Value Logic Thinking
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The notion of value is central to humanity. Our decisions are based on value - including our purchasing decisions! Value is also central to all concepts of business models.
In the form of Value Propositions, it connects a company's offering with the customer's needs. While everyone agrees that value needs to be created and captured - it remains a fuzzy concept that is hard to grasp and align on. So let’s dive deeper:
Why is this important for innovation
Value logic thinking is central to modern business models and is a key component of the Business Model Canvas (BMC). It’s not just about articulating a value proposition; it's about creating value through a dynamic interaction between the company and the customer.
Key Concepts:
- Value Proposition: This is a clear statement that explains why a customer should choose your product or service. It details how you solve their problems or improve their situation, delivers specific benefits, and differentiates you from competitors. For example, Uber’s value proposition is: "The smartest way to get around. One tap and a car comes directly to you."
- Value Elements: It’s an interactive process where the customer plays an active role. Value is not a static concept but is built from multiple elements that vary in significance to different customers.
Value propositions can often be a nightmare for practitioners, primarily due to their tendency to be unspecific and fuzzy. They are not always grounded in reality but can be heavily influenced by marketing-driven, subjective formulations and understandings. This leads to value propositions that are difficult to compare or quantify, and often lack a shared vocabulary, making them challenging to communicate effectively and measure consistently. This is why we prefer working with Elements of Value, as they address the complexities that value propositions often overlook.
What to expect from this toolkit
Methods
- Value Elements Canvas: This method helps to explore the value creation of an idea for the customer. It sets out various value-creating elements and, by recombining these, allows different alternatives to an idea to be explored and detailed.
📖 To Read
- Maslow's Hierarchy of Needs: Maslow’s Hierarchy of Needs, which ranks human needs from basic to self-actualization, can be applied to understand customer values. Customers, like individuals, have a hierarchy of values they seek from products and services.
- The B2B Elements of Value: As B2B offerings become more commoditised, the subjective, sometimes quite personal considerations of business customers are increasingly important in purchases. This article is about how to discover what matters most to B2B buyers.
- The Elements of Value Pyramid: This article provides real-world examples to demonstrate how companies have used the elements to grow revenue, refine product design to better meet customers’ needs, identify where customers perceive strengths and weaknesses, and cross-sell services.
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