces involves uncertainties.
Applications
– Product Development: Design products with unique value propositions. – Marketing Strategy: Shape marketing campaigns based on differentiated factors. – Industry Disruption: Create blue ocean strategies to disrupt existing industries. – Business Expansion: Explore new markets or segments.
Use Cases
– Apple Inc.: Apple’s shift from traditional computers to consumer electronics was a result of value curve analysis, focusing on design, user-friendliness, and an integrated ecosystem. – Netflix: Netflix disrupted the entertainment industry by focusing on streaming, personalization, and original content. – Cirque du Soleil: It combined elements of circus and theater to create a new form of entertainment.
Examples
– Uber: Uber differentiated by providing ride-sharing through a mobile app, revolutionizing the taxi industry. – Airbnb: Airbnb transformed the lodging industry by offering unique accommodations and a community-based platform. – Tesla: Tesla disrupted the automotive industry with electric cars, autonomy, and sustainable energy solutions.
The Value Curve Model was developed by authors W. Chan Kim and Renee Mauborgne in 1997.
The concept was expanded in their 2005 book Blue Ocean Strategy, where they argued that a business should focus on creating a new product and subsequent market with no competition.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
This is in direct contrast to traditional “red ocean” strategies, which advocate trying to beat the competition in an existing market.
The model itself can be depicted on a graph with the following axes:
The available consumer products in a marketplace are represented on the y-axis and rated on a scale of low to high.
The competitive factors of a given industry (or the range of factors that players in an industry invest in to be competitive), are represented on the x-axis. In other words, competitive ability.
An example of the Value Curve Model can be seen by considering air travel in Europe.
In this case, airline companies would be plotted on the y-axis and then judged according to their competitive ability in certain industry factors on the x-axis.
Specifically, these might include low fares, ancillary services, airport taxes, and average delay time.
A higher position on the graph correlates to a higher score. Returning to the airline example, British Airways might offer more value in ancillary services when compared to Ryanair.
However, Qatar Airways might beat both competitors when it comes to average delay time.
Ultimately, the Value Curve Model allows businesses to compare their products against those of their competitors.
This allows them to identify potential gaps in the market or identify areas where there is room for improvement.
The Four Actions Framework
Once the value curve has been established, the Four Actions Framework can be employed to alter the product in a given market.
While Kim and Mauborgne advocate the Blue Ocean Strategy, the framework can also be used to refine existing products.
In pursuit of these goals, there are four points that all businesses must consider:
Raise
Can any existing product attributes (competitive factors) be enhanced in such a way that they provide extra consumer value? In other words, which attributes can set new industry standards or trends?
Reduce
Conversely, are there any such elements that can be reduced or eliminated if their relative value or cost does not justify the means? Perhaps some factors erode profits or reduce competitive advantage?
Eliminate
This means removing factors that customers pay for as part of a status quo that industry players take advantage of. In the wine industry, the aging qualities of wine and the complex terms used to describe wine are promoted to add value to the finished product.
But what do these somewhat pretentious and superfluous terms mean to the average consumer? Better value-adding, competitive factors may include wine club discounts or guided tours of the winemaking process.
Create
Is there an opportunity to bring something novel to the market that solves a consumer problem in a more effective way than a competitor offering?
Instead of creating complex wines with complicated descriptions, a winery could produce a wine that was fun, unpretentious, and easy to drink at an attractive price point.
Value Curve Model Case Study
Let’s take a look at the model using European air travel as an example.
Airlines would be plotted on the y-axis with competitiveness according to industry-specific factors on the x-axis.
These may include low fares, ancillary services, airport taxes, and average delay time.
A more prominent position on the graph correlates with a higher score.
For example, British Airways may offer more value in ancillary services when compared to Ryanair.
However, Emirates may have them bothered covered when it comes to average delay time.
In essence, the Value Curve model allows businesses to compare their products against those of their competitors, enabling them to identify potential gaps in the market or areas where there is room for improvement.
And therefore, devise a practical business strategy on top of which formulate a competitive response to market forces.
Drawbacks of the Value Curve Model
Overemphasis on Differentiation:
Risk of Over-Differentiation: The Value Curve Model emphasizes differentiation, which can sometimes lead to over-differentiating a product or service to the point where it no longer meets the core needs of the target market.
Neglect of Core Market Demands: In the pursuit of uniqueness, there’s a risk of neglecting basic market demands and expectations, potentially alienating the core customer base.
Complexity in Implementation:
Challenges in Identifying Unique Value Propositions: Identifying and implementing unique value propositions that stand out in the market can be complex and resource-intensive.
Difficulty in Balancing Factors: Striking the right balance between reducing, eliminating, raising, and creating factors in the value curve can be challenging.
Market Understanding and Research Intensity:
Requires Deep Market Insight: Effective use of the Value Curve Model necessitates a deep understanding of the market and customer preferences, which requires extensive research.
Risk of Misinterpreting Market Trends: There’s a possibility of misinterpreting market trends or customer desires, leading to strategic missteps.
Potential for Financial Implications:
Cost Implications: Redesigning products or services to create a new value curve can involve significant costs in research, development, and marketing.
Uncertain ROI: The return on investment from shifting the value curve can be uncertain, especially if the market does not respond as expected to the new offerings.
When to Use the Value Curve Model
Suitable Scenarios:
Highly Competitive Markets: Useful in markets that are highly competitive or saturated, where differentiation can be a key driver of success.
Strategic Re-evaluation: When a company is looking to re-evaluate its strategic position or explore new market opportunities.
Strategic Application:
Innovation and Redesign: For guiding innovation and redesign efforts to distinguish a company’s offerings from those of competitors.
Market Analysis: In conducting market analysis to identify gaps and opportunities for differentiation.
How to Use the Value Curve Model
Implementing the Framework:
Analyze Current Value Curves: Examine the current value curves of your own products/services and those of competitors.
Identify Factors for Change: Determine which factors to eliminate, reduce, raise, and create to shift the value curve and create a new value proposition.
Develop a Unique Value Curve: Design a new value curve that offers unique value propositions to customers.
Implement Changes: Implement the necessary changes in products/services and market them accordingly.
Best Practices:
Customer-Centric Approach: Keep a strong focus on customer needs and preferences throughout the process.
Balance Innovation with Feasibility: While striving for innovation, ensure that the changes are feasible and align with the company’s capabilities and market realities.
Continuous Market Feedback: Regularly collect and analyze customer feedback to refine the value curve based on real market responses.
What to Expect from Implementing the Value Curve Model
Enhanced Competitive Positioning:
Potential for Market Differentiation: If successfully implemented, the new value curve can significantly differentiate a company’s offerings, potentially capturing a larger market share.
Innovation-Driven Growth: Encourages an innovation-driven approach that can lead to growth and expansion into new market segments.
Organizational and Market Impact:
Shift in Strategic Focus: Implementing a new value curve can lead to a significant shift in the company’s strategic focus and operational priorities.
Cultural Shift Towards Innovation: May drive a cultural shift within the organization towards embracing innovation and value creation.
Challenges and Risks:
Risk of Market Misalignment: There’s always a risk that the market might not respond favorably to the new value propositions, impacting the return on investment.
Resource Allocation: Effective implementation may require substantial allocation of resources, including time, talent, and capital.
In summary, the Value Curve Model is a strategic tool used to differentiate a company’s offerings from those of competitors by altering various elements of the value proposition.
It is particularly useful in saturated markets where standing out is crucial. However, its effective application requires a careful balance between innovation and market demands, a deep understanding of customer preferences, and a willingness to reallocate resources and possibly shift strategic directions.
While it offers a pathway to significant market differentiation and competitive advantage, businesses must be prepared for the challenges and complexities involved in reshaping their value curve, ensuring alignment with market needs and organizational capabilities.
Case Studies
Smartphone Manufacturers:
Raise: Enhancing camera technology, battery life, and processing power to provide extra consumer value.
Reduce: Reducing the price of entry-level models to target a broader customer base.
Eliminate: Eliminating pre-installed bloatware that doesn’t contribute significantly to user experience.
Create: Creating innovative features like foldable screens or augmented reality applications.
Fast Food Chains:
Raise: Offering healthier menu options and customization to cater to changing consumer preferences.
Reduce: Reducing wait times through mobile ordering and drive-through efficiency.
Eliminate: Eliminating artificial ingredients or trans fats to improve food quality.
Create: Creating loyalty programs and exclusive menu items to incentivize repeat visits.
E-commerce Platforms:
Raise: Enhancing user experience with personalized recommendations and one-click purchasing.
Reduce: Reducing shipping times through advanced logistics and warehousing solutions.
Eliminate: Eliminating hidden fees or complicated return processes to improve customer satisfaction.
Create: Creating subscription models with added benefits like streaming services or exclusive discounts.
Automakers:
Raise: Enhancing safety features, connectivity, and autonomous driving capabilities.
Reduce: Reducing emissions and fuel consumption to meet environmental standards.
Eliminate: Eliminating manual gearshift in electric vehicles for a simplified driving experience.
Create: Creating electric vehicles with extended range and affordable pricing.
Streaming Services:
Raise: Offering a vast library of original content and high-definition streaming options.
Reduce: Reducing subscription costs through various plans and bundling options.
Eliminate: Eliminating ads for premium subscribers to enhance the viewing experience.
Create: Creating interactive content or exclusive partnerships to differentiate from competitors.
Retailers:
Raise: Enhancing in-store experiences with augmented reality shopping tools.
Reduce: Reducing checkout times through self-checkout kiosks and mobile payments.
Eliminate: Eliminating out-of-stock items through efficient inventory management.
Create: Creating pop-up stores or limited-time offers to generate excitement and foot traffic.
Telecommunication Companies:
Raise: Enhancing network speed, coverage, and customer support services.
Reduce: Reducing international roaming charges and long-term contract requirements.
Eliminate: Eliminating hidden fees or complex billing structures.
Create: Creating family plans and bundled services for convenience and cost savings.
Tech Companies:
Raise: Enhancing cybersecurity measures and cloud computing capabilities.
Reduce: Reducing software subscription costs for small businesses.
Eliminate: Eliminating the need for physical servers through cloud-based solutions.
Create: Creating user-friendly software interfaces and AI-driven automation tools.
Healthcare Providers:
Raise: Enhancing telemedicine services and patient data security.
Reduce: Reducing administrative paperwork and appointment wait times.
Eliminate: Eliminating redundant medical tests through centralized electronic health records.
Create: Creating wellness programs and mobile health apps for proactive patient care.
Fashion Brands:
Raise: Offering sustainable and eco-friendly fashion lines.
Reduce: Reducing waste through made-to-order or on-demand manufacturing.
Eliminate: Eliminating animal fur or exotic leather in favor of cruelty-free materials.
Create: Creating limited-edition collections and collaborations with influencers.
Key takeaways
The Value Curve Model is a tool that businesses can use to differentiate and then manage product portfolios to create a competitive advantage.
The Value Curve Model plots the available consumer products in a marketplace against their ability to provide value and thus be competitive.
The Value Curve Model can be used in conjunction with the Four Actions Framework to assess new products and new markets in line with the Blue Ocean Strategy.
Key Highlights
Introduction to the Value Curve Model:
The Value Curve Model is a graphical representation developed by W. Chan Kim and Renee Mauborgne in 1997.
It illustrates where a business is creating value through its products and services and how it competes in the market.
The model helps businesses compare their offerings against competitors and identify potential areas for improvement or innovation.
Blue Ocean Strategy:
The Value Curve Model is closely associated with the “Blue Ocean Strategy,” which focuses on creating new markets with no competition, as opposed to competing in existing markets (red oceans).
Blue ocean strategy involves value innovation, where companies create uncontested markets and break the cost-value trade-off.
Graphical Representation:
The model is represented on a graph with two axes:
The y-axis represents available consumer products and is rated on a scale from low to high.
The x-axis represents competitive factors or industry-specific attributes that determine competitive ability.
Application of the Model:
Businesses can plot themselves and competitors on the graph, comparing their competitive abilities and product offerings.
For example, in the airline industry, companies might be plotted based on factors like low fares, ancillary services, airport taxes, and average delay time.
Four Actions Framework:
The Four Actions Framework is used alongside the Value Curve Model to refine existing products or create new ones.
It involves four key considerations:
Raise: Enhancing existing attributes to provide extra consumer value.
Reduce: Identifying elements that can be reduced or eliminated if they don’t justify their value or cost.
Eliminate: Removing factors that customers pay for but don’t significantly contribute to value.
Create: Introducing novel solutions that address consumer problems more effectively than competitors.
Value Curve Model Case Study:
Using the example of European air travel, airlines can be plotted based on factors like low fares, ancillary services, airport taxes, and average delay time.
Companies like British Airways or Emirates can be compared based on their competitive strengths in these areas.
Key Takeaways:
The Value Curve Model helps businesses differentiate and manage their product portfolios for a competitive advantage.
It guides businesses in assessing their value proposition compared to competitors and identifying potential gaps in the market.
The model can be used in conjunction with the Four Actions Framework to align with the Blue Ocean Strategy and drive innovation and differentiation.
Related Frameworks
Definition
Focus
Application
Value Curve Model
Developed by W. Chan Kim and Renée Mauborgne, it involves visually mapping out a company’s or product’s value proposition against key factors relative to competitors, aiming to identify and create new market spaces by redefining industry boundaries and offering innovative value.
Focuses on understanding and reshaping customer value perceptions to create uncontested market space and drive innovation.
Strategic Management, Innovation, Blue Ocean Strategy
Blue Ocean Strategy
A strategic framework introduced by W. Chan Kim and Renée Mauborgne, emphasizing the creation of new market spaces (blue oceans) by simultaneously pursuing differentiation and low cost, thereby escaping competition in existing market spaces (red oceans).
Focuses on creating new value for customers by innovating and redefining industry boundaries, leading to sustainable growth and profitability.
Strategic Management, Innovation, Market Strategy
Porter’s Five Forces
Developed by Michael Porter, it analyzes the competitive forces within an industry: Threat of New Entrants, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitutes, and Competitive Rivalry, to assess industry attractiveness and competitive intensity.
Focuses on understanding industry structure and competition to formulate strategies based on competitive forces and industry dynamics.
Competitive Strategy, Industry Analysis
Business Model Canvas
A strategic management tool used for visualizing and analyzing a company’s business model, comprising nine building blocks: Key Partners, Key Activities, Key Resources, Value Proposition, Customer Relationships, Channels, Customer Segments, Cost Structure, and Revenue Streams.
Focuses on describing, analyzing, and designing business models to understand how an organization creates, delivers, and captures value.
Business Model Innovation, Strategic Planning
Lean Startup Methodology
An approach for developing businesses and products, emphasizing iterative product development cycles, validated learning, and a build-measure-learn feedback loop to minimize waste and maximize the chances of creating a successful product or service.
Focuses on rapidly testing and iterating ideas to validate assumptions, reduce risks, and optimize resources in the startup or product development process.
Entrepreneurship, Product Development, Innovation
Design Thinking
A human-centered approach to innovation, involving empathy with users, defining problems, ideating solutions, prototyping, and testing, to develop products, services, and experiences that address real user needs and generate value.
Focuses on understanding user needs and behaviors, fostering creativity, and iteratively designing solutions to complex problems.
Innovation, Product Design, User Experience
Customer Journey Mapping
A visualization technique used to understand and analyze the customer’s interactions, emotions, and experiences throughout their journey with a product or service, aiming to identify pain points, opportunities, and areas for improvement.
Focuses on understanding and improving the customer experience across various touchpoints to enhance satisfaction and loyalty.
Customer Experience, Service Design
Disruptive Innovation Theory
Introduced by Clayton Christensen, it describes how new entrants with simpler, more convenient, or lower-cost innovations can disrupt existing markets and incumbents, often starting in underserved or overlooked segments before gradually moving upmarket.
Focuses on understanding how disruptive technologies and business models can reshape industries and create new market opportunities.
The ADKAR model is a management tool designed to assist employees and businesses in transitioning through organizational change. To maximize the chances of employees embracing change, the ADKAR model was developed by author and engineer Jeff Hiatt in 2003. The model seeks to guide people through the change process and importantly, ensure that people do not revert to habitual ways of operating after some time has passed.
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived from whether the market is new or existing, and whether the product is new or existing.
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.
The lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
The McKinsey Horizon Model helps a business focus on innovation and growth. The model is a strategy framework divided into three broad categories, otherwise known as horizons. Thus, the framework is sometimes referred to as McKinsey’s Three Horizons of Growth.
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
According to Michael Porter, a competitive advantage, in a given industry could be pursued in two key ways: low cost (cost leadership), or differentiation. A third generic strategy is focus. According to Porter a failure to do so would end up stuck in the middle scenario, where the company will not retain a long-term competitive advantage.
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes that a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – defined as the combination of processes that the company uses to make money.
Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, related and supporting industries.
A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
