Capture Value : TTP’s to capture a portion of the value you create in order to have a sustainable business model that continues to create value. Overview: The rule for product development that requires the manager to create value by prioritizing and developing products that solve the customers’ job to be done with no cost of delay includes a tactic for capturing value in order to establish a sustainable business model that continues to create value over time. The fundamentals of “capturing value“ is a business's ability to create profits from its transactions, it equates to ensuring that your business can make a sustainable profit, (i.e., revenues exceed costs). Your profits will be determined by decisions you make with respect to price (revenues) and the cost to produce and deliver your product. Even organizations that are identified as "non-profit" need to be able to capture enough money such that they can sustain their organization. For example, they may use a grant process to fund new initiatives, for this tactic, that is a form of capturing value. A company can create a lot of value without being valuable itself. A business creates X Dollars (value) and captures Y% of $X. X and Y are Independent Variables. "if you want to create and capture lasting value, don’t build an undifferentiated commodity." "there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that’s still going to be lousy. The money still won’t come to you. All of the advantages from great improvements are going to flow through to the customers." business. The essence of capturing value is expressed in this way: "The big idea here is this: strategy choices aim to shift relative price or relative cost in a company's favor. Ultimately, of course, it's the spread between the two that matters; any strategy must result in a favorable relationship between relative price and relative cost." (Magretta) It is important to note that capturing value doesn't equate to the size of the business, "Just because a business is large, does not mean that it is making (profits) a huge amount of money. Conversely, very high quality small companies can capture huge percentages of their revenue." (Jorgenson) In 2012, when the average airfare was $178, the airlines only made $0.37 per passenger trip, while Google brought in $50 billion and kept 21% of those revenues as profits, nearly 100x the airline industry's profit margin. (Jorgenson) "The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price 10 percent, then you’ve got a terrible business." A business’s ability to capture value is a main input into it’s valuation (remember how Google was valued at 4x all airlines put together?) Ability to capture value is crucial to command a strong valuation and build a valuable business. Resources: Magretta, Joan. Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Review Press. Boston, MA. 2012 Jorgenson, Eric. Why Value Capture is the Most Important Business Idea You Haven't Read Enough About. https://medium.com/evergreen-business-weekly/why-value-capture-is-the-most-important-business-idea-you-haven-t-read-enough-about-c035c657d091 Christensen, Clayton M., Grossman, Jerome H. & Hwang, Jason. The Innovator's Prescription: A Disruptive Solution for Health Care. McGraw-Hill. New York, NY. 2009 Osterwalder, Alexander & Pigneur, Yves. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons, Inc. Hoboken, NJ. 2010.