value-curve

What Is The Value Curve Model And The Four Actions Framework

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.

Understanding the Value Curve Model

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. This 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, 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), 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.

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.

Connected Business Frameworks

Scientific Management

scientific-management
Scientific Management Theory was created by Frederick Winslow Taylor in 1911 as a means of encouraging industrial companies to switch to mass production. With a background in mechanical engineering, he applied engineering principles to workplace productivity on the factory floor. Scientific Management Theory seeks to find the most efficient way of performing a job in the workplace.

Poka-Yoke

poka-yoke
Poka-yoke is a Japanese quality control technique developed by former Toyota engineer Shigeo Shingo. Translated as “mistake-proofing”, poka-yoke aims to prevent defects in the manufacturing process that are the result of human error. Poka-yoke is a lean manufacturing technique that ensures that the right conditions exist before a step in the process is executed. This makes it a preventative form of quality control since errors are detected and then rectified before they occur.

Gemba Walk

gemba-walk
A Gemba Walk is a fundamental component of lean management. It describes the personal observation of work to learn more about it. Gemba is a Japanese word that loosely translates as “the real place”, or in business, “the place where value is created”. The Gemba Walk as a concept was created by Taiichi Ohno, the father of the Toyota Production System of lean manufacturing. Ohno wanted to encourage management executives to leave their offices and see where the real work happened. This, he hoped, would build relationships between employees with vastly different skillsets and build trust.

Dual Track Agile

dual-track-agile
Product discovery is a critical part of agile methodologies, as its aim is to ensure that products customers love are built. Product discovery involves learning through a raft of methods, including design thinking, lean start-up, and A/B testing to name a few. Dual Track Agile is an agile methodology containing two separate tracks: the “discovery” track and the “delivery” track.

Scaled Agile

scaled-agile-lean-development
Scaled Agile Lean Development (ScALeD) helps businesses discover a balanced approach to agile transition and scaling questions. The ScALed approach helps businesses successfully respond to change. Inspired by a combination of lean and agile values, ScALed is practitioner-based and can be completed through various agile frameworks and practices.

Kanban Framework

kanban
Kanban is a lean manufacturing framework first developed by Toyota in the late 1940s. The Kanban framework is a means of visualizing work as it moves through identifying potential bottlenecks. It does that through a process called just-in-time (JIT) manufacturing to optimize engineering processes, speed up manufacturing products, and improve the go-to-market strategy.

Toyota Production System

toyota-production-system
The Toyota Production System (TPS) is an early form of lean manufacturing created by auto-manufacturer Toyota. Created by the Toyota Motor Corporation in the 1940s and 50s, the Toyota Production System seeks to manufacture vehicles ordered by customers most quickly and efficiently possible.

Six Sigma

six-sigma
Six Sigma is a data-driven approach and methodology for eliminating errors or defects in a product, service, or process. Six Sigma was developed by Motorola as a management approach based on quality fundamentals in the early 1980s. A decade later, it was popularized by General Electric who estimated that the methodology saved them $12 billion in the first five years of operation.

Supply Chain

data-supply-chain
A classic supply chain moves from upstream to downstream, where the raw material is transformed into products, moved through logistics and distributed to final customers. A data supply chain moves in the opposite direction. The raw data is “sourced” from the customer/user. As it moves downstream, it gets processed and refined by proprietary algorithms and stored in data centers.

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