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:
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.
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.
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.
Tend to focus on assets and services
Usually incur more costs with more sales
May be easier to understand
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:
Let's look at each element.
What do you want to offer—and how do digital elements help?
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.
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.
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:
What painful parts of customer jobs will you solve? For example, you might lessen:
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:
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.