The ValueHub™ Theory (1)

 

In hindsight, the idea behind the ROUNDMAP™ originated from a meeting in 2012, to which I was invited, to help determine the future of a local radio station considering the online challenges they were facing. While listening to suggestions, an idea started to take shape in my mind, which I would later refer to as a ValueHub™.

The problem: if a radio station wants to attract an audience, it has to offer something that is considered valuable to its listeners. Some people may listen to a particular station because they enjoy the music genre; others may prefer it because of local news and weather reports. Regardless, the radio station needs to create relevant value to attract listeners.

Several suggestions were made to include social media channels. Value creation comes at a cost: local news, weather, and traffic information need to be aggregated, curated, and formatted, adding new value to it before the content can be distributed across various channels.

Similar Pattern

I noticed a pattern. Similar to how content from multiple external sources needs to be funneled to a hub (editor) to be curated and dispersed across various channels (to reach an audience), so does an upstream supply chain that funnels raw materials to a production facility to be processed and distributed (to get a customer).

I stood up, walked to the drawing board, and drew the following image (to the left):

After I got home, I looked at the image and asked myself: What if I were to replace ‘content’ with ‘value’?

It made so much sense that it became the beginning of the ValueHub™ theory. However, it was still a linear representation while returning listeners point to a circular process. I wondered: What was driving some listeners to tune in repeatedly, and how do I represent this in the image?

In the case of the radio station, audience engagement appeared to increase the number of returning listeners. Besides, any response from the audience was a good indication of which content was most valuable, what times attracted the most audience, etc. This allowed the station to create more of the content people loved, thus becoming more valuable, which helped retain more listeners over a more extended period (loyalty).

The solution: Create more audience engagement by getting more listeners involved (f.i. in newsgathering) by utilizing the (social) channels that listeners use most.

Engagement

Then I realized that engagement, in a similar matter, was also driving the customer lifecycle. Engagement drives customers to return or refer – in most cases after having experienced the value delivered to them the first time around, which is, in essence, their first sales cycle.

So I made a few changes to the previous image (and tilted it for better viewing):

The concept was simple: one ValueHub™ has a surplus value (+) while the other has a deficit (-). When two ValueHubs become aware of the value differential (a need that can be fulfilled), the hubs will be pulled towards each other, like magnets. If there is no resistance (f.i. no lack of confidence), the value will start to flow from one ValueHub (+) to the other (-) until the value differential is neutralized, i.e., the need fulfilled.

Usually, this would be a ‘good’ time to depart once the need is fulfilled. However, we also know from experience that for as long as the buyer engages with the seller, and vice versa, their relative positions will not change much. Therefore, whenever the buyer experiences another deficit, he/she/it will most likely repurchase from the same seller.

Provided no other seller had drawn the buyer’s attention to a better (value) offer.

Value Chains and Value Streams

I learned about value chains (Michael Porter) and value streams more recently. In a sense, these concepts are comparable to my ValueHub™ theory.

Value chains contain value creation, value delivery, and value capture. Porter did not mention a value intake. However, he did include the upstream supply chain in his value chain model. I believe the Value Intake is a separate process from Value Creation and should be mentioned separately.

A more contemporary approach, value streams, take the perspective of the initiating or triggering stakeholder – often a customer – rather than an internal value chain or process perspective. Porter also mentioned the buyer’s value chain as a vital source of information to understand the customer’s actual needs.

ValueHub

The ValueHub™ can be perceived as a forwarding process: a series of activities that are unique to the business and offer the company a competitive advantage over others or reverse-engineered from an ‘initiating or triggering stakeholder perspective,’ i.e., seen from a buyer’s need or value deficit.

In any case, the ValueHub™, in my perception, is very much like a black box, and its mode of operation should be considered a trade secret. Similar to how Coca-Cola scrupulously protects the recipe for its lucrative beverage.

Formula

Each ValueHub™ needs internal resources and capabilities to create value. However, it also needs materials from external sources in most cases: this is what I call the Value Intake.

The ValueHub formula is simple:

VH Delivery (p) - VH Intake (c) - VH Creation (c) = VH Capture

VH = ValueHub, p = performance, c = cost

Recurrence

Although value chains and value streams are equally valid, they both miss* what I believe is a vital component: recurrence. This is how I got to create a circular framework: I wasn’t content with the analogy of funnels and timelines to represent the customer lifecycle; it had to be a circle to represent the recurring cycle.

In my following representation, it looks like this:

I believe it is engagement that is capable of driving recurring value capturing. Without it, most purchases will be one-off, and the value that can be captured will remain limited. Provided that the product fits the needs and the experiences match the expectations.

There is one last thing I would like to mention: if a ValueHub is unable to deliver the value it has created (find enough paying customers to cover the cost), the ValueHub should be liquidated. A business can not sustain, regardless of the investment, if it cannot build meaningful and lasting customer relationships at a profit.

Fourth Quarter

In the ROUNDMAP™, engagement, based on shared experiences, is being represented by the RED quarter, named SUCCESS. It is a crucial element in customer lifecycle management, and it has the potential to cross the silos.

(*) The Customer Development method by Steve Blank, the godfather of the LEAN start-up movement, does include recurrence, or rather re-iteration; however, the LEAN methodology is intended to find a product-market fit fast (pose a business model hypothesis, design an experiment, get out of the building and test it), not to lead a single customer through a customer lifecycle.

EDWIN KORVER

Architect of ROUNDMAP™ - Advancing Grandmastership of Business™ ✪ Business Model Matrix™ ✪ Polymath ✪ Generalist ✪ Systems Thinker ✪ Board Member, CEO CROSS-SILO BV

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