The Executive’s Playbook for Decision Model Innovation (Part 8)

Where Customer Centricity meets Decision Intelligence

Step 4: Engineer Value-Capture Mechanisms

Core concept: Now that we have a promising decision-support solution for our customers, we turn to how it will generate and sustain value for our business. Step 4 is about designing the value capture – pricing models, revenue streams, and competitive moats – to ensure our innovation is profitable and defensible. We tackle questions like: Do we primarily close the price-value gap, erect barriers to competition, or cut costs as our lever?​ What pricing architecture lets us monetize the decision support without cannibalizing our core business? How can we “lock in” customers (or keep competitors at bay) through data, algorithms, or switching costs?

Close price-value gap vs. barriers vs. cost efficiency: These are three broad strategies to reclaim value in a commoditizing scenario, and our DMI initiative can play a role in each – sometimes simultaneously.

• Closing the price-value gap means increasing what customers are willing to pay by delivering new value (or by better communicating the value we deliver). With our decision-support proposition, we likely add new value. We need to decide if we will charge more directly for that added value or use it to justify our existing price (prevent discounting). For instance, if we sell a hardware product that’s become commodity, and we now bundle a smart decision-support service with it, perhaps we can maintain a premium price instead of cutting price – effectively closing the gap between what we charge and what customers are willing to pay by giving them a reason to pay more. An example: John Deere sells tractors (a very competitive market), but by adding precision agriculture decision support (guidance, data analytics), they justify higher prices or subscription fees, keeping the price-value equation favourable. We might choose to explicitly price the new service (e.g., a subscription on top), or implicitly include it and defend a premium. To close the gap, the customer must perceive clear additional value in monetary terms. This strategy is about value-based pricing – aligning price with the new value created (like higher crop yields, reduced downtime, cost savings, convenience, etc., enabled by our decision-support).