A value pool is a concentration of economic value within a market or ecosystem. It helps answer a more useful question than simply asking how large a market is: Where is the economic opportunity actually located? A large market can contain activities with very different economics. Some generate considerable revenue but little profit. Others are smaller but highly profitable. New technology can create entirely new sources of value or move existing ones from one participant to another. Value pool analysis makes those differences visible. The term needs some care because it is not used consistently. The older and more precise idea of a profit pool refers to the total profit earned across the different activities in an industry. Gadiesh and Gilbert introduced this approach to show that revenue and profit can be distributed very differently across a value chain.
Today, consultants often use value pool more broadly to describe concentrations of revenue, profit or future economic opportunity. McKinsey, for example, uses value pool analysis to identify attractive customer segments, use cases, products and services, and describes its ecosystem value pool work in terms of revenue sizing across markets.
So whenever we talk about a value pool, the first question should be: What kind of value are we measuring?
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How is a value pool different from a market?
A market tells you where economic activity exists. A value pool tells you where within that activity the economic value sits. Imagine a £20 billion market. Knowing its size tells you very little about whether the attractive opportunity lies in manufacturing, software, distribution, financing, servicing, data or some other activity. Those activities may have completely different margins, growth rates and competitive structures. Value pool analysis breaks the market apart. Instead of seeing one large number, you begin to see several pools of economic opportunity. That matters in ecosystems because the organisations creating the customer outcome are often spread across several industries. The opportunity may not sit in your traditional market at all.
How is a value pool different from a revenue pool or profit pool?
The distinction is important. A revenue pool measures where customers spend money. A profit pool measures where profit is earned. A value pool is often used more broadly to identify where economically attractive opportunities exist now or may emerge in future. Those are not the same thing. An activity can attract enormous revenue while producing weak margins. Another can generate relatively modest revenue but capture a large share of the system’s profit. A third may currently be small but become strategically important because technology or customer behaviour is changing. This is why simply labelling something a value pool is not enough. A useful analysis should say what is being measured, such as revenue, profit, margin, customer lifetime value or expected future economic value. The original profit pool work made precisely this point: managers can be misled when they assume that the largest source of revenue must also be the most attractive source of profit.
Why do value pools move?
Because the way value is created and captured changes. Technology can make an existing activity cheaper. A new customer need can create a new service. Regulation can open or close opportunities. A new interface can change who owns the customer relationship. A scarce capability can become more important. A previously valuable activity can become commoditised. This is especially important in ecosystems because value can move between participants, not just between products. Consider electric mobility. The economic opportunity does not stop with selling a vehicle. There can also be value in batteries, charging, energy management, finance, insurance, maintenance, software and other services. As the system develops, the relative attractiveness of those activities can change. So value pool mapping should not only ask: Where is the money today? It should also ask: Where is value likely to move? McKinsey uses value pools in much this way when evaluating adjacent sectors and deciding where an organisation should participate in an ecosystem.
How do bottlenecks and control points shape value pools?
This is where value pools become strategically interesting. Value is not distributed simply according to how much each participant contributes. Power and dependency also matter. A bottleneck can restrict the performance of the whole ecosystem. If one organisation controls that scarce capability and there are few alternatives, the bottleneck can also give it bargaining power. That can allow the participant to capture a larger share of the economic value created by the system. A control point can produce a similar effect. Control over customer access, transactions, standards, interfaces or scarce data can influence how value is divided. Our ecosystem advantage research identifies value capture advantage precisely in these terms: control over scarce roles, customer access, interfaces, standards, data or transactions can allow a participant to appropriate more of the value created collectively.
[Source document: Ecosystem Advantage_ What Creates It, How It Compounds, and How Managers Can Measure It.pdf]
This means that mapping value pools without mapping dependencies and power gives an incomplete picture. Suppose five participants collectively create £100 of value. There is no reason to assume each captures £20. One may control the scarce component everyone needs. Another may control access to the customer. Another may operate in a highly competitive activity where suppliers are easy to replace. Their ability to capture value will be very different. This also explains why bottlenecks can attract investment and competition. A valuable bottleneck signals scarcity. Competitors have an incentive to remove it, substitute for it or capture it themselves. So a bottleneck can create a powerful position, but that position may not last. And there is another tension. A participant can sometimes capture too much. If an orchestrator or powerful participant takes so much value that complementors can no longer earn an attractive return, they may reduce investment, find alternatives or leave. Our research therefore distinguishes clearly between creating ecosystem value and capturing it. More value for one participant does not automatically mean a healthier ecosystem.
[Source document: Ecosystem Advantage_ What Creates It, How It Compounds, and How Managers Can Measure It.pdf]
How do you map value pools?
Start with the customer outcome, not your existing industry boundaries. Then identify the activities and participants needed to deliver it. For each part of the system, ask: How much economic value sits here now? How attractive are the economics? Is the pool growing or shrinking? What could cause value to move? Who has the power to capture it? That last question is essential. A good value pool map should therefore show more than market size. It should reveal the relationship between: value creation → scarcity and dependency → bargaining power → value capture That is where the strategic insight sits. A large value pool may be unattractive if competition makes it difficult to capture any of the value. A smaller pool may be highly attractive if you possess a capability, relationship or position others cannot easily replace. And an apparently insignificant pool today may become important if AI, regulation or another change shifts the economics of the wider system. So the purpose of mapping value pools is not simply to find where the money is. It is to understand: where value is forming, why it sits there, who can capture it and where it might move next.
Related concepts
Ecosystem Value Creation
Value Capture
Ecosystem Bottleneck
Ecosystem Control Point
Strategic Dependency
Ecosystem Advantage
Ecosystem Position
Ecosystem Strategy