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Value Proposition Foundations

by Doug Davidoff | Feb 5, 2007 11:46:32 AM

The central theme of any business is a value proposition, or promise, designed to solve important problems that potential customers face. Choosing your value proposition is only the first step in accelerating growth. The second is to determine where you are going to anchor your value proposition. There are four Value Proposition Foundations(tm) you can choose from:

Operational Excellence – This value proposition focuses on being the best at producing products and services at the lowest cost possible. The focus of this value proposition is taking out costs wherever you can, ensuring predictability and stability in the implementation or manufacturing process, passing on savings to your clients and adding some of those savings to your profit margins. Operational Excellence is typically the value proposition of great commodity organizations.

Customer Intimacy – This value proposition focuses on being the best at collaborating with your customers and having a close relationship with them. You want to get to know your clients as well as or better then they know themselves. Your solutions are always customized to their individual needs. Your customers, in essence, become collaborators with you in the development of your products and services.

Best In Class – This value proposition focuses on building the best, however you define it. The best does not mean the tightest fit. The company with this value proposition focuses almost fanatically on staying ahead of the competition. Your mission is to provide an offering that can’t be found anywhere else and is superior to everything else. When a new product/service comes to market, a Best-In-Class company is already at work making it obsolete.

Enrichment – This is the underlying value proposition of organizations that focus on being the best at making the world (or the individual) better. Much of the experience economy, comprised of companies such as Imagine, operates in the realm of enrichment. This value proposition does not mean that there is not a profit motive, but profit is pursued through the aim of enabling people or organizations to become their best or fulfill their desires.

You must choose one, and only one, value proposition foundation for your organization. Once you make that decision, everything you do should nurture and reinforce that value proposition. And I do mean everything! Your marketing must support it. Your hiring practices must support it. Your sales systems, operations and anything else you can think of must be coordinated to make you the absolute best you can possibly be in that area. The “absolute best you can” is necessarily limited by the resources you have available such as time, people and capital. But put the resources you do have available behind your one thing and be the best you are able to be at that particular moment.

You have to understand that every successful offering obviously has some elements from each of the Value Proposition Foundations. Even if you have chosen “Enrichment” as your value proposition, you must have some organizational structure, your offerings must be pertinent to your customers and the quality of what you do must meet a certain standard. But none of those things is your “one thing.” Enrichment is. The key is to develop enough competency to manage those other elements outside your chosen value proposition foundation, so they don’t prevent you from consistently delivering on your promise.