Value Capturing Strategies

The question of what strategies firms can use in other to capture value is interesting. Even though the computer market is enormous, it took Intel, a microchip processor producer some strategies to draw consumers attention to them. Value capturing is essential for every company seeking to make a profit. Let's just leave the non-profits out of this (even though they also need it to avail themselves).

For companies to profit from their innovation amidst all their competitors in the ecosystem, they need to draw attention to themselves ----Teece, 2006. Strategizing to capture value by innovative ecosystem comes in different ways, with different companies and ways they deem fit to follow in other to sail through. Note that, not same strategies work for every company, as different companies may require different strategies in other to capture value, and to do this, they need to be in a better position where not even their competitors or suppliers will be a problem. A strategy that worked for the food industry might not work for the automotive industry. 

To start with, companies can disintegrate and outsource. Firms can set themselves as the focal point while other sectors of producing their products are outsourced. The results of this are making them a focus on what they do best while transferring their other activities to other companies -----Arias-Aranda, Bustinza & Barrales-Molina, 2011. This doesn’t just help to capture value but also, they expand their expertise ---Lankford & Parsa, 1999- and reduce cost. Example, apple outsourced most of their sectors by using others to capture value, they created products that excite customers by making use of the energies of other people. Apple added value in the eyes of its customers and gives them exactly what they expect. Its customers are willing to give them any amount to purchase their goods. 

Firms will be able to capture value by managing their supply base. Limiting your supply base is a risk a company will not want to take while missing out on bigger opportunities. By being able to have a diverse supply base and managing them does not just improve on your purchasing style but also energizes the downstream economy. With diverse and many suppliers, most of them being agile, competition is at its best, just like in the jungle; the fittest survive. This leaves companies with the best suppliers in other to make good products and capture value. An example of such an ecosystem is Nestle when they decided to bring their Nespresso into the limelight, they brought in different manufacturers ----Jacobides, 2019.

Also, another strategy to capture value is through relative replaceability -----Jacobides, 2015. Once a company makes it difficult to be irreplaceable in their ecosystem, they capture all the value because what they offer is difficult to replace, that is, they become scarce. An example is companies and the job market. Since many people are looking for jobs and there are few companies to employ, they tend to pay them as they deem fit. There is a higher demand for work and a lower supply of it. Refusing an offer gives others the advantage to replace you. 

Another way is through standardization. Separating competition from cooperation ----Bannerman & Zhu, 2008-- enables value capturing and this is what standardization do. Companies need to maintain consistency in their products for a long time so that their customers can trust their brand. Example, Microsoft made themselves central and opened the flood gate of competition to the other part of the sector that they don’t produce (Jacobides, 2015). 

Companies that effectively design and execute these strategies, such as those described above, stand to gain a competitive advantage. This can help managers to consider decisions and opportunities they could never have imagined before.

References

Arias-Aranda, D., Bustinza, O. F., & Barrales-Molina, V. (2011). Operations flexibility and outsourcing benefits: an empirical study in service firms. The Service Industries Journal, 31(11), 1849-1870.

Bannerman, P. L., & Zhu, L. (2008, December). Standardization as a business ecosystem enabler. In International Conference on Service-Oriented Computing (pp. 298-303). Springer, Berlin, Heidelberg.

Jacobides, M. G. (2019). In the Ecosystem Economy, What’s Your Strategy?. Harvard Business Review, 97(5), 128-137.

Jacobides, M. (2015). Creating and Capturing Value in Your Business Ecosystems– TedXTalks: https://www. tedxthessaloniki. com/index. php/talk_video/creating-and-capturing-value-inyour-businessecosystems/# sthash. wUfQjlTZ. dpuf.

Lankford, W. M., & Parsa, F. (1999). Outsourcing: a primer. Management Decision.

Teece, D. J. (2006). Reflections on “profiting from innovation”. Research Policy, 35(8), 1131-1146.