Value Propositions
As January draws to a close I look back on a busy month of travel that took me to three continents and visits to a wide range of clients in both the for-profit and not-for-profit sectors. A common theme no matter what type of organization is value for time, energy, and resources spent. We want more value in each of our transactions. As a result, regardless of how the metrics of time, energy, and resources are defined, they represent the ways in which comparisons between alternatives are drawn, distinctions and differentiations of one to another are determined, and ultimately, decisions to choose are made based on which alternative offers the greatest value. Does one alternative take less time than another? Does it take more physical effort, require specialized skills, or is it informed by direct experience? Does it cost more to rent, lease, buy, or contract, or does it tie-up more capital? These and related questions are at the heart of determining value.
Of course, what we are looking for from others who might help us are ways in which their input provides value. In other words, we look for what Geoffrey Moore terms the "value proposition" as the impetus to choose from what is presented to us for consideration including choosing nothing at all if it does not improve our current situation. (For further reference, consider the following books authored by Mr. Moore: CROSSING THE CHASM and INSIDE THE TORNADO, and his blog "Dealing with Darwin") Essentially, the value proposition presents ways we can use our time, energy, and resources in pursuit of our endeavors. Our task is to evaluate whether one value proposition is better than what we are already doing or is best among other value propositions available. Knowing what constitutes a value proposition guides us in our evaluation of various alternatives.
Basically, value propositions surface in three ways: information, packages, and integrated solutions.Let's take information. Go to any blog, like this one, or website that features certain products, services, or points of view and what you see and read are testimonials with references. The authors describe the context in or circumstances under which their experiences occurred, including probable causes / root cause if a problem and contributing / off-setting factors if an opportunity; they document the results; and they offer an evaluation of the various factors and actions that made a difference one way or the other. The idea is that if we can match our circumstances with theirs we will be in position to make a more informed decision using the results of their approaches as guidelines. The value comes in not repeating the mistakes of others or duplicating what worked well by taking the same steps they did. The value proposition of time and energy spent going to a particular information source versus another is based on accuracy, timeliness, and relevance. For that reason one blog is more popular than another, one search engine is tapped more frequently than another, and one reference website is consulted more often than another.
The problem with information alone is I have to find it, first; then read it and see how it fits my situation; then act upon it. This can and often does consume considerable time. And it may very well be worth the effort. However, if I am dealing with a complex system where there are multiple dimensions to take into consideration, a complete package is preferable.
Here's an example: let's say I want a high-speed Internet access with a secure wireless router to do online banking transactions from my laptop. Also, I have been reading about VOIP and that service sounds interesting, maybe even a Wi-Fi phone to be independent of a computer. In addition, I have a cable TV service that includes Internet access as an option. Oh, and I have land-line phone service in the office that also includes a DSL option. But then the company providing my cell phone service offers wireless connectivity for my laptop through a wireless card. Of course, there are parts of the world where there is no cell phone coverage and land line service is spotty at best. For these there are satellite phones and high-speed Internet access.
With all these choices, how does one proceed? As one can well imagine, there is a wealth of information about each and every combination of service and product. The time and energy required researching these and putting together a cost-effective and reasonably performing bundle is ENORMOUS. Can't someone do it for me?
Therein lies the next level of value proposition—the package. Most organizations providing a variety of products and services catalogue their offerings into generalized buckets that fit together logically and purposefully. Their interest is to reduce the time customers spend making a decision and is cost-effective and satisfying, operationally; the package functions as intended. The organization that presents a value proposition with the least outlay of costs, the fewest ongoing transactions and the greatest degree of "fit" and satisfaction wins the prize!
Despite excellent bundling and packaging strategies guided by Customer Relationship Management (CRM) practices the customer must choose among an array of options and alternatives to fulfill all the requirements of a business or personal application. Companies can engage in customer segmentation schemes to better target their package toward particular customer groups and reduce the customer's involvement. Also, they can provide opportunities for customers to interact with representatives online or by phone to better tailor a package to meet specific and often unique requirements. Still, the customer remains the integrator who exercises the final step in putting a solution together that truly matches the unique context in which it fulfills its mandate. Packaging efforts fall short of the goal which is for an organization to design, deliver, and maintain a totally integrated solution that meets and exceeds the needs of the customer WITHOUT the customer having to be directly involved.
The strongest value proposition is the one in which the customer does not have to decide what is the best solution overall or which are the best components to include in the total solution. The organization becomes the integrator of choice for the customer. To be relieved of having to spend time, energy, and resources to develop, implement, and maintain an integrated solution is of supreme value to the customer.
This suggests a three-stage progression of value propositions organizations can use as a scorecard to see whether they are on the way to becoming the integrator or is the customer relegated to remain so:
Step one: is the information you provide accurate, timely, and relevant?
Step two: does the package of products and services you offer indicate you understand the customer's needs and circumstances and does the package function as promised?
Step three: does the integrated solution you provide merit the trust and confidence of the customer that you are making choices in the customer's best interest?
As might be expected, the third step is not easily reached. Only those who have the intelligence, means, moxie, and integrity to warrant such trust earn this right. However, it should be the goal of all who serve others through organizations of any type. How does your organization stack up?
Are you in position to offer a better value proposition for the customer?
posted by Steve Bosserman on Tuesday January 30 2007
URL of this article:
http://www.newmediaexplorer.org/steve_bosserman/2007/01/30/value_propositions.htm
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