Thursday, April 19, 2012

Trading items of unequal value

In my recent post The value of non-moneterized transactions, I wanted to illustrate that value can be created but also captured without money changing hands. Most often of course it is a combination; your first paying customer may also be your best reference customer, your proof of concept towards investors, your valuable partner in understanding the market and so on. The cost for your customer to agree to being a reference customer or provide you with data, may be close to zero, while the value for you may be substantial. When designing business models, it is important to understand what you have that may be valuable for others, and what others have that may be valuable to you.

In his excellent book on negotiation Getting More: How to Negotiate to Achieve Your Goals in the Real World, Stuart Diamond presents twelve major strategies, tools that support them, and specific applications and examples. One of the twelve strategies is the concept of trading things of unequal value, something that I also see as an important concept in designing value propositions and business models.

"All parties value things differently, and often unequally. Once you find out what they are, you can trade them."

"Find out what each party cares and doesn't care about, big and small, tangible and intangible, in the deal or outside the deal, rational and emotional. Then trade off items that one party values but the other party doesn't."

"One of the more remarkable business success stories of expanding the pie involves Brad Oberwager, the founder and CEO of Sundia Corporation of Oakland, California, producer of high-quality fruit cups… …several years ago he approached ten of the twenty largest watermelon growers in North America. He offered them part of his planned fruit cup business if they would simply let him put "Sundia" stickers on the watermelons they sold in stores. It cost the growers nothing. For two years store owners saw the stickers. Then, one day, Brad, with the growers' support, started making calls to the stores. He offered a fruit cup with higher value added with the brand they had come to know: Overnight we represented thirty-two percent of the market."

Think broadly about value creation
So when designing business models, think broadly about value creation and value capture. Think broadly about which actors exists around your company, around your customers, or even around your physical office space. And when you have decided to go for a partner, supplier, or customer think broadly about what you can provide them with besides your direct products, services, or payments, and what they could provide you with, to get the best return on your assets by trading items of unequal value.

4 comments:

  1. Nice post. I guess Stuart's thoughts come back to the fundamentals of barter (transacting on the arbitrage perception of value).

    Do you have any suggestions/ 'plugins'/business model framework to display the extraction/change in value 'over time'?

    By that I mean, if we take the example with the fruit cups, we would first show the watermelon growers as partners to Sundia with an exchange of stickers for exposure. How could you then display the strategic intent to open NEW value transfer activities with other partners? (e.g. using De May De Ridder or Osterwalder)

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  2. Who said you can't get something for nothing? I normally say that wishing to Get Business Results overnight is hasty and short-sighted, but you seem to have made it work pretty well!

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  3. I've found Lots of necessary information from your blog. Just bookmark your blog for more explore! I will definitely share this post with others. Thanks.

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  4. Thanks for this informative post

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