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 Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.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:

  1. 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.
  2. Between companies. For photographers, value is transferred from Adobe Lightroom to Adobe Photoshop during a processing workflow.
  3. 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:

  1. 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.
  2. Stabilitygrowth rates moderate as competitive equilibrium is established. Market share and margins remain stable.
  3. 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.

Main Free Guides:

FourWeekMBA Business Toolbox

Tech Business Model Template

A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

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.

Transitional Business Models

A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion Theory

The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.



Asymmetric Betting


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).

Revenue Streams Matrix

In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Modeling

Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Pricing Strategies

A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
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