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Value-capture innovation

Most companies focus their innovation efforts on value creation – investing in setting up and running R&D labs, etc.  They assume that if value is created, rewards will follow. Some of these companies may get away with "only value-creation" if they're able to sell their new offerings through existing approaches. Others need to think about value-capture innovation as well.

Stefan Michel describes: "When Netflix became a mortal threat to Blockbuster, it was easy to chalk up its victory to greater value creation ... But, the death blow came from the value-capture side. The brick-and-mortar incumbent's revenue model relied heavily on late fees. Netflix innovated a subscription model that milked higher revenue from the same tendency to be tardy – without vilifying customers in the process."

So, by value-capture innovation, we don't mean doing stuff like changing the price tag from $9.50 to $9.99. Value-capture innovation is strategic. Michel provides a catalog of 15 value-capture innovations. One of them that I like is Change the payer. Faced with an impending termination of contract due to customer's internal budgeting, a business school came up with a value-capture innovation. They offered their executive education programs at half the cost to the original payer (HR head) after convincing the company's functional heads to cover the other half of the costs.

Read Michel's catalog of value-capture innovations in HBR October 2014.

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