The Value Creation Plane
Fundamentally speaking, the goal of any product or service is to create value for society in exchange for monetary compensation. This is the cornerstone of capitalism. Whether your business is brand new or already established, there is always room for broadening your value across the marketplace.
Neal Cabage is a digital product architect and author of The Smarter Startup, in which he explains his concept of a “Value Creation Plane.” Cabage uses two different spectrums and juxtaposes them on a cartesian plane.
The Four Quadrants
The X axis is represented by Business Function – what does your business do? On one side we have Monetization and on the other we have Innovation. The Y axis is represented by Perceived Value and at the top is Emotion – how much fun is your product or service? At the bottom end of the Y axis we have Logic – what problem does your product or service solve?
The purpose of the Value Creation Plane is to take these two spectrums and juxtapose them on the plane to create four quadrants. The goal here is to place your product or service into the appropriate quadrant, and then see if there is any way to branch out into other quadrants.
- Starbucks: Coffee is a cheap, easily accessible commodity that everyone can get at the supermarket and drink at home, and yet, Starbucks has taken over the world. Coffee itself would start off in the bottom left quadrant, Monetization, because it’s a productive way of delivering caffeine that is easily monetized. But consider how Starbucks was able to take such a basic commodity and push it to the right of the spectrum as an Innovation. Not only is the Starbucks brand fun and social (appealing to the Emotional side of consumers) but it can also be an ideal and convenient place to get work done and take meetings, so now we also have Business Function and Logic.
- Apple: They took a product which was firmly living in the Business Function quadrant, yet through creative marketing they were able to branch out into Innovation and create an Emotional value for their computers and phones. They weren’t only elegant and user-friendly, but they became a very personal part of our everyday lives that we just can’t live without.
- Netflix: They started out in the upper left quadrant of Monetizing a pre-existing commodity – movies and TV series – and shifted right toward Innovation by also creating their own original content. In addition, Netflix popularized the concept of “binge-watching” content by altering the traditional delivery system in a way that appeals to customers through its accessibility and convenience.
- LinkedIn: They took a social network which lives in the upper right quadrant of Emotion, and they branched down into Logic by making it a productive tool for business professionals.
“So as you go about planning out your new product or business, think about how you can create new value (for) something that already exists in the market, and transcend into another quadrant.”
The more quadrants your business lives in, the more successful it will be. Even the most basic of commodities can be re-branded with a little creative marketing and application. Your imagination is truly the only limitation here.