“Innovation isn’t worth much if you don’t get paid for it.”

Businesses innovate to create value and generate new revenue streams. That’s routine.

What’s not common, though potentially promising and powerful, is capturing new value in existing businesses. It might also be the only way to revive a wobbling and declining venture, or reinventing it altogether. Switzerland-based Vastergaard’s ‘LifeStraw’ technology, which can remove 99.99999% of bacteria and 99.9% of protozoan cysts from contaminated water, became popular with aid organizations whenever disaster struck. Restricting its use solely in relief zones, while 780 million people worldwide lack access to clean water in their daily lives, is tantamount to ignoring a much larger vibrant marketplace for a smaller NGO customer base. Though the cost of LifeStraw was beyond the means of most households in developing countries where it could be most useful, Vestergaard found a way around for families to fund their purchase– with carbon offset credits. Using LifeStraw meant not having to burn petrol or wood to boil unclean water. Since carbon emissions trade allows for monetizing any documented CO2 savings, Vestergaard grew its business considerably by introducing the Carbon for Water initiative, thereby enabling thousands of Kenyan families to procure LifeStraw.

However, the assumption that value creation will naturally lead to rewards may not be true. When companies singularly focus on value creation and incur big costs, they tend to leave money on the table by not examining possibilities of value capture. In pursuit of the new, organizations maintain R&D labs, crowdsource ideas, conduct pilots, but have a blind spot for opportunities that can lend themselves to capturing new value.

A discerning leader spots new scope and potential in old businesses too. The following five methods or changes can help him to unlock new values that would otherwise remain untapped and unexplored.

1. Changing the price mechanism: This approach focuses on the mechanism or rationaledealing with pricing strategies. The most familiar of them is value-based pricing where a product or service is set a price according to the offering’s worth to the customer and not by simply marking up production costs or calibrating against competitors’ prices. With the assumption that value-based pricing is superior and with eyes on two challenges, discovering customers’ value perceptions and creating a structure in which different customers are charged different prices depending on their willingness to pay, the next set of innovations begin. Google’s revenue stream, for instance, is driven by auctioning. Instead of setting prices, Google has its reserves funded from advertisers’ bidding for the keywords with which they want to be associated. Depending on banks’ and brokers’ priorities and budgets, the term ‘mortgage’ for instance is valued to different degrees. While auctioning can result in prices that far from please companies but must be honoured as an eBay seller will concede, it can also yield prices a seller wouldn’t dream of quoting. Demand-driven pricing allows for fluctuations in aggregate demand. Hotels, airlines, car rentals for instance predict peaks and valleys in demand based on past reservation patterns, and adjust prices to maximize profitability during both high and low periods.

2. Changing the payer: In a typical business environment people consuming offerings pay forthe value that they receive, but some arrangements serve consumers and producers alike. The media business, for example, follows a two-sided market model. Here content is expensive to produce and consumption is subsidized by advertisers. Many businesses have consumers that others would also like to  In two-sided markets or more, the payer may be made to change in the value constellation.
3. Changing the price carrier: Simply put, the price carrier in a product or service offering ispart of the experience the price hangs on. A visit to a certain restaurant could be rewarding for free Wi-Fi connection too. The customer pays for his food and beverage, oblivious of the value of the complete experience. A strategic question therefore emerges, whether the price tag is affixed to the right part of the package and if profits would be impacted if the fringe benefit were to be removed. Netflix provides a classic case of changing the carrier. Initially there were discrete transactions in which customers selected DVDs and paid for each one. Growing familiar with their tastes over time, clerks started making helpful recommendations at no additional cost. Netflix changed that to a membership subscription model, making personalized recommendations an explicit part of its value proposition. Not the pre-rental price, the subscription service emerged as the price carrier. Bundling and unbundling products and services by companies actually imply working on the price carrier. Bundling is common in telecommunications where a customer’s solution generally comprises several elements that could each be priced separately. An overall price with elements bundled into a package allows sellers to assemble varying solutions appealing to different customer segments. The airline industry can be looked at for an example of unbundling. An air ticket would earlier include a full range of services, which are now often charged separately – checked bags, food, extra legroom etc. A variant on bundling is the all- inclusive offering. An all-inclusive offering combines elements that would not necessarily be components of one solution, but which consumers would automatically pay for given the timeframe or setting. Cruise ships for instance offer all-inclusive deals covering meals, entertainment, and accommodation – purchases not compulsorily connected, yet provided (should one want to avail but would not be able to go anywhere else) and charged for as part of the deal.
4. Changingthe timing: While the above innovations usually assume a simultaneous exchange of value, ‘desynchronized’ innovations are rewarding too. When a customer buys a Gilette razor and blades together, it is a relatively low-price purchase. The customer probably receives more value in that transaction than what is paid for. The charge of the razor, however, is levied with every subsequent purchase of blades. The same model is replicated by ink jet printers. A printer may not be expensive, but replacement cartridges certainly are. If customers are allowed to buy printers from a third-party supplier the business would not be sustainable. Both these cases demonstrate that changing the timing is generally tied to a price-carrier change. Installed base pricing, also called the razor and blades model, allows a company to secure its future revenue stream. Future contracting, yet another approach to changing the timing and desynchronizing the value exchange, is observed, for instance, when an upcoming hotel pre-sells its rooms and other facilities.
5. Changing the segment: Whereas the first four categories capture value with the existingcustomer base, this category targets customers who are new to the company or even to the  It is a two-step approach. First – identifying people who are unable to pay or averse to the existing price of an offering but displays a need or desire. Second – figuring out how to create a profitable offering for them. Conventional textbook marketing approach suggests conducting a market analysis to define objectives before formulating a business strategy incorporating product, price, place, and promotion decisions. This form of target costing on the other hand involves gaining customer insights to determine the price at which a certain segment of the market will buy a certain product/service, and then designing it to offer at a cost which ensures a sufficient margin.

So far, inordinate amounts of time and resource have been accorded to value creation. It is time business leaders took to driving value capture in strategy and innovation exercises of their firms too. It goes without saying that the various innovation approaches to value capture outlined above are neither mutually exclusive nor applicable to every market. Yet, organizations across industry verticals would be better served reassessing customer needs, revisiting internal practices and processes, and taking a fresh new look at their existing businesses to discover hidden opportunities where there seemed none.