The Value Stick is a strategic tool used to understand and optimize value distribution among stakeholders—customers, employees, and the organization itself. It offers a framework for creating value by focusing on four key levers: Willingness to Pay (WTP), Price, Cost, and Willingness to Sell (WTS). Within FOAM (Fractal Organization Agile Model), the Value Stick is central to guiding decision-making across all layers (Strategic, Architectural, and Operational), ensuring that every element of the organization is purpose-driven, aligned with strategic goals, and optimized for value delivery. Each lever of the Value Stick, when applied within FOAM, serves a distinct role in balancing customer satisfaction, employee engagement, and organizational efficiency.

Overview of the Value Stick’s Levers in FOAM

In FOAM, the four levers of the Value Stick—WTP, Price, Cost, and WTS—are employed to assess and adjust the organization’s value proposition dynamically. By focusing on each lever, FOAM enables teams to contribute meaningfully to overall value creation and capture, with each lever informing specific aspects of architecture design, team operation, and strategic alignment.

Here’s a comprehensive look at how each lever functions within FOAM, supporting purpose-driven and value-centric operations.

1. Willingness to Pay (WTP): Increasing Customer Value

Definition of WTP

Willingness to Pay (WTP) represents the maximum amount a customer is willing to pay for a product or service, reflecting the perceived value from the customer’s perspective. It is a critical lever for increasing revenue potential by enhancing how much customers value the offering.

WTP in FOAM

In FOAM, WTP aligns closely with the organization’s Why (Golden Circle), ensuring that all activities aimed at increasing WTP are purpose-driven and resonate with the customer’s values. FOAM uses WTP as a guiding metric to enhance customer satisfaction, experience, and perceived value, integrating this lever into product development, customer experience, and brand alignment.

Strategic Layer: At this layer, increasing WTP involves positioning products or services in a way that aligns with the organization’s purpose, making offerings more compelling to customers. This alignment with the Why ensures that customers are willing to pay a premium because they identify with the organization’s mission.
Architectural Layer: FOAM’s architectural design focuses on delivering high-quality experiences that increase WTP. This may involve incorporating superior design, user-friendly interfaces, and additional features that directly improve the customer experience and elevate perceived value.
Operational Layer: Stream-Aligned Teams in FOAM are focused on delivering features and services that enhance customer experience, thus directly impacting WTP. Feedback loops through Sense & Respond allow these teams to continually refine offerings based on customer feedback, ensuring that each iteration increases the customer’s perceived value.

Example in FOAM

In a mission-driven healthcare organization, WTP is increased by enhancing patient experience through personalized care and easy access to healthcare information. The organization aligns its services with the purpose of improving community health, which resonates with patients and increases their willingness to invest in the organization’s services.

2. Price: Capturing Organizational Value

Definition of Price

Price represents the amount the organization charges for its products or services. It is a lever that directly impacts revenue and determines the organization’s ability to capture value relative to the perceived value (WTP).