What is the Value Creation framework called?
The framework is called Value Creation – Value Capturing, or simply VC2.
It explains how companies must balance creating value for customers and capturing value (profits) for themselves.
What does VC2 stand for?
VC2 stands for Value Creation – Value Capturing.
It’s a framework used to analyze how companies create value for customers and capture value for themselves, which is key to long-term success.
Which measure is used to show value capturing?
Return on Assets (ROA) is used to measure value capturing.
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What does value capturing mean?
It’s about how well a company earns money (profits) from its business and shares it with investors. -
Why ROA?
ROA = Net Profit ÷ Total Assets
It shows how efficiently a company turns its assets into profit. It’s widely used, stable, and good for comparing across companies. -
How is it used in the framework?
In the VC2 framework, ROA is shown on the X-axis of a graph that compares value creation and value capturing.
What measure is used to show value creation?
Brand Value over Revenues is used as a proxy (or substitute) to measure value creation.
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Why this proxy?
Value creation is about how much customers think a product is worth—but that’s hard to measure directly.
So, brand value (a measure of customer perception) is used, divided by revenue to adjust for company size.
This shows how much value customers feel they get for every dollar spent. -
How is it used in the framework?
In the VC2 framework, Brand Value ÷ Revenues is on the Y-axis.
What does value creation mean for customers?
Value creation is the benefit a customer believes they get from a product or service.
- For consumers (B2C): It improves their lives.
- For businesses (B2B): It helps them make more money.
- If customers don’t see value, the product shouldn’t exist.
- It means giving better, cheaper, or faster options than competitors.
- Customers are the ultimate judges of value.
Because value can’t be directly measured, brand value over revenues is used as a stand-in measure.
