I thought of the following model a few weeks ago to describe how value is realized in today’s fast-paced, largely unpredictable markets. I’ve entitled it “Value Creation in a Wild Wired World“. Please let me know what you think…

Industrial Age Value Creation:

This V model of Value creation is suited to stable, predictable markets and industries.The consumer doesn’t have many alternative choices of products and services to fulfill their needs here. The company needs to recoup their significant investment of cash, time and labour by charging as much as possible, and keeping the product as is for as long as possible – taking it from being a Star product to a Cash Cow eventually. Microsofts OS is a good example of this, but they’re slowly shifting to the model below…

Rapid Prototyping, Perpetual Beta

An alternative model, more suited to fast changing, unpredictable, hyper-competitive markets looks more this:

The idea here is to launch with a “good enough” prototype, attract early adopter users, and develop the product according to their needs and feedback. In the software development world, this is known as “Beta” – where the product is in testing mode, and constantly improving according to how people are using it. There is generally less upfront investment required in this model, which is important since many products launched into unpredictable, competitive markets will fail unless they adapt in ways that weren’t originally envisaged by the product team. Often times the best ideas here arise to serve an unmet need of the founder – you might hear the founder saying the product was launched to “scratch my own itch” The other motto of firms that operate with this model is: “release early, release often”. Google does this well.

Your feedback

What do you think about these models? Do they make sense? Is there anything you’d label differently, add to, or remove from the diagrams?

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