What is Value Migration? Definition of Value Migration, Value Migration Meaning and Concept
Value migration is a change in the way value or profitability is generated in a company.
Value migration occurs when changing customer preferences, technology, or other factors mean that where value was previously generated, it has now been lost or substantially reduced. At the same time that these changes occur, there are other ways of generating value that allow us to respond appropriately to the new circumstances.
The concept of value migration was introduced by AJ Slywotzky in his classic book “How to think several moves ahead of the competition” (1996), published by Harvard Business School Press.
Types of value migration
Value migration can be affected at different levels of the company and its activity:
- An area or division of the company
- A company
- a market sector
How to deal with value migration
The business model of a company defines how to combine the different resources or factors of production in order to deliver a product or service to customers. The model's ability to generate value will depend on its ability to understand and meet customer needs.
Changes in the environment, customer preferences, and technology can cause value to migrate to other forms of customer service, products, or services. In order to deal with this situation, the company must recognize that its business model is becoming obsolete and requires adjustments.
The necessary adjustments to face value migration can be diverse. Thus, for example, sometimes it may be necessary to change the production model of a service (for example, to focus on quality instead of price), it may be necessary to change the focus of the business (for example, to change from the sale of news to the sale of advertising ) or change the production strategy (for example, from selling parts to selling the whole piece of equipment or machinery), among other cases.
In order to adopt the necessary adjustments to the business model, it is important to recognize in which stage of value migration the company is. Which we will see in the next section.
Value Migration Phases
Value migration has three essential phases:
- Value entry : The company begins to generate value in an increasing way because its business model allows it to create products or services valued by customers and is capable of differentiating itself from its competitors.
- Stability : The business model is capable of consistently generating value as it has found a way to meet the needs of its customers.
- Value output : The company is able to adjust to changes in its environment. Change or adjust your business model to meet new consumer priorities.
Recognizing in which value migration phase the company is, will allow adopting the most appropriate strategy.