concept: value migration

Value migration is the shift of  economic and shareholder value from the traditional business models to new and emerging models. This results from the new offerings to consumer needs, which replaces the earlier obsolete products. Value migration is triggered by the ever evolving sophisticated customer needs. This occurs when customer needs change or a new business model begins to capture on an existing market. Businesses which earlier enjoyed a leadership in the market faces value  outflow i.e declining revenue and customer base. A companies unwillingness to shift from traditional business to new model triggers value migration.

 A new model address the needs of the customers differently by offering better product quality & features which the traditional company was not able to meet or the need did not exist. The customer preference changes because they are willing to pay more or shift their existing preference to new model. In this process economic benefit is transferred to new model. Value migration key is to focus on the business models that adapt to changing customer needs and create new demand.

 A classic case for explaining value migration concept can be of Nokia; once the market leader gradually lost its leadership as new business model (smart phones) met the customer need by better technology, features and creating an undiscovered need of customers. Nokia was unwilling to shift to the new business model (institutional memory). Samsung as a new entrant was able to sense the changing trend in customers which Nokia being in the industry was not able to see.  Samsung offered customers with new technology, features & creating a demand for smart phones which Nokia was not able to sense.

The underlying in this concept is understanding customer perspective. Customers make choices based on priorities. As priorities changes new design present customers with new options and they make new choices. These choices develop potential economic value for those from which they will buy. These changing priorities trigger value migration process.

 In1920s, Value migrated from ford’s single car model to General Motors’ price ladder model (different variants).In 1930s, from grocery stores to super market concept. In India’s context, early 90s saw a shift from Bajaj (scooters) to Hero Honda (bikes).

Jamna auto industries (Jamnaauto), a market leader in leafspring industry (suspension system), sensed the changing technology in suspension system and offered air suspension. As a first market mover, advantage it managed to maintain market leadership.