Value-Based Strategy

In a fascinating lecture, Harvard Business School’s Professor Felix Oberholzer-Gee pulled back the curtain on the key drivers behind the success of iconic companies. Despite a highly competitive marketplace where imitation is common, how do some businesses rise above the rest and dominate? The secret sauce lies in the “value stick approach.”

The ‘value stick approach’ is a four-pronged strategy:

1. Willingness to Pay: This reflects the perceived value of the product for the customer.

2. Price for Users is 0: That’s the actual cost the customer pays.

3. The Operating Costs of the Company: An essential consideration for the profitability equation.

4. Willingness to Sell: The eagerness or desperation of a company to sell its product.

Success stems from increasing the willingness to pay while decreasing the willingness to sell. It may sound counterintuitive at first, but it essentially means enhancing the perceived value of the product while minimizing desperation to sell.

But what about imitation? It’s a common tactic in the business world. However, Professor Oberholzer-Gee’s lecture emphasized that copying a competitor’s successful idea can actually stifle your profitability. But don’t rule out imitation entirely. There’s a smarter way to imitate, as demonstrated by Etsy.

By shifting the competitive focus from the top of the value stick (the willingness to pay) to the bottom (the willingness to sell), Etsy was able to emulate success while still maintaining its unique market position. This strategy of ‘smart imitation’ can be instrumental in climbing the ladder of big success.

The value stick approach and smart imitation might just be the strategy your business needs to dominate in this competitive age. After all, it’s not just about competing; it’s about winning. Stay ahead by being unique and smart.

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