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Chapter 3 | Business Model Innovation Guidebook

Designing Digital Value Propositions

Digital business models and value propositions require new thinking about where value is created—or co-created—and how it's delivered.

A value proposition describes where what a user or customer needs meets what an organization can offer.

Value propositions are a tool for designing and assessing products, services, or other offerings.

A value proposition is part of a larger business model and specifies how a value model (or models) will solve a particular user or customer need. Across industries, there are four basic models for value creation:

  • Things (asset-building)
  • People (services)
  • Ideas (technology, intellectual property, and data)
  • Connections (networks of people and machines)

Each model for value creation answers the question, "what business are we in?"

Value propositions detail how one or more value models solve customers' specific needs or desires.

You can learn more in our guide to Value Models.

The business model environment denotes all of the forces outside the given business model that can affect the value propositions within it. It can be a source of inspiration for updating value propositions or creating new offerings.

An infographic showing all of the elements of a Business Model surrounded by the four elements of the Business Model Environment: Technological and Social Trends, Industry Trends, Market Trends, and Macroeconomic Trends.

Examples include culture-level changes, macroeconomics, industry forces (competitors and regulators), and market forces (customer demand).

You can learn more about business models and business model environments in Introduction to Business Models.

What makes a value proposition 'digital?'

While there may not be a rigid business definition of what makes something 'digital,' digital value propositions leverage some form of exponential technology to offer speed, scale, or ease which is not possible with an analog value proposition.

Analog value propositions are often easy to understand. They tend to focus on the familiar business models of selling assets or services. Typically, the more sales that occur, the more costs are incurred.

In contrast, digital value propositions sometimes focus on ideas (IP), technologies, and platforms—or leverage them to extend asset- or service-based value. Unlike analog value propositions, revenue increases may have low or near-zero cost increases. Digital value propositions may require a shift in thinking and increased Digital Fluency for the organization and/or its customers.

Analog Value Propositions

Tend to focus on assets and services

Usually incur more costs with more sales

May be easier to understand

Digital Value Propositions

Tend to focus on ideas (IP), technologies and platforms—or leverage them to extend assets/services

May be able to sell more with near-zero cost increases

May require a shift in paradigm/thinking

Sometimes it's easiest to think of a value proposition as an ad-lib. Here's a statement for a value proposition showing its key elements:

  1. Our [offering]
  2. help(s) [customer group]
  3. who want to [jobs to be done]
  4. using data [data sources] and [technologies]
  5. to [reduce verb + customer pain]
  6. and [increase verb + customer gain]
  7. unlike [competing value propositions]

Let's look at each element.

Icon of a wrapped present.

1. Offering

Ad-Lib Line: Our [offering]

What do you want to offer—and how do digital elements help?

  • For example, you might want to:
  • Create a new product or service
  • Improve an existing offering/effort
  • Aggregate, analyze or distribute digital assets, like content or datasets
  • Create a social network, platform, or marketplace

2. Customer

Ad-Lib line: help(s) [customer group]

Who are they?

Consider your customer's or stakeholder's orientation to the world. Demographics describe details about their circumstances, while Psychographics describe their worldview and emotions, and Sociographics refer to the networks of people they inhabit.

3. Customer Jobs

Ad-Lib line: who want to [jobs to be done]

What do they have to get done?

You can infer specific needs or opportunities your user or customer may have from their demographics, psychographics, and sociographics. Each of these views of the user corresponds to specific functional, emotional, and social 'jobs' they need to do.

You can construct a view of actual or fictional users and other stakeholders by developing a persona model— a comprehensive profile of a person used in the value proposition and user experience design processes.

4. Data and Tech

Ad-Lib line: using [data sources] and [technologies]

What data sources will you draw upon? What technologies will you use?

Data is a core element of any digital value proposition. Consider what data, analysis, technologies, or intellectual property you might use to help your customers. Here are a few examples of data:  

  • Unstructured text
  • Images
  • Maps
  • Individuals’ demographics
  • User activity and preferences
  • Transactions
  • Prices
  • Company info
  • Trends
  • Geographical data

You can learn more about using data in Creating Value with Data and access the Data Source Explorer to consider what kinds of datasets you could use or create.

5. Pains

Ad-Lib line: to [reduce verb + customer pain]

What painful parts of customer jobs will you solve? For example, you might lessen:

  • Effort, time, or cost
  • Friction and hassle
  • Complexity
  • Inconsistency or problems with reliability
  • Problems integrating different technologies
  • Challenges of sharing work or collaborating with others

6. Gains

Ad-Lib line: and [increase verb = customer gain]

What parts of customer jobs will you make easier or more effective? These might simply be the inverse of pains you relieve, but could also be:

  • Bringing surprise and delight to customers
  • Adding a better design or aesthetic to a functional item or tool
  • Bringing play to work
  • Solving additional problems a customer didn't know they had or had given up on solving
  • Helping a user focus or optimize their time

7. Differentiation

Ad-Lib line: unlike [competing value propositions]

How is this different?

If your offering isn't wholly new (e.g., other offerings in the market try to solve the same 'jobs to be done' for the same customer), a well-crafted value proposition can help you determine how you are different. It will also allow you to see whether your competitors are direct, indirect, or 'phantom' competitors.