1 The value proposition (VP)
In Session 3 you were introduced to the business model canvas and this explained the value proposition at the centre of your business model. The value proposition is the answer to the question – what is it you are trying to build and for whom? It goes beyond an idea or product and expands to:
- what problem(s) or need(s) you are solving or meeting for customers
- how your idea will either alleviate the problem or provide a gain for customers
- who the customers are whose needs or problems you are focused on.
The best value propositions are clear about these points and provide a compelling reason for a big enough group of customers to choose your business, product or service over another. To help illustrate this point, think of the spreadsheet and social media apps as examples.
The spreadsheet was originally developed for accountants to organise and manipulate a lot of complex data that would otherwise be very time-consuming and problematic to do manually. It solves the problems of complexity, manual data inputting, errors and duplication of data. So it is a very convenient technological resolution to a problem that has now become universally adopted for a much wider audience.
As human beings, however, we have many different kinds of need – e.g. the need to be entertained, to socialise and communicate with others. Social media apps arguably have provided a solution to some of these needs. One thing you might notice is that where you do solve a universal need, the target audience could be very large indeed as opposed to a very niche group of customers.
Next you will consider how mutual value is created.