Creating New Value
Why do some products succeed spectacularly while others fail to gain traction? While there are many contributing factors such as timing, execution, competition, and product-market fit, at the most fundamental level success comes down to whether a product creates meaningful value for the market it serves.
Creating value can be difficult to reason about because it is often discussed abstractly. To make the concept more concrete, it helps to think about value along two dimensions: how value is created by the business, and how that value is perceived by customers. Together, these dimensions form what I refer to as the Value Creation Plane, a simple conceptual model for understanding differentiation and opportunity.
What is Value?
Value is best understood from the customer’s perspective. A product creates value when it satisfies a need or desire in a way that customers recognize as meaningful and are willing to choose over available alternatives. In some cases this value is practical and logical, such as saving time, reducing effort, or improving outcomes. In other cases it is emotional, such as delight, identity, entertainment, or belonging.
Importantly, value is not static. What customers perceive as valuable evolves over time as markets mature, expectations shift, and new possibilities emerge. This is why products that once felt differentiated can quickly become commoditized, while new products are able to redefine what customers expect.
The Value Creation Plane
The Value Creation Plane describes value along two axes. The first axis reflects how a business creates value. On one end is monetization, where companies focus on extracting value from existing assets, capabilities, or behaviors. On the other end is innovation, where companies create new capabilities or offerings that did not previously exist.
The second axis reflects how customers perceive value. At one end is productivity or functional value, where products help customers accomplish tasks more efficiently or effectively. At the other end is emotional value, where products resonate through experience, identity, or enjoyment.
When these two dimensions are combined, they create distinct regions of value creation. Some products compete by incrementally improving efficiency, while others differentiate through emotional experience. The most compelling opportunities often emerge when companies move into regions of the plane that are less crowded and less directly comparable to existing alternatives.
How is this useful? Consider the scenario where you want to enter an established market but you want to innovate the market by taking it to the next level as Apple or Starbucks did. You’d start by identifying the quadrant where the majority of the competition resides, and then determine how you can transcend to another quadrant, thus providing new value. The Value Creation Plane is a simple planning tool that will make this process easier.
Apple Example
In the case of Apple, they created new value around a boring commodity market for computers that focused entirely on quantifiable metrics of value such as Megabytes and CPU speed. Apple created new value atop this commodity market by taking what had been squarely in the bottom-right quadrant and shifting to the upper-right quadrant by appealing to emotion through design and user experience; something sorely lacking from the computer market until then.
LinkedIn Example
LinkedIn is another intriguing example. Social networks like Facebook already existed and were thriving in the upper-right quadrant, but LinkedIn applied the concept of social networking to something more logical and productive – business networking. As such they leveraged the effectiveness of social networks but in a way that created new and non-substitutable value for those who needed a more logical and practical application. Consequently they thrived even as Facebook dominated and while other social networks collapsed in Facebook’s shadow.
Conclusion
At its core, creating new value is about changing how customers perceive what is possible. Products that succeed over the long term do more than solve known problems. They redefine expectations and introduce new forms of value that customers come to recognize as meaningful.
The Value Creation Plane provides a useful lens for thinking about where value exists today, where markets are saturated, and where new opportunities may emerge. By understanding both how value is created and how it is perceived, product teams can make more deliberate choices about where to compete and how to differentiate.