The Value Proposition – The Heart Of Innovation And Growth – Part Two

The critical role of the value proposition

10 good reasons why

The Customer Value Proposition deserves a lot more care and attention than it commonly receives.

When thought through and well articulated, the CVP becomes a powerful lens, through which can be clarified and agreed, for example:

1. The commercial viability of an innovation (prior to the CVP work, most innovations are in fact latent, “inventions awaiting value”);

2. The internal business case required for investment;

3. Identification and prioritisation of key benefits …

4. … and the required product or service features that deliver them;

5. The choice and segmentation of a market, and positioning within that market;

6. A true – rather than imagined – competitor set …

7. … along with insight into the innovation’s strengths and weaknesses relative to those competitors;

8. Guidance on pricing, linking back to the costs required for the business case;

9. Briefing inputs for brand development and realisation;

10. Guidelines for Go To Market, brand communications and messaging strategies.

So the CVP has, or should have, enormous impact for a wide range of stakeholders and beneficiaries. It’s a low cost, high impact tool … a strategic gift that keeps on giving.

And yet it’s remarkable how infrequently – and, even if it is done, how inadequately – a value proposition is properly bottomed out.

Why is this?

Rethinking innovation

From invention to innovation …

In my own experience of this type of work, often with new digital product and service development, the biggest blocks tend to be cultural. Engineers, for example, looking through profoundly different eyes to investors or marketers, tend to see an “invention” as the innovation itself. They also, it must also be said, typically struggle to step through the looking glass to view their brainchild as a customer might see it.

There is still, after far too many decades, a stubborn antipathy in the engineering community to anything that looks like marketing or sales. I’ve also observed myself – and joked about it – that engineers remain “in love with the problem”, while everyone else wants to know about the solution.

But the value of the invention can’t be confused with the value of the innovation.

The former is typically based around an original solution to a functional problem. The latter, we could say, moves the invention forward, to become a marketable solution to a customer problem. The invention – in terms of value proposition development and all that follows – is important only insofar as it supports the anticipated delivery of product or service value to the customer. We could say that it’s the “how”, not the “why” or the “what”, the “where” or the “when”.

… and from innovation to exploitation

What we commonly refer to, under a blanket, catch-all term, as “innovation” in fact unpacks into several distinct and necessary phases. It may be useful to differentiate “Innovation as a process” (“Big I”) from innovation as one stage in this larger process (“little i”).

With this in mind, and having untangled “little i” innovation and invention, we can also add a third dynamic to the larger process of “Big I” Innovation. This is exploitation, used here in a non-pejorative commercial sense, as in combining impactful go to market and sustained realisation of commercial value.

All three of these dynamics – invention, innovation and exploitation – are required to be present, balanced and well-executed, in order for a programme of new product or service development to predictably deliver real returns to the firm.

“Little i” innovation, if we accept the approach, becomes the crucial bridge that links the functional solution of the invention to the marketing and income generation achieved in successful exploitation. And it’s precisely on this bridge – where a promising invention meets a potentially lucrative customer problem – that the majority of the CVP work is focused.

We can see now why the deliberate and careful application of value proposition work is crucial to the process of turning fresh invention into customer value, and customer value into profit for the firm. The model can also, by the way, be reversed. A market opportunity (exploitation) can be mapped back, via the innovation stage, to explore existing or potential inventions that could fit the bill.

While it may sound hubristic, it’s not ridiculous to suggest that the customer value proposition is, itself, the beating heart of successful commercial innovation.

Too little, too soon

While all this may form a powerful argument in its support, there remain deeper attitudes underlying the prevalent corporate resistance to formal, disciplined value proposition work.

Foremost among these are a widespread pressure to take new products and services to market as rapidly as possible, and, despite declared commitments to so-called “customer centricity”, a pervasive low level of interest in directly engaging with customer value.

Underlying the latter issue is an old school, industrially-based belief – one that demands a robust challenge – that the job of a firm is to sell stuff to people, and the job of marketing and sales is to do things to people to make them buy our stuff.

This mindset is also a cause of what we might call fake customer centricity, playing out, for example, in the form of highly targeted, frequently intrusive digital advertising. CRM, and its related philosophy, LCV (Lifetime Customer Value) often fall into a similar trap.

Value is thought of as something that we do to customers.

Ultimately, these beliefs cause firms to take to market suboptimal innovations, too quickly, with key benefits and features omitted, wrongly prioritised or poorly articulated, or all of the above. In turn, brand positioning and communications are, as a result, imprecise and uncompelling, requiring a disproportionate spend on sales and advertising to compensate for these weaknesses.

In other words – sin of all commercial sins – an awful lot of money gets left on the table. So the job of the CVP is to ensure that, as far as is realistically possible, such common failures are minimised from the start.

We need to realise maximum possible value for the firm, by articulating, communicating and delivering maximum possible value for the customer.

Managing the meaning of value

Where value as a benefit for a firm is, by comparison, almost childishly simple, customer value is a particular type of benefit that is not only utterly subjective, but entirely contingent upon context and usage that, if not practically then certainly theoretically, change every second for every potential customer. Consciously or otherwise, each customer brings their own personal and circumstantial criteria to meet the firm’s proposition.

Value resides in the customer’s own mind, and refers to a range of diverse and variable factors. Now, our engineer may imagine that referring here means that a customer will, for example, be comparing one product to another based entirely on functional differences.

But for a product or service proposition to do its job, it needs to do two things:

Reach into and across the customer’s entire context of use to embrace a wide range of potential, external references;

While at the same time limiting them, by excluding some from the dialogue altogether and prioritising some over others, in order that the customer doesn’t have to work hard to grasp the elements of the offer.

The value proposition work is central here, in that, done well, it enables the firm to:

Both limit and define the potentially infinite range of comparative references that the customer could go to, when offered a new product or service;

At the same time, reducing the implied competition;

While emphasising – versus this particular competitive set – the particular appeals of the firm’s offering to the customer.

In other words, by helping the customer to meaningfully frame – and thus also to simplify – the till-now-unarticulated question that they bring to our proposition, we are enabling them to make sense of and prioritise the unique elements of the offering, while differentiating it in their minds from our primary competition.

Of This and That

The simplest and most powerful approach to framing a customer value proposition is, “You know THIS? Well … THAT!”

THIS, in context, refers to a thoroughly explored and understood problem that we believe a viable customer segment needs resolved (or, of course, an opportunity they’d like to unlock).

THAT is a precise and corresponding account of our proposed solution.

We should immediately take note of three important principles that emerge here:

The value proposition is framed entirely in the context, and in the terms, of the customer’s requirement;

The value that we are proposing is therefore in direct proportion to the value of their problem: simply put, the larger the customer problem, as we have framed it, the correspondingly larger and more potentially remunerative our proposed solution.

With a glance back at the cultural blocks above, we can appreciate the difference between the engineering problem – which is the basis of the invention – and the customer problem, which is the basis for the innovation.

We do need, it must be emphasised again, to resist the siren call of simply comparing our offering with the feature sets and pricing of our real or imagined competition. A key CVP rule is to look for competition after, not before, the contextual customer narrative and our response to it are both formed.

Our competitors are not the people who “do what we do”. They are the firms that occupy the same or similar space in the mind of our customer. Again, this is about context, not content.

A well-formed Customer Value Proposition is best approached as a clearly articulated solution, to a clearly articulated customer need. We can add, if only for a bit of colour, that it can also be seen as a compelling answer to an important customer question.

Framing and claiming value

The THIS that the well-formed CVP lays out is a distillation and definition of the primary contexts within which an offering would represent maximum value for the customer, and the corresponding usages of the product or service that we want the customer to understand. It’s a kind of staging, where the product or service and the customer are cast together in a little drama which shows the way to value.

Of course, great advertising – in particular long form print ads, such as the popular Jack Daniels poster campaign on the London Underground, and (the audio-visual equivalent) the extended TV ads that play in the cinema – are almost always emotionally evocative dramatisations of these idealised encounters between customer and brand.

So the job of the CVP is very much to “frame and claim” value, and the framing (the THIS) is entirely critical to the impact of the claiming (the THAT).

The outputs of this work form the basis on which benefit – which otherwise would remain generic and vague – becomes clearly relevant and meaningful to a customer.