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What is your Value Proposition?
The term value proposition has been around since Michael Lanning coined it in 1984, while working for McKinsey and Company. So why do so few companies know what it is, or truly understand how they add value in the marketplace?
Value proposition is what an organization does, that will cause their clients to realize tangible benefits through the use of their product or service. Value proposition is more than just the service you provide; or how you sell, service, or distribute it. It's how you string all those components together, to best serve your clients and deliver them real value. Value proposition can be both a description of how your organization adds value today, and also a concrete statement of you will add value in the future.
Without a clearly articulated, well understood, statement of value proposition, it's impossible for you to describe a compelling vision and strategy for your clients.
Understanding value proposition is not just an exercise for small companies, or new companies. In fact, large, well-established companies have the burden of history, and complex value chains that are more difficult to describe. Understanding where in that chain a firm adds value, improves management focus and attention, and forces tough choices regarding priorities. It’s here that bigger companies struggle, because managers often perceive that anything they are doing now falls squarely within their value proposition.
Value proposition is much more than an elevator pitch or a slogan, but it is important that you can boil your value proposition down to a concise and compelling statement. It's often when companies try to articulate their statement of value proposition in a way that others can understand it, that the tough questions begin to surface.
A deep understanding of a firm's value proposition is an integral part of helping your client understand their Vision Statement. The Vision Statement is the most important component of a really good business plan. They are also the most overused, abused, and poorly written part of almost all the business plans you will ever see.
The Practical Vision Statement sets the tone for everything that follows in an integrated business plan. Next month, we will talk more about Vision Statements and how you can help your clients define or refine theirs.
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