Core Concepts: Value Path
By Gregory Ronczewski, Director of Product Design at Ibbaka. See his skill profile.
Definition of a Value Path
“A value path is a series of steps that results in value for the customer or end-user. Different user personas may have different value paths.”
Context for Value Paths
The Path metaphor is a way to illustrate a process that is both a way of getting to a destination and a way of life or thought. It includes the idea of movement in a direction, towards a goal or destination. The metaphor is used extensively in the service Service Design discipline in the form of a customer journey map.
Other Definitions of Value Path
American Productivity & Quality Center
“A value path is a process that links process performance, business outputs, and organizational goals to focus on value creation. “
In their book, Peter G.W. Keen and Ronald O. Williams, The Value Path: Embedding Innovation in Everyday Business When the Customer Makes the Rules argue that "the only measure of innovation is the value it creates." This aligns well with how one defines value: a fair return in goods, services, or money for something exchanged. For a company to evolve and grow in an ever-changing environment, value offers an excellent measure to attract and keep customers.
Value paths play play a critical role in usage based pricing. In pricing it is not just any usage that matters. It is the usage that leads to something of value. The best metrics for usage based pricing are those that measure the completion of value paths.
See How to introduce usage based pricing.
Define the endpoints. It is hard to build a path if you do not know the destination. The destination needs to be clearly defined and deliver some tangible economic, emotional or community value. Ideally, completing the value path will lead to value documented in a value model.
Build the path. Define steps that results in value for the customer or end-user. Different user personas may have different value paths. Paths do not have to be completely on the software platform. Service design has shown us that the path can cross modes, just as a path in the physical world could include use of a bus and a ferry, and a bicycle could be substituted for the bus.
Align packaging with the value paths. Value paths and usage-based pricing combine to create offers targeted at specific personas.
Use these value paths to design usage-based pricing. Good usage-based pricing reinforces the connection between price and value.
At Ibbaka we celebrate and respect the different value paths that customers and users choose to take: 'Enable an action' value path, 'Generate a result' value path, or 'Create a report' value path are implemented in our Role and Skill Coverage as well as our process for Joint Skill Assessment. These value paths generate value for the customers who decided to join us on those not very well-plotted paths that surround skill management.
More reading for you
Core Concepts for Pricing and Customer Value Management
Value Path (this post)
Coming soon …
Community Value Driver
Connecting Value and Pricing Models
Cross Price Elasticity
Customer Value Journey
Customer Value Management
Economic Value Driver
Interactions of Cross Price Elasticity and Price Elasticity of Demand
Package Design
Pocket Price Waterfall
Price Elasticity of Demand
Pricing Design
Pricing Model
Value Based Market Segmentation
Value Ratio
Value to Customer (V2C)