The Big Picture…
Proposed value – the first component of value – is a value proposition:
an offer from an enterprise to help beneficiaries make progress in some aspect of the beneficiaries’ lives
It is beneficiary focussed. And identifies the functional and non-functional progress beneficiaries are seeking to make and how the enterprise proposes to help achieve that. A value proposition is always a service – the application of skills and competence. Where sometimes that service is frozen into goods to be transported in time and/or space and unfrozen by the beneficiary through use.
And value is always co-created through the beneficiary integrating their resources and skills with the enterprises’. Normally through interactions with employees, physical resources, goods or systems of the enterprise. As such, the proposition needs to identify not only how the enterprise will help the beneficiary make progress. But additionally what the enterprise needs from the beneficiary.
Only the beneficiary can determine the value achieved (the amount of progress they have made).
We can guide such an offer into the following form (adapted from Moore’s “Crossing the Chasm“):
- I (beneficiary)
- seeks to make functional (job to be done, hindrance to avoid, problem to solve) and/or non-functional progress (list)
- the (product/brand name) is a (product category)
- that offers to help me make progress by (how functional and non-functional progress offered)
- and where I need to bring (list of skills and competence).
For some, price is an integral part of a value proposition. My definition of value includes reducing costs as a non-functional element of progress. And for others, aspects such that the value proposition addresses a real problem, it is essential and testable are key factors (e.g. Brooks).
Brooks and Moore also require the concept of uniqueness. I see these as baked into the functional/non-functional progress for which help is offered.
Value achieved – the amount of progress made – is subjective and uniquely (and phenomenologically) determined by an individual beneficiary. But value proposed needs to appeal to sufficient numbers of beneficiaries for it to be viably offered. Therefore, an element of customisation is beneficial (which is in stark contrast to our normal view of products vs services: that services are poor as they are inconsistent).
A beneficiary can find many ways to make progress. Your value proposition is just one of many. Including the proposition of do nothing; or to defer making progress until a better proposition comes along.
The beneficiaries list of skills and competence is important. Maybe they need training. Or maybe they have learned something in another market/industry that can be taken advantage of in your industry/market.
Some entity needs to offer this value proposition. And that leads us to a straightforward definition of the main purpose of an enterprise. To be a value co-creation enabling system.
Innovation nicely evolves into the act of creating and offering a new value proposition that offers to help beneficiary make progress better than they currently can.
I’ve previously defined that value comprises of:
- proposed value – the offer of helping a beneficiary make progress in some aspect of their life, and
- realised value – the amount of value actually co-created during use.
And that proposed value is best described by a value proposition. That is to say a statement explaining how the enterprise will help a beneficiary make progress.
A value proposition is an offer from an enterprise to help a beneficiary make progress in some aspect of the beneficiaries life
What is a value proposition?
Well, there are a variety of definitions, mainly from marketing. And Hassan‘s paper has a nice literature survey of those. For me, I will give and use this definition:
Brooks, in “Crafting a killer value proposition statement“, mentions a value proposition needs to be:
- Testable – the problem you are addressing, and your offering, must be testable
- Real – the problem must be real, and there needs to be people looking to solve that problem (beneficiaries)
- Unique – one or more unique characteristics of your offering will help establish and sustain a competitive advantage (or survivability of your network, in service-dominant logic terms)
- Essential – the offering needs to be seen by enough beneficiaries as essential