In recent weeks, I have been preparing for my return to the classroom as a full-time faculty member. During the Fall Semester which begins in August, I will be teaching an MBA course in Strategic Management and an undergraduate course in Operations and Supply Chain Management.
One of the most important concepts that I will present early on in both courses is what is known as a “value proposition.” In very general terms, a value proposition is a promise made by an organization or an individual concerning the benefit or value that the organization or individual will provide to a customer, client, or other constituent. In my two courses, I will focus on the primary and most common use of value propositions in business. However, in today’s column, in addition to that primary and most common use, I will provide you with other important ways in which you can use value propositions to move your organization and yourself forward.
Most commonly, a value proposition is made by a company to its customers indicating why the customers should choose to purchase its product or service. It is a promise the firm makes to its customers concerning the benefits or overall value of their product or service. Ultimately, the most common purpose of a value proposition is to tell potential customers why they should buy your products or services rather than those of your competitors by clearly indicating your benefits or “value.”
Clearly, you can see why I will spend significant time in my Strategic Management course discussing value propositions. Strategic Management is all about how to make your firm more competitive, and value propositions encapsulate how a firm competes by indicating what the firm and its products and services do better than their competitors. Therefore, at the heart of a firm’s strategy is its value proposition, so very early on in my course, I will explore with my students the power a value proposition has in identifying and executing a firm’s strategy.
While it is typically the role of senior management to determine the strategy of the firm, and hence its value proposition, there are two functional areas of the business that play the most instrumental role in its success. First, a value proposition must be communicated to the firm’s potential customers to let them know the benefits and value of its products and services. This is done by a firm’s Marketing and Sales function. Whether it is done by advertising, other messaging, or directly calling on customers, Marketing and Sales need to let the firm’s target market know how and why their products and services will provide more benefit than those of their competitors.
While it is up to Marketing and Sales to communicate your firm’s value proposition (for some great examples of value propositions, see: https://www.wordstream.com/blog/ws/2016/04/27/value-proposition-examples), it is ultimately up to your Operations and Supply Chain Management team to deliver on that proposition. They are part of the company that will make sure that your products and services embody the benefits and value touted in your value proposition. This is why value propositions will play an important and early role in my Operations and Supply Chain Management course. It will be up to that function to deliver on the firm’s value proposition such that customers will get what they were promised.
So, at the end of the day, your value proposition and how well you live up to the proposition will determine how successful you are in your marketplace. The power of the value proposition is its ability to identify how you are going to compete and win business. While value propositions related to your products and services are clearly powerful and impactful, let me identify a couple of other areas where value propositions can move you and your company forward.
A second important area in which you can use value propositions is the area of employee recruitment and retention. During the past couple of years, many firms have been struggling in a tight labor market. It’s become more critical to become better at attracting new employees and retaining your existing ones. One way of doing that is to have a clear value proposition that you present to current and prospective employees that indicates why it would benefit them to work with you rather than another organization that is competing for their services. Such a value proposition can include things such as pay and benefits, but might be more effective if you could differentiate how you invest in your people’s development and also provide a positive culture. In addition, if you do things “beyond the work,” such as being involved in the community will also help. While it is typically the responsibility of recruiters and Human Resources to communicate this value proposition, it is often up to senior managers to ensure that the value in the proposition is delivered.
One last area in which I think we can all apply value propositions is each of us having our own personal value propositions. I think it is important for each of us to reflect on the value we provide in our work life, in our personal lives, and in our communities. While this may not be the easiest thing to do, I think an understanding of your own personal value proposition(s) will help you thrive in all aspects of your life.
As you can see, I am a big proponent of value propositions. In order for firms to successfully compete in their markets and successfully compete for the best employees, value propositions are essential. Also, I believe personal value propositions can help make each of us more successful. So, you can be sure my students this Fall will work hard on learning about and developing their own value propositions.
