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Why you need to know your value proposition

In every organisation, when you look beneath the surface, you find three kinds of business - a product innovation business, an infrastructure business and a customer relationship business.

Each of these businesses is very different. They tend to attract different types of people, with different skills and cultures. To be successful an organisation needs to be at least competitive in all three of these businesses, but to be world class (a requirement today), an organisation needs to choose one (and only one) to be world class in; then align everything in its business to reinforcing this.

It's a bit like going to the Olympics, you have to choose your sport and become world class in it. It's highly unlikely that you are going to be world class in boxing and swimming and high jumping because the body shape and exercise and food requirements are all fundamentally different.

When it comes to running an organisation there are only three 'sports' (Value Propositions) and it's really important to choose which one you are going to compete in because it's highly unlikely that you can be world class in all three. And being stuck in the middle is strategically a very weak place to be.

The three value propositions are:

1. Product Leadership. (e.g. Nike, Peter Jackson and Weta Workshop, Walt Disney or 3M) where the customers get products which are constantly redefining the state of the art. The emphasis is on innovation so they can constantly come up with market leading products and services ...or

2. Operational excellence. (e.g. The Warehouse or Mc Donalds) where the customer gets a reliable product or service at a competitive price, delivered with a minimum of difficulty and inconvenience. The emphasis is on operations/infrastructural management, so they can produce great quality products every time at leading prices... or

3. Customer Focus (e.g. Booz Allen Consulting or IBM in the 1960s) where the customer gets a total solution, not just a product or service. The emphasis is on customer service, so they know the customer's business better than the customer knows it.

In nearly all cases choosing the "right" value proposition will lead to significantly better results than choosing either of the other two. What's "right" depends on the industry you're in, the market you're in, your position within them and other circumstances. This is where I really start to earn my money. Probably the most difficult strategy facilitation task I face is getting everyone on the management team to agree on the "right" one. You see it's partly science, but it's also partly an art. It's something you get a feel for and initially there's nearly always differences of opinion.

As I think back over the last couple of years, as I've worked with the Government Auditor, Swift Energy, CRL Energy and Huhtamaki Packaging and significant business units in the ANZ National Bank, MAF, MSD, Salvation Army, Prime Minster's Department, Department of Labour and many more, they have all sensed that this is a critical decision bifurcation point (proceed one way and you end up like McDonalds, proceed the other way and you end up like Weta Workshop).

If you chose the wrong option the outcomes you get will be sub optimal but it's better than NOT choosing. To not choose is to be not strategic. Fit, trade-offs and differentiation are key concepts in strategy. Not choosing means not being one thing or the other. Not choosing means being grey and colourless. This is because to be world-class in one Value Proposition means, almost by definition, that it is impossible to be world class in the others. For example the culture you need for Operational Excellence is very different from the culture you need for Product Leadership or Customer Focus. If you are not convinced, just think about the differences in Culture between McDonalds and Weta Workshop and the Image and the Service delivery. How successful do you think Weta Workshop would have been with McDonalds' culture? Or McDonalds with the Weta Workshop culture?

This is really important stuff. If you and your senior team are not totally certain and agree on what your Value Proposition is, give me a call on Phone +6421620456 or Skype Bruce.Holland. You owe it to yourselves!

Very best wishes

Bruce.

Bruce Holland

Helps large organisations be focussed, fast and flexible. Places where people have more meaning, depth and connection.

Expert in Strategy, Structure, Culture and Leadership Development.

One of NZ's most experienced change agents.

Liberating the Human Spirit at Work

Key words: strategy, strategies, business strategy, business strategies, strategy management, strategic management, strategy development, implementation.