Leaders of strategic initiatives need to have a working knowledge of the various perspectives on value propositions. Why? Because organizations often charter strategic initiatives to close the gap (or create advantage) on value propositions. To reinforce this point, PMI’s updated Standard for Program Management places more emphasis business value realization as a key rational for the use of program and project management techniques.

The term “value proposition” is a bit abstract, and borders on jargon. That probably explains why many managers  shy away from developing them.  As one research study explains,

“Value propositions can be intimidating because they strive to combine small size — often 10 words or less — with a lot of substance. After all, those 10 words are supposed to convey the unique qualities of your company and/or products and services.”

This article identifies two approaches for describing the value proposition, using elements of the Renew Blue strategic initiative at Best Buy as an example.

Business Model Canvas Perspective

Osterwalder and Pigneur’s business model canvas is a useful tool for understanding business models. You can understand the value proposition as the answers to (and optimization of) these two questions:

• Where does the money come from? What are the revenue streams?  What customers are sought, and how much are they willing to pay?
• Where does the money go?  What is the cost structure?  What does it cost to serve that customer?

The nearby graphic shows how I interpret Best Buy’s value proposition in its short-term rejuvenation objectives based on the company’s presentation in November 2012.  The data and model are from their communications.

The VALiD Methodology

The VALiD methodology (Value in Design) originated with a group of people at Loughborough University in the United Kingdom as a tool for building architects to help project teams understand the issues that are important to their stakeholders. First, you need to understand the values of the stakeholders, then define value in terms of criteria and targets, and then assess the value proposition in terms of benefits, sacrifices, and resources.   See the nearby figure for a generic formula, which is described in the VALiD framework:

Best Buy is redesigning most of its big box stores as part of Renew Blue and this redesign and associated merchandising hopes to create a better shopping experience.  See the following figure to examine the VALiD framework for the new value proposition. VALiD helps stakeholders express the “get” and the “give” of their value as the benefits they seek from the project, the sacrifices they are willing to make to get those benefits, and the resources then consume in doing so.

The point of this article is to stress that the value proposition is the key results area of competitive performance and provide you with two differing-but-complementary approaches. I provide the examples from Best Buy’s Renew Blue initiative to help illustrate the helpfulness of the tools in generating strategic insight.

Best Buy certainly has a huge business turnaround challenge ahead of it. I will provide more analysis of their approach (from a strategic initiative leadership perspective) in future articles.

Do you agree that value propositions are important? How have you developed them and what do you include in your statements?