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) 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, shareholders, 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 that offers users a free platform. Thus, (as of now), there is no exchange of money between Facebook and its users.
What is a value proposition, then?
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 that has scaled up and it already has hundreds if not thousands of employees and hundreds of thousands of customers.
Three value proposition examples
That is why we’ll look at companies that offer “multi-sided” value propositions. Or more variations of a core value proposition, based on the key players the company interacts with.
Apple’s value proposition
Amazon 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 for 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 detail all the conversion metrics of their ads. While Overture was the first to offer 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 creating 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.
DoorDash Value Proposition
- For restaurants, more exposure for their brands and an additional revenue stream.
- For dashers, the ability to earn income flexibly.
- For eaters, the comfort of having food delivered straight to their doors.
Vroom Value Propositions
Vroom is an e-commerce platform for used cars. Its value propositions are in line with its key partners:
- Car buyers get a curated, wide, and reconditioned inventory, with a set of value-added services (insurance and more), together with the car purchase.
- Car sellers can get the easy valuation of the car, and in this case also a simple setup process to sell the car directly to Vroom.
Honey Value Propositions
- For members, Honey makes available discounts to shop conveniently in many shops part of the network.
- For stores part of the network, they get additional exposure on the platform, thus attracting more potential customers.
Udemy Value Propositions
- Instructors get an additional income stream, and the ability to work flexibly, with a scalable product, like a course.
- E-learners get access to the Udemy marketplace, with a wide variety of courses, usually available at an affordable price.
- Companies get access to a whole library of courses, so they can reduce the training costs for employees and an smoother transition with the company, as they have unlimited learning resources available for their growth.
Discord Value Propositions
- Gamers get a platform where they can interact with other gamers.
- Developers get an ecosystem where they can make money by developing games on the platform.
Craiglist Value Propositions
- Users get access to a free website that has any sort of listings, from jobs, to rents and sales of used items.
- Companies get mostly free postings on the platform, except for a few categories of products where the listings is paid.
WordPress Value Propositions
- Website owners get easy to set up a blogging platform for free, with the possibility to expand their capability with plugins and extensions.
- Developers get access to an ecosystem where they can develop their own tools to be hosted on the WordPress marketplace and build a business around that tool.
- 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 also have multiple value propositions.
- Value Proposition Defined: A value proposition is a critical element in a business model, representing the benefits, gains, or pain alleviation that potential customers or key partners can expect from interacting with a company. It serves as the core promise of value delivery.
- Multifaceted Business Value: Business value is not a one-size-fits-all concept. It varies depending on the stakeholders involved, such as investors, shareholders, partners, employees, and customers. Each interaction with a company offers a chance to create and capture business value.
- Business Value Definition: Business value can be defined as the payoffs or benefits that stakeholders receive when engaging with a company. It is not limited to monetary value but includes any economic benefit derived from the interaction.
- Monetizing Interactions: Even when no money directly changes hands in interactions, business value can still be created. For example, platforms like Facebook offer free services to users while generating revenue through advertising.
- Value Proposition in Business Models: A value proposition is anything that is valuable to key partners and players within a company’s business model. It serves as the glue that holds the business model together and makes it sustainable.
- Linear vs. Complex Business Models: A distinction should be made between value propositions in linear business models and more complex, platform-based, or scaled business models. Larger organizations tend to have multiple value propositions for various stakeholders.
- Examples of Value Propositions: The article provides insights into the value propositions of three major organizations: Apple, Amazon, and Google, which all offer multi-sided value propositions tailored to their key players.
- Apple’s Value Proposition: Apple’s value propositions include reliability, innovative technology, and an increasing focus on user privacy. These elements help define the brand and maintain its recognition among consumers.
- Amazon’s Value Proposition: Amazon’s value propositions are diverse, catering to various target customers and markets. Its customer-centric approach, with a focus on low prices and ease of use, is central to its value offerings.
- Google’s Value Proposition: Google’s sophisticated business model involves creating value propositions for users (free search engine), businesses (advertising), publishers (monetization), and developers (AI and machine learning).
- Other Value Proposition Examples: The article also highlights the value propositions of other companies like DoorDash, Vroom, Honey, Udemy, Discord, Craigslist, and WordPress, showcasing how each company addresses the needs of its key partners.
- Key Takeaways: The article concludes with several key takeaways, emphasizing the importance of value propositions as a core building block of any business model and the creation of value beyond monetary transactions.
- Value Proposition Evolution: Value propositions may evolve over time in response to changing customer needs, market dynamics, and technological advancements. Companies must adapt to remain competitive.
- Diverse Stakeholders: Recognizing that business value can be created for various stakeholders, including employees, partners, and users, is essential in modern business models.
- Sustainability Through Value: Value propositions play a crucial role in the long-term sustainability of a business. They help maintain customer loyalty and competitive advantage.
- Balancing Multiple Propositions: In more complex business models, companies may need to balance multiple value propositions to serve various customer segments and partners effectively.
- Value Beyond Money: Business value is not solely about monetary transactions. It encompasses a wide range of benefits, including convenience, efficiency, and improved experiences.
- Continuous Innovation: Successful companies often innovate their value propositions to stay ahead in the market and remain relevant to changing customer expectations.
FourWeekMBA Business Toolbox
This framework has been thought for any type of business model, be it digital or not. It’s a framework to start mind mapping the key components of your business or how it might look as it grows. Here, as usual, what matters is not the framework itself (let’s prevent falling trap of the Maslow’s Hammer), what matters is to have a framework that enables you to hold the key components of your business in your mind, and execute fast to prevent running the business on too many untested assumptions, especially about what customers really want. Any framework that helps us test fast, it’s welcomed in our business strategy.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
This framework is well suited for all these cases where technology plays a key role in enhancing the value proposition for the users and customers. In short, when the company you’re building, analyzing, or looking at is a tech or platform business model, the template below is perfect for the job.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
This framework is well suited to analyze and understand blockchain-based business models. Here, the underlying blockchain protocol, and the token economics behind it play a key role in aligning incentives and also in creating disincentives for the community of developers, individual contributors, entrepreneurs, and investors that enable the whole business model. The blockchain-based model is similar to a platform-based business model, but with an important twist, decentralization should be the key element enabling both decision-making and how incentives are distributed across the network.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values, and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape, and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
FourWeekMBA Business Toolbox
- Value Proposition
- Distribution Channels
- How To Write A Mission Statement
- Revenue Models
- Financial Structure
- Cash Flow
- Types of Business Models You Need to Know
- The Complete Guide To Business Development
- Business Strategy: Definition, Examples, And Case Studies
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- What Is Market Segmentation? the Ultimate Guide to Market Segmentation
- Marketing Strategy: Definition, Types, And Examples
- Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
- How To Write A Mission Statement
- What is Growth Hacking?