The Value Hub™ Theory (2)

You may first want to read part one of the Value Hub™ Theory.

If you already have, let’s have a look at how the Value Hub™ theory evolved into the shape and layout of the ROUNDMAP™.

The 4th step was a major one. Since engagement depends on two interconnecting parties – employee engagement (inner circle to the firm’s Value Hub) on one hand and customer engagement (outer circle of the buyer’s Value Hub) on the other – I started to perceive it as two circles (in opposite direction) interlinking the two Value Hubs, while both are probing, sensing, scanning, exploring, and messaging each other. This is what Porter referred to as ‘signaling’:

EMPLOYEE ENGAGEMENT (INNER CIRCLE) AND

As we’ve discussed in the first part, the theory of the Value Hub™ came from describing the content intake, curation, and delivery process of a radio station. This then led to an hourglass-type shape, containing two funnels, one of Value Intake (inward) and one of Value Delivery (outward), with a Value Creation process in the middle. By replacing ‘content’ by ‘value’ and ‘curation’ by ‘creation’ the Value Hub™ came to be.

Value creation is the performance of actions that increase the worth of goods, services or even a business. Many business operators now focus on value creation both in the context of creating better value for customers purchasing its products and services, as well as for shareholders in the business who want to see their stake appreciate in value.

This representation allowed us to conceptualize the following situation: one Value Hub™ having a surplus of value (derived from the value it created) whilst another Value Hub™ experiences a deficit (relative to the value it wants to create or obtain). If both agree to exchange value (for credit), the value will start to flow from one hub to the other until the mutual value differential is being neutralized, i.e., the customer’s need fulfilled.

Competitive differentiation, and therefore competitive advantages, can be derived from three phases of the Value Hub™: Intake, Creation and Delivery. Value Capture is the process of retaining some percentage of the value provided in every transaction, it can only be minimized or maximized.

Signaling

How do Value Hubs become aware of each other value surplus and deficit?

Signaling does. Michael Porter made a distinction between market and customer signals in his bestseller Competitive Advantages. While potential buyers signal their needs – by searching online, browsing your website or any behavior that indicates customer intent – sellers, obviously, send out signals too. PR, blogs, advertising, and webinars are just a few examples of signals to let potential buyers know about the value they have to offer.

Therefore, certain signals will drive buyers towards the firm. Porter suggested two criteria: signaling criteria and use criteria. Use criteria are what the solution is intended for (functionally and emotionally), while the signaling criteria involve channels, formats, brand image, etc.

Obviously, buyers receive signals from multiple sellers. The firm. therefore, needs to signal what is called ‘differential value’:

Differential value is the economic expression of the unique portion of your value proposition.  It is your next best alternative. As such, differential value adds knowledge and context to the concept of “value”. It’s not just a nebulous description of what the customer gets for their money. Instead, it describes how and why the customer can only obtain this particular value by purchasing this particular product. It provides an easily identifiable means of comparing products that doesn’t rely strictly on price.

This differential value is a perception: it is most often not actual or absolute. A car made by brand X may have identical absolute value as a car offered by brand Y, at least if we consider its usability to drive from A to B. However, the perceived value from brand X over Y, and therefore the differential value of X over Y, can be significant in the mind of person 1, while person 2 might perceive the contrary. So, by signaling differential value some buyers will prefer solution A over B, while others might prefer B over A.

Chains or Streams

If we are to represent the Value Hub™ theory in a value chain, value stream, value network or value pool (or what have you), it will look like this:

contenthub-to-valuehub-5-of-6

For example, a car manufacturer requires steel sheets from a steel factory (#1) to be able to mold the sheets into body parts of the car. After the car is assembled (#2) and distributed to a dealer (#3), it can be sold to a customer (#4), who uses it to drive to work to make an income. Most Value Hubs require value from other Value Hubs to be able to create, deliver and capture value.

Traditionally the customer is the end-node of a value chain, but with the rise of the prosumer, we’ve seen more and more consumers actively participate in value chain processes.

Engagement

While signaling differential value attracts some buyers to the firm, it requires engagement from both parties, not just to deliver one-off value but to keep the relationship ongoing. Employee and customer engagement are therefore two separate circles – an inner and an outer circle – as each serves its own value creation process.

Buying Stages

However, there was another aspect I had to consider to complete the picture. Signaling does not lead to purchase by itself: customers need to be informed, persuaded, and so on, to get them to purchase and return. In other words, the process of buying and selling goes through several stages or steps.

Ok, now let’s focus on the firm’s Value Delivery section (surplus) and the customer’s Value Hub:

contenthub-to-valuehub-cut-out

and while keeping the firm’s Value Hub™ in the center, represented by the + sign, now map the buying stages transitioning around it:

contenthub-to-valuehub-sections

OK, let’s turn this into a more conceptual perspective:

contenthub-to-valuehub-6of6

Again, in the middle is the firm’s Value Hub™, represented by a + sign. The potential customer is represented by an empty hourglass (1). Turning clockwise: if the marketing signals are relevant, the customer may want to investigate similar solutions (2). However, if the signals are not relevant the messages will be ignored. If the solution offers more differential value than other solutions and the firm is trustworthy, the customer will likely purchase (3), if not, he/she will leave (dashed line).  If the product meets the customer’s expectations, he/she will be satisfied (4). If not, he/she will likely complain, or worse, return the product. If the customer has a perception of future value, he/she will likely want to become engaged in an ongoing customer relationship and return (1).

ROUNDMAP™

Obviously, the ROUNDMAP contains not 4 but many more steps. Regardless, you now understand how the ROUNDMAP™ evolved out of the Value Hub™ theory.

CheckThe best way to perceive the ROUNDMAP™ is a representation of your firm’s Value Hub™ (located in the middle), while it signals differential value to (potential) buyers and at the same time receives signals that it needs to interpret, in order to progress buyers (step by step clockwise) through the Integrated Customer Lifecycle™.

 

However, as we discussed, some lifecycles will be completed, others will stall. A way to perceive these dynamics is the following animation:

Cycles

 

We’ve enjoyed describing our theory and we hope you find it useful in understanding the ROUNDMAP’s circular logic.

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