The Values Chain: An Inquiry into How We Create and Capture Value When We Innovate

by Jim Lane (Biofuels Digest) A note to my readers: a few weeks back, I was asked to give some remarks at a private meeting of venture capitalists and technology pioneers on the future of wellness, nutrition, agriculture, biotechnology and innovation. I decided to focus on the capture of value, and tell this story of a Values Chain that I see replacing the Value Chain. You may agree, you might disagree. But this is how I have been looking at it.

Here’s my hypothesis: If we hope to gain the full return from innovation, today, we have to create a values chain, not just a value chain. Let’s explore value capture in a modern context, shall we?

If you have enjoyed, say, a $15 whisky cocktail at a popular urban bar or restaurant, you’ll know that there’s lots of value being created via our friend, the cocktail.

More or less, there’s 4 cents for the grain technology, 96 cents for the whisky technology and $14.00 for artistry of the servers, and the promotion.

More technological innovation, by far, is in the grains. Though the art of designing and serving cocktails advance; though the beverage industry optimizes its manufacturing and supply-chain, by far the most innovation and risk is in the design and breeding of the corn.

In the long-term, 4 cents, or a 0.03 percent share of the proceeds from the final product, is not going to be sufficient value in order to justify the risks, timelines and labor in agricultural innovation. Invariably, low returns must lead to innovations not pursued or corners cut.

We assign the determining role of value to the power of markets, a belief that “price and performance” dictates the distribution of the rewards, but we have rarely if ever reviewed these assumptions in a rigorous way.

To put it simply, we might add an S, and move from a value chain to a Values Chain.

The reason to move in this direction is not to be more fuzzy and friendly, a form of corporate Kumbaya by which we, er, signal to our customers that “We Care About Values. Yay!” Rather, we might better make this journey because markets are changing, times are changing, and moving from a value chain to a values chain is the best way to capture value for our innovations and accelerate returns to our shareholders and stakeholders.

I’d like to draw your attention to the information at the lower left. These contain negative statements, not about what the product contains, but drawing attention to attributes that are missing. We begin to see here how we can relate food to broader goals such as health & wellness. “No artificial flavors” is a statement that relates a product to a preference for “natural” and a desire to avoid “artificial”. This is not information about a product, but meta-information that connects products to life goals, and positions food as a service helping customers reach their goals.

GMO! The devil! Burger King has shifted the conversation from labspeak to humanspeak, and have in that process they have created a new and more positive type of foodspeak. They decided to think different, as Apple once exhorted us.

We might think different as innovators to capture more value that is being transferred to other partners in the value chain who have better mastered the power of story and connect to their customers through the power of service.

Uber is not a car it is a service, IBM does not sell machines, but services, AT&T does not sell phone calls or phones but a service. Wells Fargo doesn’t sell a spot in the vault but a service.

The technology leads to the product, the product leads to the service, the service leads to the experience, the experience leads to alignment, and therein is the completion, and in our society, we make payment on completion. So, to capture value, why not seek alignment? READ MORE