Value Lifecycle Management

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This post discusses a specific aspect of Jobs to be Done. If you haven’t already done so, we suggest starting with the post—What is Jobs To Be Done. This will give you a broad overview of JTBD concepts with links to other posts that take a deeper dive into those concepts.

Customers have a set of needs with respect to getting a particular job done, which consists of the key outcomes wanted during job action and expected success outcomes. Once an exhaustive set of customer needs is captured for any job, these needs are valid over time because they’re anchored to job logic. And Job logic is stable for as long as a job exists — usually a very long period. This means that new needs aren’t added to this set, nor do any of the needs in the set drop off. Customers will have the same set of needs for any job well into the future.

What does change over time is how customers prioritize a set of needs for getting a job done with respect to the importance and satisfaction of each of those needs. This shifting of priorities is caused by the dynamic nature of job circumstance and the limitations of solutions-in-use. Now, as customer priorities change, the value that they want from products and services also changes. This is the value lifecycle of any product or service.

Organizations can perform Value Target Analysis as needed to reveal changes in the value lifecycle. When changes occur, value targets can be adjusted to keep products and services positioned as the best value among competing alternatives at the lowest possible cost, thereby maximizing profitable growth. This is the essence of Value Lifecycle Management.

Now, it should be noted that the value lifecycle is not the same thing as the Product Lifecycle Model, although the two are related. In short, the value lifecycle describes the economic force that drives the product lifecycle and determines its characteristics.

Now, it’s worth emphasizing that every product/service has a value lifecycle. For instance, undershot value is the customer’s priority today, but once satisfied, undershot value becomes must-be value. Customers now expect satisfaction of these needs in all competing solutions, but they aren’t willing to pay more for that value. Further, satisfaction of these needs does not increase the differential value of an offering. However, if must-be value is not satisfied by a solution, customers will quickly devalue that offering.

On the customer side, overshot product and service features can actually increase the time, effort and resources required to get a job done for certain customers. And this creates new priorities that drive them to hire simpler and cheaper solutions. You may recognize this as the pattern of disruptive innovation.

On the provider side, overshot value can significantly bloat the cost structure of a solution, which can result in a double bind. If a provider reduces the price of their solution to remain competitive without a reduction in the cost structure, they sacrifice profit margin. Since the satisfaction of must-be needs doesn’t increase differential value, no additional sales will be generated to offset this margin decline. If a provider’s solution remains more expensive than competing alternatives without a higher differential value, customers will fire that solution and hire a competing solution they perceive to be better value.

Now, as technology, design and business models evolve, customers may become aware of how a solution can help them get a job done better in ways they were indifferent about or hadn’t considered before. Suddenly these indifferent needs become important and not well satisfied. That is, they become undershot, which creates new priorities to satisfy those needs. And so, the value lifecycle goes.

Now over time, competing solutions get better at satisfying undershot needs, moving more and more needs into the must-be category. This trend is accelerated to the extent that competing solutions imitate each other’s features, a phenomenon called value convergence. When this happens, customers are no longer able to distinguish significant differential value among competing solutions. The only way to increase perceived value under these conditions is to progressively lower the selling price. Now we have price-based competition as providers race to zero profit. And so begins the decline of these solutions as described by the product lifecycle model.

However, there’s another way. Customer value lifecycle management enables organizations to hold the best value position and maintain decent profitability even as competing solutions race to zero by maximizing value and minimizing costs. When a product or service reaches the mature phase of the product lifecycle, the key is to convert indifferent or latent value to undershot value and then satisfy that value before competitors are even aware that those needs exist.

Competitors will, of course, imitate your new features, but by then most of those features will become must-be value. Imitation at this point does not increase differential value and will not create significant customer demand for competitors. What it will do is increase the cost structure of competitive solutions, which can be exploited to your benefit with value-based pricing. But to have pricing flexibility, it’s critical to keep the cost structure of your offerings as low as possible.

Since customer priorities for any job changes over time and competing solutions are getting better and cheaper, it’s essential to maintain up-to-date value targets for all of your solutions. Value Target Analysis is a fast, reliable and inexpensive way to identify the value that customers want from products and services at any point in their value lifecycles. Further, Value Target Analysis can be performed by anyone with a little education. When value targets are known, it becomes clear when to —

  • Scale-up undershot dimensions of value that are not yet good enough, thereby increasing the differential value of a solution.
  • Scale-down overshot dimensions of value, thereby reducing the cost structure of a solution. This enables incremental price reductions without sacrificing significant profit margin.
  • Maintain must-be dimensions of value at the least cost that are important and appropriately satisfied.
  • Explore indifferent or latent dimensions of value that can signal opportunities to help customers get a job done better in ways they haven’t considered before.

By managing the customer value lifecycle in this way, organizations are able to maximize the profitable growth potential of all of their products and services.

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