Many companies focus on creating value for customers through innovation but often miss the crucial step of capturing that value. In this episode, Stefan Michel, Director of the Executive MBA program at IMD in Lausanne, Switzerland, shares his framework for defining the value of your innovations and how to apply it to develop new business ideas or compete with market entrants. He also illustrates value capture with real-world examples from companies like Nespresso and Google.
says that many businesses don’t actually know how. “Many companies spend a lot of time on innovating, in a sense that they create more value for customers,” he argues. “What they often miss is to think about how to capture that value.”
STEFAN MICHEL: Many companies spend a lot of time on innovating, in a sense that they create more value for customers. And what they often miss is to think about how to capture that value. And this is really what this research is about. How can we capture the value that we create with customers in different ways?
STEFAN MICHEL: Yes. The first one is change the price mechanism. The second one is that you change the payer. So who actually pays for the value. The third one is that you change to price carrier. That means, where do you put the price tag on? The fourth category talks about how to change the timing when you capture that value. And finally, the fifth one is how to change the segment and capture value differently with different segments.
JULIA KIRBY: What a clever solution. To use carbon credits to pay for a water solution. Price carrier– what does it mean to change the price carrier? Another interesting example of auctioning that is on the government side is license plates. So we have seen in several countries like Saudi Arabia or Switzerland or Russia that the government sells out very unique license plates. Like the number one or specific numbers. Maybe 88 in China. And then whoever bids the highest amount for a specific license plate gets that license plate.
JULIA KIRBY: In other words, you could use this as a kind of diagnostic tool. Because something’s happening in your competitive set that is maybe blind siding you. But using the framework, you could understand it better.
Strategy Innovation Value-Based Pricing Pricing Value Capture Nespresso Google New Revenue Streams Growth Strategy
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