The Value Hub™ 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 Value Hub™.

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. Obviously, value creation comes at a cost: local news, weather, and traffic information need to be aggregated, curated, and formatted, in essence 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) in order 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 in order to be processed and distributed (to reach a customer).

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

contenthub-to-valuehub-1-of-3

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

It made so much sense that it became the beginning of the Value Hub™ 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 again and again 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 then allowed the station to create more of the content people loved, thus becoming more valuable, which in turn helped retain more listeners over a longer period of time (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 is what drives customers to return or refer – in most cases after having experienced the value that was 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):

contenthub-to-valuehub-2-of-3

The concept was simple: one Value Hub™ has a surplus of value (+) while the other has a deficit (-). When two Value Hubs become aware of the value differential (a need that can be fulfilled) between them, 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 Value Hub (+) to the other (-), until the value differential is neutralized, i.e., the need fulfilled.

Normally, once the need is fulfilled, this would be a ‘good’ time to depart, 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

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

Value chains contain three components: 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, therefore, 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.

Value Hub

In fact, the Value Hub™ can either be perceived as a forwarding process: a series of activities that are unique to the business and offer the business a competitive advantage over others, or reversed engineered from a ‘initiating or triggering stakeholder perspective’, i.e., seen from a buyer’s need or value deficit.

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

The Value Hub formula is simple:

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

VH = Value Hub, p = performance, c = cost

Recurrence

Although I consider value chains and value streams 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 next representation it looks like this:

contenthub-to-valuehub-3-of-3

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 of course that the product fits the needs and the experiences fit the expectations.

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

Continue reading: The Value Hub Theory (2)

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.

ROUNDMAP-Q4

(*) The Customer Development method by Steve Blank, 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.

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