What is value migration?

Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.



Understanding value migration

In marketing, value migration describes the flow of economic value from obsolete business models to models better suited to satisfying consumer priorities.

Value flows in three ways:

Between industries

For example, in-flight entertainment (IFE) transfers value from the airline industry to the entertainment industry.

In India, the value of the rail industry as an affordable means of transport has shifted to the airline industry.

Between companies

For photographers, value is transferred from Adobe Lightroom to Adobe Photoshop during a processing workflow.

Between business designs within a company

A popular example is the transferring of value from IBM mainframe computers to IBM PCs with system integration.

In recent decades, telecom service providers have also seen value migrate from voice to data.

While every organization seeks to satisfy the end-user, Slywotzky argued that the factors determining value are constantly changing.

Therefore, the business that can predict value migration ahead of time is the business that can gain a competitive advantage.

The three stages of value migration

Generally speaking, value migration has three distinct stages:

Value inflow

In the first stage, a company or industry captures value from another company or industry due to a superior value proposition.

The profit margin or market share of the entity expands.


Growth rates moderate as competitive equilibrium is established. Market share and margins remain stable.

Value outflow

At some point, value begins to migrate toward companies meeting evolving consumer needs.

The original company or industry experiences a decline in market share with contracting margins and a reversal in growth.

Anticipating value migration

In the introduction, we noted that competitive advantage could be secured by the early identification of value migration.

This can be anticipated in several ways:

Understanding the customer

Are there observable shifts in the composition of the target audience?

Are customer priorities changing due to regulation, increased purchasing power, or technological innovation?

Indeed, are customers becoming more powerful or discerning?

Understanding the business design

The organization should understand how flexible its business design is.

In other words, can it serve different customer priorities?

Does it have the ability to provide value for both the customer and the company?

What are the chances the design will become obsolete?

Avoiding commoditization

How can the business avoid a scenario where its goods or services become devalued commodities?

Building a strong brand and avoiding heavy, bulk discounting is a good place to start.

But commoditized products are often the result of rigid, undifferentiated business design.

In this case, the business must revitalize its product offering with a focus on delivering higher value.

Key takeaways

  • Value migration describes the migration of value from outdated business models to those which are better able to satisfy consumer priorities.
  • Value migration occurs in three ways: between industries, between companies, and between business designs within the same organization.
  • Anticipating value migration is the key to maintaining or securing a competitive advantage. A deep understanding of the customer and business design reduces the odds that a product becomes devalued through commoditization.

Key Highlights

  • Definition and Origin: Disruptive innovation was termed by Clayton M. Christensen. It’s a process wherein a product or service starts at the lower end of the market and eventually displaces established competitors. Christensen is an influential management thinker known for this concept.
  • Types of Technologies: Christensen classified technologies into sustainable and disruptive categories. Sustainable technologies improve performance predictably, while disruptive technologies are less predictable and can reshape industry dynamics.
  • Process of Disruption: Disruptive innovation occurs as a product gains traction in the lower market segment. It’s often more accessible and affordable compared to existing sophisticated products.
  • Not Breakthrough Technologies: Disruptive innovations differ from breakthrough technologies. Instead of making great products even better, they focus on making products or services more affordable and accessible.
  • Causes of Disruption: Companies often innovate faster than customer needs evolve. This can lead to products becoming too advanced or expensive for the majority, opening up opportunities for disruptive innovators to cater to the underserved lower market.
  • Ingredients for Disruption: Three crucial factors for a new company to be a disruptive innovator:
    • Enabling Technology: A transformative technology that changes how consumers operate.
    • Coherent Value Network: All stakeholders, including suppliers and partners, should benefit from the technology.
    • Innovative Business Model: A model targeting the lower market with affordable and user-friendly solutions.
  • Examples of Disruption:
    • Academia: Wikipedia’s free digital encyclopedia displaced Encyclopedia Britannica.
    • Media Entertainment: Netflix disrupted Blockbuster by embracing streaming trends.
    • Photography: Digital cameras displaced Kodak’s film dominance.
    • Transportation: Concorde faced retirement due to costs, while affordable private jets became alternatives.

What are the three types of value migration?

The three main types of value migration comprise:

What are the three stages of value migration?

The three stages of value migration comprise:

How can you prevent value migration?

There are several factors affecting value migration, and some fo the ways you can avoid that are:

Main Free Guides:

Related Innovation Frameworks

Business Engineering


Business Model Innovation

Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Innovation Theory

The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.

Types of Innovation

According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).

Continuous Innovation

That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

Disruptive Innovation

Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Business Competition

In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Diffusion of Innovation

Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.

Frugal Innovation

In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.

Constructive Disruption

A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.

Growth Matrix

In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Innovation Funnel

An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.

Idea Generation


Design Thinking

Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.

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