Many top management teams continue to struggle with the concept of “value proposition” (VP) and how they can operationalize it, yet the phrase is one of the most widely used by businesses worldwide. Much of the academic literature takes the perspective that a value proposition refers to the value that is predetermined by the supplier and then delivered to customers. Other studies define customer value proposition as a strategic tool facilitating the communication of an organization’s ability to share resources and offer a superior value package to targeted customers. In our view, the most important features to consider when defining value proposition for a company is that it makes explicit how a stakeholder and the company benefit from (1) completing transactions with each other and/or (2) improving how these transactions are completed. This view emphasizes the importance of considering the broad range of stakeholders involved in the value creation process. This is especially true for companies interested to scale early and rapidly. Scaling a company is a special way of growing. It refers to the ability of a company to achieve a substantial growth of its customer base and revenue without adding proportionate extra resources. For example, a new company that grows its value from $0 to $1 billion in less than ten years is a company that scaled. For such companies, the value propositions that matter the most are those that help them scale, and the portfolio of value propositions for their stakeholders is considered the most valuable asset. Many new companies do not scale because they were not designed to scale at the early stages of their existence. They did not make the difference between scaling and growing, nor were they able to align their multiple value propositions to their scaling objectives. Interestingly, regional business incubators and accelerators spend significant efforts helping new companies to develop their customer value propositions; these efforts, however, have not resulted in the launch of many companies that can scale company value.
Despite the inherent challenges with conceptualizing the portfolio of their value propositions, many companies do indeed see their value proposition development as the single most important organizing principle which drives their businesses. We can see this happening amid the COVID-19 pandemic, when both new and mature companies are choosing to reinvent their product direction and therefore their value propositions in order to remain either competitive, or even perhaps afloat. These companies are exploring new opportunities and funding sources that can help them address the ensuing COVID-19 realities. For example, beer companies are reshaping their production lines to produce sanitizers; companies that traditionally offer conference management resources and equipment are now offering online teaching platforms; and some medical diagnostic companies have switched to new products that address COVID-19 testing. These fundamental changes affect companies’ product development, sales, marketing operations, as well as their value chains and the business ecosystems upon which they depend. It is essential, therefore, that much consideration goes into navigating through these changes by shaping new portfolios of value propositions as part of new scaling strategies and entirely new business pathways. The key point here is that, paradoxically, the COVID-19 realities offer an opportunity for new and existing companies to benefit from the adoption of VP development practices that are typical of new companies interested to scale rapidly. In other words, Canadian companies struggling with the current realities could turn the challenges into opportunities by using these practices to quickly reposition and gain a competitive advantage.
Lessons from Companies that Scaled Early and Rapidly
A new company committed to scale rapidly must develop and align value propositions for diverse parties. This is especially important during times of economic difficulties, as we are experiencing with COVID-19-related restrictions, because companies focusing on reshaping their customer value propositions should see this as part of the alignment of their entire portfolio of value propositions. The context of new scaling companies requires a reconceptualization of a company’s value proposition development practices, which takes explicitly into consideration some of their key characteristics. Below is a summary of these characteristics for companies dealing with the current crisis to use as a valuable source of examples of practices and that can help reshape their ways of doing business.
- New companies committed to scale need to operate across borders and adopt capital investment patterns that enable them to meet their scaling objectives.
- The successful operation of such companies depends on the constructive engagement of multiple stakeholders, such as customers, employees, investors, external resource owners, as well as key local and international partners. The multiplicity of such critically relevant business stakeholders necessitates the formulation of multiple value propositions aiming at completely different target groups with different roles, needs, and priorities.
- The necessity of formulating multiple value propositions requires the development of operational capabilities for the configuration of internal and external resources in a way that could align the value propositions to key stakeholders, as well as align the portfolio of their multiple value positions to company’s scaling master plan.
- Companies engaging into a scaling pathway greatly benefit from the adoption of business analytics and digitalization capabilities to shape and align their multiple value propositions.
A Value Proposition Clinic for Ottawa-Carleton Companies: We are Here to Help!
Our research team, Tony Bailetti and Stoyan Tanev (in cooperation with Christian Keen from Laval University) has established the Value Proposition Clinic to help technology companies in the National Capital Region address the challenges associated with reinventing their value propositions as a result of the global pandemic.
The Value Proposition Clinic complements the compulsory course for the Master of Applied Business Analytics, a new option of the Technology Management program. The course focuses on using machine-learning tools for solving entrepreneurial problems. It has been designed as a living lab offering a value co-creation space for problem owners (company managers) and problem solvers (TIM students, faculty, and key partners). It focuses on web-content analytics for generating competitive business insights, performing competitor analysis, and reshaping company value propositions by using the insights emerging from our applied research program.
The Value Proposition Clinic assesses companies in terms of the resources allocated to develop, communicate, and deliver their value propositions, and how well these value propositions:
- Resonate with the targeted stakeholder (e.g., customer, investor, partner)
- Create value for the stakeholder
- Will be delivered to the stakeholder
- Are aligned with the value propositions of other stakeholders
- Support the plan to scale company’s value early and rapidly
The Clinic builds on the research conducted on new companies that scale rapidly with the goal to advance the practice of value proposition development in critical periods of business and economic change, such as what businesses may be experiencing during the current COVID-19 pandemic. The team will incorporate two major insights that we deem extremely significant: (1) the need to formulate and align multiple stakeholder value propositions and (2) the need to align these value propositions to the company’s plan to scale. Both insights will greatly benefit every single company interested in a healthy and profitably growing business.
 Sylvie Ratté, Senior Economist, Business Development Bank of Canada (BDC), “The Scale Up Challenge: How Are Canadian Companies Performing?,” BDC Study, September 2016: www.bdc.ca/en/documents/marketing/BDC-etude-canadian-firms-EN-9sept.pdf
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