It is all about Value Creation

How much value can your business create in a global context?

The term Value and Value Creation is frequently mentioned in the discussions of business strategy or when a potential investment opportunity is evaluated. But what is the exact meaning of value in a business context?


Our view is that value is created in a chain of players, extending from suppliers of resources to firms, through firms, to buyers of products and services from firms (see figure 1). Value is created by a business operating together with its customers and suppliers. The customers “Willingness-to-pay” is the highest price that a customer would be willing to pay for a firm’s product. The cost includes all the inputs required by a firm: raw material, capital and labor. The value created by a transaction is the difference between willingness to pay and the cost. Value Creation determines “the size of the pie” that the business manages to capture on a defined market and industry.

From the perspective of an individual player, such as a firm, the main question is: How much value can our business expect to capture and what is the potential in a global context? This is the central question in a Value Creating Strategy?

A Value Creating Strategy defines how the firm is operating the business today and the current competitive position. Most importantly, the Value Creating Strategy defines and prioritizes the potential for operational improvements. This is a strategic assessment on how the “customers willingness to pay” could be raised and how the costs of the internal operations and purchases from suppliers could be lowered, but also how the customer base could be increased.


The above strategic assessment is essential, but the most crucial and challenging part of the Value Creating Strategy is to discover new value curves that differentiate and moves the firm to a new competitive position. This is done by asking four main questions:


  1. What factors can be raised well beyond industry standards (more than we do today)?
  2. What factors can be created that the industry has never offered (reshape today’s offer)?
  3. What factors can be eliminated that the industry has taken for granted?
  4. What factors can be reduced well below the industry standard?



By discovering new value curves, the current operation and business is challenged to move towards to a new competitive position. The main objective is not only to identify areas for operational improvements. It is also to identify factors that will reshape today’s offer and the ultimate goal is to create uncontested market spaces ripe for growth.

The Value Creating Strategy ensures that we have a clear view of what should be done in order to improve the firms value during a given time period (see figure 2). The Value Creating Strategy defines how “the size of the pie” could be increased by the business.

valuecreation_2The key challenge is of course the execution of the Value Creating strategy. The execution makes sure that all the business potentials are realized. Our experience is that most Value Creating strategies are translated to a couple Strategic Value Creating themes. Depending on a business unique situation, most commonly one or a few of the following themes:




  • Operational improvement – in the current operation, realize revenue improvement and cost reducing initiatives. This theme broadly spans from improving the effectiveness in sales, distribution and marketing to the optimization of supply chain and sourcing. This also includes reduction of the suppliers’ costs and establishment of “value managed partnerships” with the suppliers.
  • Repositioning business – changing current operating model that differentiates the firm in comparison to competition and attracts new customers. This theme drives the business towards an ideal repositioning where the firm has reshaped todays offer. A repositioning that will improve willingness-to-pay of buyers and/or lowering the willingness to pay for competitors’ products.
  • New market growth – accelerating growth on new and prioritized markets. This theme ensures that the business is expanded to markets where the firm gets the highest leverage on its products, services, resources, capabilities and customer base. This theme also realizes the most suitable establishment models for growth on each new market.
  • Buy and merge – realizing add-on acquisitions in segments and on markets where the growth path will be accelerated by buying instead of building. This theme is a result of an assessment where three essential questions have been answered; 1) does someone else have capabilities that would enhance the business, 2) is the ROI higher to buy than organically grow the business into the new segments or markets, 3) can we identify and realize synergies and other advantages by buying and merging a new business?

Wetter & Company is a Nordic Strategy and Management Consulting boutique supporting portfolio companies (owned by Private Equity and Venture Capital firms) with their Value Creation. We offer hands-on Business development and Operational improvement services with the objective to improve value and profit by growing businesses through international expansion, add-on acquisitions and/or execution of operational excellence programs.

We support our clients with the definition and implementation of Value Creating strategies. We also offer hands-on support in the execution of the Strategic Value Creating Themes as well as designing Performance Management Systems, aligned with the overall strategy.

Find out more about our consulting services!

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