top of page

How to Craft an Unassailable Value Proposition

(This post originally appeared on LinkedIn here)

In my last posts I described how to build generic value propositions top down working backwards from C-level strategic initiatives. Today I’m going to talk about how to turn a generic value proposition into a highly customized one for an individual Economic Buyer.

On any level of an organization an Economic Buyer must demonstrate a business case to justify spending of discretionary budget (funds for expenses that are not considered fixed or mandatory). Besides financial and technical aspects, political priorities impact how a business case is received: Spending the budget must contribute to the organization’s overall goals.

But how are these goals determined?

Any organization, whether for-profit or not, is built around a purpose, in the case of commercial organizations for shareholder value. The larger an organization the more it is influenced by societal aspects: they need to be good citizens. So to build a customized value proposition we need to start with the environment our customer's organization is acting in.

Let’s pick up the example I already used in my last post: building a value proposition for the manager of an automotive plant (disclosure: I’m an Auto guy) for an AI-based press shop optimization solution.

Due to their shere size, economic and environmental impact Automotive OEMs must comply with expectations from their environment, the global society. One target society imposes on OEMs these days is improving sustainability both of how cars are produced as well as how they are used. For our example we will focus on the first target.

Vehicle production starts with stamping metal parts in press shops. Producing metal is (still) a process with an enormous carbon footprint so to improve a car's sustainability the OEM must minimize the amount of metal used per vehicle. Reducing the scrap rate of a press shop is one way to reduce the overall amount of metal used for a given output and thus helps to improve the sustainability of how vehicles are built. So our value proposition ticks the box on the first level of organizational targets: achieving environmental targets.

On the next level we need the value proposition to promote the achievement of shareholder targets: growing market capitalization and returns. Reducing the amount of metal required to produce a vehicle increases its margin ultimately resulting in higher earnings per share. So our value proposition also ticks the box on shareholder targets.

Inside every organization members are fighting for budgets as there is never enough of it to fund all business improvement proposals. So our value proposition must demonstrate a positive impact on the organization’s internal targets with one of them being the maximization of Return on Capital (RoC). Reducing scrap increases the output of the press without changing it, so our solution increases RoC of the entire press shop and thus the plant. By now our value proposition also ticks the box on organizational targets.

All the boxes we ticked so far are mandatory requirements but not yet sufficient to get our offering sold: We need to add political value to our proposal to push it to the top of the list of business cases.

In our example plant managers are competing with each other for new model launches. There are objective criteria for allocating a new model to a plant (e.g., time per vehicle, production cost per vehicle, time for ramp-up), but also political ones. For our example let’s assume that representatives of the workforce have a major impact on decisions on where models are built. As a result, work conditions and job security are important decision influences for the plant manager.

Despite the fact that optimizing a press improves the overall performance of the entire plant, our AI-based solution can produce resistance in the workforce: How will it impact the number of people required to manage the press? Will it increase transparency of workers’ performance and thus increase pressure? In order for the workforce representatives to support our proposal we must demonstrate the positive impact our solution has on the press operators, e.g., upskilling on AI, reducing stress after tools or material were changed. This way our value proposition also ticks the box on political value.

The last box we need to tick is regarding the personal targets of the Economic Buyer. Every reward comes with risk, so the risk-taking attitude of the Economic Buyer impacts their decision and all the value we demonstrated so far doesn’t automatically overcompensate the risk perceived by them. For our example let’s assume the plant manager took over their job just recently joining from another plant where they were responsible for the paint shop.

Does the plant manager intend to continue advancing through the ranks? What is the time they plan to spend in this position? What will the next one look like? Internal or external?

There are three ways to find out about this:

  1. Looking at their track record

  2. Probing with other contacts knowing them (peers, direct reports, managers, partners)

  3. Asking them directly

Once we clearly understand the Economic Buyer’s personal goals we can add the final twist to our value proposition: the personal gain. In our example: The plant manager wants to rise through the ranks up to Executive level with being appointed manager of a larger plant as the next step. We will tweak our value proposition pointing out the lighthouse effect deploying our disruptive AI-based press shop optimization will have on the OEM’s entire manufacturing organization by improving sustainability, profitability, and flexibility of vehicle production.

This is what our value proposition reads at the end of the journey:

Plant X will lead the way (personal value) in sustainability (environmental), profitability (shareholder), workforce productivity (political), and flexibility (organizational) by minimizing scrap, reducing time to switch parts, and shortening ramp-up of new models as a result of deploying our leading AI-based press shop optimization, upskilling and supporting press shop operators, and closing the loop on press output quality.

44 views0 comments


bottom of page