Value drivers

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Value drivers
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Value drivers are factors that have a strong impact on the value of a given product, making it more attractive to the prospective consumer, and thus, the position of the company among competitors on the market also increases. These factors may have a different form, eg customer loyalty, technological novelties or brand awareness on the market. Value Drivers are characteristic features of the company that may reduce the risks and failures that entrepreneurs face while conducting business, or increase the level of this activity in the future. The company value consists of licenses, patents, technology, market position, company strategy, mission and vision, business systems and models, and human resources[1].

Value drivers include[2]:

  • management team,
  • effective financial control,
  • a constant base of buyers,
  • supporting operating systems,
  • growth strategy,
  • cash flow,
  • facility appearance.

The Value drivers of Business Model

Major business model value drivers are[3]:

  • Novelty concerns innovations in the business model, referring to the activity system. May refer also to the new methods of production of goods or services, their subsequent distribution or the new ways of reaching the customer using marketing techniques.
  • Lock-in is about activities in the model that affect the level of change costs and can also refer to encouraging participants to trade in the activity system. Lock-in in the business model and the process of its creation will proceed properly, if it can encourage customers to make the next purchase and build a lasting relationship with a company. Thanks to this, the number of purchases will increase, and the client will not have to use other competing companies.
  • Complementarity concerns the interrelationships between activities that take place in the business model that can be increased. Complementarity applies when a package of products offered together produces more profits than each of them separately.
  • Efficiency refers to cost saving, which is possible thanks to common operating systems. The efficiency of a given transaction is greater when the costs are lower. Improving such a model is possible by reducing the amount of information asymmetry that occurs in the contact between customers and sellers, by providing up-to-date and specific information. As a result, consumers make more rational and thoughtful purchasing decisions, have more choice at relatively low costs, and deliveries and all distribution activities run more efficiently.

Value drivers analysis

Value Driver analysis is a key element of the proper functioning of the company and strategy planning, it helps in effective management and distinguishing strategic operations for business. For example, if growth factors are identified as important to the enterprise, companies should plan strategically to be able to take these factors into account.

Identifying value drivers consists of three stages[4]:

  • creating a map of drivers,
  • checking how important and sensitive these drivers are,
  • testing the controlling level of each driver.

Footnotes

  1. Value Drivers White Paper (2007) p.1-3
  2. Value Drivers White Paper (2007) p.1
  3. Value Drivers of e-Commerce Business Models,2014, p. 18-19
  4. Identifying and Managing Key Value Drivers, (2017), p.2

References

Author: Justyna Wicek