Indeed, the value proposition isn’t just a promise and payoff for customers, but that is also very important to connect key players (employees, distributors, partners and more) both internally and externally to the organization.
What is business value?
There isn’t a single definition of value. But that is somewhat relative, and we need to ask “to whom?”
For instance, when it comes to the business world, value can be created for investors, for shareholders, for partners, employees, customers, and more.
Thus, depending on the interactions the company has with several stakeholders, at each interaction, the company has the chance to create and capture business value.
For what matter we might define business value as:
The payoffs that a stakeholder (partner, employee, customer, user or any other key player for the organization) gains from interacting with a company.
Business value isn’t intended just as monetary value. Business value is also created when from the interaction, there is no money exchanged, yet the interaction has an economic benefit for someone else.
For instance, Facebook is a media business, which offers a free platform to its users. Thus, (as of now) there is no exchange of money between Facebook and its users. However, the actions users take on the Facebook platform are valuable for businesses willing to capture some of that value by advertising on Facebook‘s newsfeed.
What is a value proposition then?
A value proposition might be defined as anything the is valuable to a set of key partners and players for the company’s business model. Indeed, a value proposition is the glue that keeps together the company’s business model in the long-run and what makes it sustainable.
The value proposition in a linear vs. platform or scaled business
It is essential to distinguish between a value proposition between a linear business vs. a more complex, platform, or scaled business model.
Indeed, it would be a mistake to believe that a value proposition is the same for a small organization vs. a business which has scaled up and it has already hundreds if not thousands of employees and hundreds of thousands of customers.
Three value proposition examples
Apple’s value proposition
Google value proposition
Some of those would be:
- Users: a free search engine for billions of users around the world. Users get a free, seamless engine that helps them find an answer to anything. Google also provides now advanced features that enable a very advanced and rich experience to users. Among all the partners Google‘s users are the most important. Even though users don’t pay for Google search, they are at the core of the overall Google business model. Without users, Google would not have a business model in the first place.
- Businesses advertising on Google: The core of the Google business model is advertising, focused on targeted text-based ads for businesses offered via the AdSense network. Before Google existed,d there was no way for marketers to know in details all the conversion metrics of their ads. While Overture was the first in offering CPC advertising, Google managed to scale it up at massive levels.
- Publishers: Before Google disrupted the advertising world and took over the digital advertising market, a few established publishers could make money via advertising. With its AdSense network, Google also allowed small publishers to monetize their content.
- Developers: in a world where AI and machine learning have become critical to create products that people want, developers have become even more important than publishers – I argue – for the development and evolution of Google‘s future business model.
- A value proposition is a key building block for any business model
- Value is created not just from the monetary standpoint
- Larger, more complex organizations will have also multiple value propositions
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