A Model of New World Value Creation

Comment by Alan Maguire on November 5, 2008 at 12:41pm

Nice model Dave. It makes sense intuitively, is confirmed by experience and ties in with Leadbetter's video on Innovation.

Comment by Dave Duarte on November 5, 2008 at 12:44pm

Thanks Alan:) I appreciate the feedback!

Comment by LouisJvR on November 12, 2008 at 3:27pm

Hi Dave,

Can I do a post of this on Heavy Chef dot com? Very relevant model.

One thing though, I'm missing a monetization element to the WWW-model. Would you say it's the same as with Industrial age value creation i.e. 'focus on high margins/high volumes to recoup investments' ??

Good post though. More of this :) !!

Ciao

L.

Comment by Dave Duarte on November 12, 2008 at 3:40pm

Hey Louis, very happy for you to post this on HeavyChef:)
Here's some further explanation:

The V model of Value creation is suited to stable, predictable markets and industries.The consumer doesn’t have many alternative choices of products and services to fulfill their needs here. The company needs to recoup their significant investment of cash, time and labour by charging as much as possible, and keeping the product as is for as long as possible - taking it from being a Star product to a Cash Cow eventually. Microsofts OS is a good example of this, but they’re slowly shifting to the WWW model.

The idea with the WWW is to launch with a “good enough” prototype, attract early adopter users, and develop the product according to their needs and feedback. In the software development world, this is known as “Beta” - where the product is in testing mode, and constantly improving according to how people are using it. There is generally less upfront investment required in this model, which is important since many products launched into unpredictable, competitive markets will fail unless they adapt in ways that weren’t originally envisaged by the product team. Often times the best ideas here arise to serve an unmet need of the founder - you might hear the founder saying the product was launched to “scratch my own itch” The other motto of firms that operate with this model is: “release early, release often”. Google does this well.

A great WWW pricing model is "Freemium" - releasing a limited, early version of the product for free, and more developed and stable versions for a fee/premium.

Comment by LouisJvR on November 13, 2008 at 9:28am

Hmmm, it's quite a mind shift for investors then who, traditionally are looking for HIGH ROIs...fast.

Still, as you mentioned, the risk is greatly reduced as startups don't need to build this big white elephant in order to get it to market - a "good enough' prototype will be suffice. Thus, greatly reducing financial risks involved.

Very exciting times we're living in!

Thanks for the feedback Dave.

L.

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