© 2011, strathclyde institute for operations management value propositions

© 2011, Strathclyde Institute for Operations Management

Value Propositions


Customers perceive value in brand/image, total care and total service, quality, performance, good value for money,

and new/ innovative products. Customers demand value for their money, but they also look for “satisfaction of their

expectations”.

The creation of mutual value for both the organisation and customers is reflected in the value propositions.

What is it?


The value proposition describes why the customers prefer your products and services rather than your competitors. The value

proposition is defined as an implicit promise a company makes to customers to deliver a particular combination of values. Each

proposition searches for the unique value that can be delivered to a chosen market. Thus, the value propositions help organisations to

focus on a selected market and narrow their operational focus (Treacy and Wiersema, 1993).

The establishment of a value proposition brings the re-adaptation of culture, infrastructure, technology, resources and measurements. The

value proposition shapes the entire organisation.

What is it?


High Value Organisations

Country

Investor

Employees

FinancialValue

Strategic Value Social Value

• GDP impact• Sustainable employment• Intellectual capital development• Employee capability development

• Min. environmental impact

• Return adjusted for risk• Long term growth

• Adaptability• Sustainability

• Ethical action

• Using people at the highest level

• Pay, wages• Funding of retirement

• Life long learning• Opportunities for growth

• Personal development• Social interaction• Work-life balance

Adapted from Livesey, 2006


Co

mp

etit

ive

Mat

uri

ty

Time

The Super Agile Collaborative

Industrial System

Processes

ProductsOrganisation

QualityOperating

Philosophy

MaterialsManagement

Facilities

FinanceInformation

People

2020+

“The Agile Enterprise”

Now

Processes


QualityOperating

Philosophy

MaterialsManagement

Facilities

FinanceInformation

People

1980sJust-In-Case

Company

Processes


QualityOperating

Philosophy

MaterialsManagement

Facilities

FinanceInformation

People 1990s“The Lean Enterprise”

Processes


QualityOperating

Philosophy

MaterialsManagement

Facilities

FinanceInformation

People

•Quality•Price•Functional performance

•Delivery speed•Delivery reliability•Product support•Styling/design• Image•Customer support•Responsiveness• Innovative product

Differentiation& Focus

Customer Value Propositions

Bundled Value Propositions

Evolution of Customer Value


Product leadership: propose best products to their customers (new designs and/or new technology) at the right time.

Operational excellence: propose standard products to their customers, at the best price with least inconvenience.

Customer intimacy: propose the best total solution to their customers.

Competitive Positions


A Product Leader company offers leading products or new application of existing products and/or services. It focuses

on creativity, fast commercialisation of ideas, and recognition of obsolete products before their competitors.

They build support processes to minimise the time to market of new products. Its products are pushed to selected markets where price is not a constraint and

innovation and fashion are more in demand.

Product Leadership


Operationally Excellent organisations compete on the delivery of a combination of quality, price and easy

purchase. They focus on standardisation, simplification and control of operations, what means that these companies

are smooth running.

Emphasis is made on product reliability, durability and convenience; unnecessary production costs are cut down and the quality of the products is improved, this results in

lower cost and good services.

Operational Excellence


Customer Intimacy focussed organisations deliver not what the market wants, but specific solutions to small number of customers. They offer an integrated and

customised solution.

They cultivate a strong relationship with its few customers and personalise basic service and even customise products

to meet particular customers’ needs. Since these organisations meet a wide range of customer needs, they need a broad set of skills and styles to get the job done. Thus, their employees are adaptable, flexible and multi-

talented.

Customer Intimacy


Hard and Soft Dimensions of Value Creation

HARD SOFT

Product performance

New product design

New piece of technology

New features (aesthetic, style)

Customised product

Efficient processes

Brand image

Trust

People’s feelings

Simplicity to deal with

Customer attention

Hassle free

Easy to buy/deal


Generic Customer Value Propositions

1. Premium

2. Premium/ Competitive

3. Competitive

4. Competitive/ Leader

5. Leader

1. Original

2. Original/ Customized

3. Customized

4. Customized/ Basic

5. Basic

1. Excellent

2. Excellent/ Average

3. Average

4. Average/ Acceptable

5. Acceptable

1. Comprehensive

2. Comprehensive/ Standard

3. Standard

4. Standard/ Minimal

5. Minimal

1. Restricted

2. Restricted/ Selective

3. Selective

4. Selective/ Universal

5. Universal

1. Prestigious

2. Prestigious/ Respected

3. Respected

4. Respected/ Functional

5. Functional

FEATURES REPUTATION

1. Premium

2. Premium/ Competitive

3. Competitive

4. Competitive/ Leader

5. Leader

1. Original

2. Original/ Customized

3. Customized

4. Customized/ Basic

5. Basic

1. Excellent

2. Excellent/ Average

3. Average

4. Average/ Acceptable

5. Acceptable

1. Comprehensive

2. Comprehensive/ Standard

3. Standard

4. Standard/ Minimal

5. Minimal

1. Restricted

2. Restricted/ Selective

3. Selective

4. Selective/ Universal

5. Universal

1. Prestigious

2. Prestigious/ Respected

3. Respected

4. Respected/ Functional

5. Functional

PRICE QUALITYSERVICE &SUPPORT AVAILABILITY

Fin

kels

tein

et

al,

2007

TechnologicalIntegrators

Socialisors

PriceMinimisers

ProcessSimplifiers

TechnologyLeaders

BrandLeaders

Mar

tinez

and

Biti

tci,

2006


Provide breakthrough over generations of continuous new designs, new features. Their core competence resides on the long term vision, the research and development of new product designs and the ability

to make technical changes in the production processes.

These firms have capacity to innovate within short product lifecycles, and try to reduce the time-to-market in new products. The development

of flexible manufacturing capabilities is essential.

Since these products are new in the market, their prices are generally high; then, the prices start declining at the same time that the product

lifecycle descends.

Innovators


Their objective is to expand the market reinforcing the solid brand image of the product and company. The company’s offer is a mix of physical attributes of the

product, brand, service and even price. Price represents a label of certain social status.

Their core competencies reside in the development of creative new concepts: creating stylish products, exploiting of brand recognition of the company’s

name, building emotional links with a social status, linking feeling with images, and so on.

These organisations are very market oriented. Consequently strong investment is placed on high publicity on superior media, market research and market

development. Their customers pay premium prices to get status by the product acquisition to feed some feelings, such as superiority, ego, social acceptance,

etc; in other words their customers buy a lifestyle.

Brand Managers


Their objective is to make the production process efficient to drive down operational costs. They focus on producing high quality products in the most cost-effective way by reducing waste. Their operations and

processes are highly optimised, standardised and the product variations are controlled, therefore, their operational facilities are much

specialised to produce a particular type of products.

Research and development of new products is poor or is focused on modifications or improvements of current products. Strong investment is directed to build capabilities to produce different volumes with the

same quality, because they have to cope with production fluctuations. Their customers pay for ordinary and reliable products at reasonable

prices.

Price Minimisers


Their objective is to build a streamlined process to make life uncomplicated for customers in a creative, novel and profitable way, e.g. direct deal between the

company and its customers.

Simplifiers pay strong attention to the processes of getting order by building capabilities to provide fast and easy transactions available to most people,

using conventional and un-conventional resources i.e. internet, catalogues, TV marketing.

Their main advantage resides in a superior order fulfilment process, like the co-ordination and integration of different operations. If they have to assemble

some parts of the product; they look for simple product designs and/or standard parts to reduce the lead-times so as to improve responsiveness. Simplifiers’ customers evade risks by buying convenient and available products. They

appreciate ease to deal with the companies.

Simplifiers


Their objective is to tailor specific and continuous solutions for carefully selected customers on the basis of long term relationships. They compete by offering customised

products and personalised services. These types of organisations support their customers’ processes, helping them to identify and provide new solutions.

In the product development, they collaborate together with the customers to bring the optimum solution for that particular customer’s problem. The capabilities of technological

integrators are focussed on multi-skilled workforce and builds flexible facilities to craft different products for different customers. They have capacity to configure any specific

need and are able to adopt the customer’s strategy.

They are focused on the relationships with the clients, therefore they do not spend too much on publicity and promotions. They are getting known by internal networking (i.e.

customers’ recommendations to other companies). Their customers pay for customised product and services as they buy total solutions.

Technological Integrators


Their objective is to build confidence and trustiness on the customers. There is a sensitive fulfilment of customers’ needs supported by careful delivery, reliability, and honesty, but also for excellent personal service.

Business, especially service businesses can retain customers by building reciprocal relationships founded on safeguarding and affirming

customers’ security, fairness and self-esteem.

The main product is the service rather than in the artefact by itself. They are mainly getting known by word-of-mouth and local

advertisement. Customers pay for flexible products and/or services and interpersonal relationships. They are buying trust from the company.

Socialisors


Value Proposition Common Threads

Innovators Risk takers

Strong design skills

Pioneers on new products/designs

High emphasis on making obsolete their products and bringing new ones.

Innovative designs and user friendly

Introduction of new applications of existing technology

Brand Managers Strong emphasis on reputation building and brand positioning

Strong investment on advertisement

Link of their products with successful people

Price Minimisers Strong emphasis on waste, production time and cost reductions

Development of efficient process, systems and methods

Simplifiers Automation of the communications between their operations

Simplification of their operational processes

Transactions made via e-mail and mail

Technological Innovators

Provide particular solutions and/or optimised solutions

Specialist on a niche market

Offer strong support from specialist on the area

Socialisors Strong emphasis on service delivery

Close contact with their customers


As an organisation you need to...

Invest in making of your value proposition

distinctive

Invest in best resources to deliver your offer

Invest in process that are critical to delivery of your

value proposition

Invest in the best network to deliver your offer

Continuously refine your focus

and ability to deliver


For further information contact [email protected]

© 2011, strathclyde institute for operations management value propositions

Documents