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Value Creation: Understanding Modularity

As entrepreneurs,  we are quite familiar with the importance of creating value for their audience. However, we often miss out on attractive opportunities that could increase growth. While value can be offered via several forms, value creation via 'Core Products' is a common approach. Revenue models that one can pursue around a core product generally seem to be:
                                                                1. Flat Fee
                                                                2. Subscription
                                                                3. Advertising

However,  business owners fail to explore opportunities that could increase their revenue while offering even MORE value! This can be done by experimenting with Modularity.

Instead of pursuing a singular focus, we break down potential value offerings into components.  We can then start playing Lego's with these components to offer value and generate revenue via multiple streams. For example, Costco offers quality & low prices on groceries for an annual subscription fee. But by drawing customers into their store, they now have a new value offering: Audience Aggregation. Which they then use to sell advertising,  insurance and even roadside assistance!

TripAdvisor offers value via trusted reviews using a Freemium revenue model. But then uses Audience Aggregation to sell Subscriptions to hotels and booking agencies. Furthermore, they sell advertising to various firms.

The truth is, Modularity  models exists all around us (think Cinemas!). We tend to miss it because it blends so seamlessly into our lives. As you grow your business, consider the various 'Lego' pieces you can fit/rearrange into your business model. The growth potential can be stupendous!

Further Readings:

Research Gate:  Modularity  in Creating Value for Diversified Customer Needs

Harvard Business School : Modularity for Value Appropriation​

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About the author

Shawn Dexter

Shawn Dexter is a Product Manager, Entrepreneur & Software Developer. He is passionate about innovation management & technology.

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