Your value is dynamic (that is why you need a value model)
Steven Forth is CEO of Ibbaka. Connect on LinkedIn
Understanding value has become more complex than a simple ROI calculator can capture and more dynamic that spreadsheets can support.
Once upon a time it was enough to have a simple ROI calculator that you kept in a spreadsheet or pushed to the web. If you were lucky it got some use, and a bit of data trickled in. But mostly it was a lead generation and sales tool. Inconsistently used, it often hurt as much as it helped. Sales did not believe the numbers it spit out, buyers either dismissed it, or sometimes used it to hold the seller to account. And that was good enough.
Those days are gone.
Today value is dynamic and context dependent. Pricing guru Mark Stiving calls this ‘context-based pricing.’
Value is is Context-Dependent: It changes based on the situation.
Value is Malleable: It can be influenced by effective value communication.
Value is Imperfect: There are always constraints in determining it.
Understanding value has become more complex than a simple ROI calculator can capture and more dynamic that spreadsheets can support.
Value models need to be adaptive and dynamic
A static value model that is developed, coded into a spreadsheet or static tool like a CPQ and then set aside is no longer fit for purpose. Value changes in response to external forces such as interest rates, trade policy (see Pricing in a Time of Tariff Uncertainty: A B2B SaaS Survival Guide) and market demand. Value is relative to the Next Best Competitive Alternative) and competitor actions and choices can dramatically change value. Most importantly, changes at customers and the customer base can change which value drivers matter, and variables in the value driver.
Value Models are Dynamic - Ibbaka Illustration
The feedback loop from customer models (value models customized for specific customers) to target customers, into value models, and back to customer models is the driver of adaptation.
Value models change in response to how customers buy, deploy and apply solutions.
Note that as the value model is a key input into pricing models an adaptive value models implies the need for adaptive pricing.
Adaptive value models
Keep value relevant to buyers and users in a rapidly changing world
Respond to competitive moves to deliver a strategic advantage
Can be embedded in generative AI driven sales and buying processes
See Will AI in the buying process lead to more pricing transparency?
Generated Value Models (GVM)
The old fashioned way of hand crafting value models using data from extensive customer interviews or conjoint surveys is too slow and expensive to support adaptive value models. Fortunately, generative AI provides a solution.
Ibabka has demonstrated that generative AI can create better value models than even the most skilled humans in a fraction of the time.
It does this by using rich context documents in a RAG (Retrieval Augmented Generation) architecture and a system of prompts operating on multiple foundation models (you can’t do this successfully just relyinging on OpenAI, or Meta, or Anthropic and so on).
These generated value models (GVMs) are easier to update and to connect to other business processes. Values for the variables can be dynamic, rather than static, the generation process can be automated, and triggers or alerts set to update value models and even prices in response to events.
Generated Customer Model (GCM)
A value model is at a level of abstraction above actual customers. It provides the general framework. What really matters is the customer model.
A customer model is the value model for a specific customer.
Technically, this means that value drivers are switched on or off and values for the variables are set for the customers. This can apply to both the customer variables, the value improvement claims and the attribution and execution risk factors that Ibbaka includes as part of every value driver.
Over the past few weeks Ibbaka has made good progress in using generative AI to generate a customer model from a value model and doing so with just a few inputs: the customer’s name and website, its business goals, its competitive position.
The customer model is the key to executing on value-based sales and value-based customer success. The value based approach to sales and customer management (and the two need to be linked together) is gaining momentum as the best way to sell and win renewals in a changing and challenging world.
Category Value Maps
When the cost of doing something drops dramatically it changes what you can do. This is what is happening with value models. The time it takes to build a value model has collapsed. Our estimate is that the cost of generating a value model is down by more than 90%. This is a game changer.
One way that Ibbaka is taking advantage if this change is by generating Category Value Maps. These maps describe how value is created by a B2B software category. They can be used by buyers to decide of they need a certain type of software and which vendor best aligns with their needs, and by vendors to understand how they are positioned in the market.
Ibabka generates these maps using GVMs (Generated Value Models). We generate value models for the key vendors in the category and then put these value models through a prompt system to generate the category value map. The first of these was published in early February. More will come over the course of the year.
