What Is Value Migration?

A Project Manager’s job is to manage projects that create value. However, Value is not a fixed thing; Value changes all the time.

This post explores the idea of Value now and in the future – and managing projects not so much where the Value is, but where it will be.

A Definition of Value Migration

definition of value migrationValue migration was first coined as a phrase by Adrian Slywotsky in his 1996 book entitled “Value Migration: How to Think Several Moves Ahead of the Competition”. A good definition is:

“Value migration is the shifting of value-creating forces from declining or outmoded business models to fresh business designs that more effectively satisfy customers’ needs and priorities.”

Value Migration is why IBM’s business declined for some time as Apple, Microsoft, and others grew from nothing. But eventually understanding how Value Migration works and building a strategy around it is why IBM has survived and thrived.

Three Types of Value Migration

3 types of Value MigrationThere are three generally accepted types of Value Migration:

  1. Value flows between industries – Industries can emerge…and eventually disappear. A famed example is the buggy whip industry, which flourished in the era of horse and buggy but then largely disappeared after the automobile took over.

    More recent examples include steel, which has disappeared for certain segments due to competition from the plastics industry.

  2. Value flows between companies – As an industry evolves, it moves from many competitors and participants to a much smaller number of survivors.

    Often, after a period of relative stability among the competitors, a disruptor appears. If incumbents do not see it, they are vulnerable to startups who can innovate and eventually replace them.

  3. Value flows between areas within a company – Companies usually evolve to have multiple parts which contribute to the whole.

    Coca Cola, for example, sells soft drinks to several key segments. There has been a shift in which segments contribute most to profit, but all segments work together to maintain the brand and volume required overall.

Value Migration, however, touches many other areas of life. Similar to Value Migration in business, there is Value Migration in the realm of international power, where the power of nations rise and fall relative to one another. Similar to nations, cities rise and fall.

Sport teams also rise and fall over time. Institutions, such as schools, can be subject to this type of cycle.

I mention them to provide a frame of reference, as we can learn from these different types of situations. You may be able to relate to some of these more than others.

Three Stages of Value Migration

3 Stages of Value MigrationThe stages of Vaule Migration look familiar – a lot like those of the stages of industry maturity and the rising of arenas of competition. In the case of Value Migration, there are three stages:

  1. Value Inflow Stage – This is where the birth of an industry or birth of a company occurs. The company, or industry, adds value in novel or new ways, or responds to a new need.

    As this new value is created, it attracts growth and further interest. Value flows into the industry and these companies.

  2. Value Stability Stage – Once a maturity level has been reached, there is a steady state between value provided and value gained.

    The industry or company is no longer growing, but is stable and profitable. Net value remains stable.

  3. Value Outflow Stage – Eventually, industries and companies are needed less. Value created declines and is supplanted but other economic areas that add greater value.

    There is a net Value Outflow from such industries and businesses.

It is highly predictable that industries and businesses will go through these stages. What is less predictable is when, and how rapidly. It is a strategic challenge to be able to predict when these stage shifts will happen, and to be able to re position an organization to manage the transition gracefully and profitably.

The Strategic Challenge: To Anticipate Value Migration

Anticipate Value MigrationOne of the great early strategic frameworks is the BCG Growth Share Matrix. It provided a framework for managing Value Migration – before the term Value Migration was even coined.

The trick with the matrix was to have different types of businesses in a portfolio. These businesses would be at different stages of their life cycles – similar to having different businesses at different stages of Value Migration.

This may be good for a larger, portfolio-centric company, but how does a company with one basic business transition so that it services into a new era?

The answer, I believe, lies in constantly monitoring and seeking to optimize its value chain. This is a multifaceted effort, with the following realms of activity:

  • Close customer contact – A company needs to monitor customer experience. It needs to employ design thinking – focused on building relationships.
  • Efficient, and minimalist, operations – Take an agile strategic approach, not over committing to businesses that may be short-lived, or under committing for businesses that are expected to last longer.
  • Embracing change – Use change to advantage by building the capabilities to deal with change. Build a lean innovation capability.
  • Leverage the network – Some direct business initiatives may change, but the underlying network to support them can grow and create increasing value. Consider the network effects available to your organization, and build accordingly.

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I recommend these strategy resources (paid link):

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The value chain is the sum of all activities that provide value to the customer. The value chain needs to be managed skillfully to optimize business value for the stage of Value Migration.

The PM Challenge: Manage Risks Around Value Migration

Manage Risks of Value MigrationAs it turns out, the risks to be managed closely resemble constraints of the Project Triple Constraint.

  1. Synchronized timing – When the project happens, and how long it takes, needs to be synchronized with the market opportunity. It needs to be aligned with the Stages of Value Migration to maximize Value from the initiative.

    The risk is in not being aligned, and thus not maximizing Value.

  2. Limited cost – Cost must be aligned with the timing and market return from the intuitive. It is expected that the opportunity will produce Value over an extended period, more investment and cost can be justified.

    The risk is in committing too much in funds to be justified by a Value of return that does not last long enough.

  3. Flexible scope – A lean agility is required here. Limiting commitments until there is more certainty is the mantra for managing this risk.

    Maintaining flexibility to deal with uncertainty, and positioning to move in with more commitment at the right time is the hallmark of this approach.

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I recommend these PM templates (paid link):

Method123 PM templates

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Each of these three focus areas involves maintaining a strategic mindset while executing skillfully.

Furthermore, the reality is that Value Migration takes excellent leadership throughout companies, and project managers are at the core of that.

Conclusion and Recommended Resources

Value Migration is at its core strategic execution. It is the clear domain of strategic project managers.

This post contained many links to other posts for a reason: this topic relates closely to many core business frameworks. It is complex and takes discipline, and the stakes are high.

Do you have a personal story to share of a Value Migration experience?

I recommend listening to as much of this as you can: “Value Migration by Adrian Slywotzky.” It is a high-powered 45 minute video that will help you to soak up the concepts and experience. The second half of the video is very healthcare-centric.

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