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How to Scale Out a Value Proposition

(This post originally appeared on LinkedIn here)

In my last post I described how missing to scale out the value proposition leaves the doors open for Incumbents to attack Disruptors from the top leveraging their decade-long relationships with the C-level of their customers. In this article I will talk about how to scale out a value proposition up to Strategic Alliance level.

Disruptors usually start their attack on Incumbents with a value proposition targeting Economical Buyers on department head level. These carry a set of targets they received from their management and the value proposition must demonstrate how the application of the Disruptor’s Product will help achieve these targets, e.g., grow revenues, reduce costs, improve margins.

Taking a value proposition to a higher level cannot be achieved by just expanding it up from the lower level. Instead a higher level value proposition must reflect the wider scope of targets on this level.

Let's use an automotive plant as an example to demonstrate this:

The plant manager is targeted on a combination of (amongst others) production volume (the number of vehicles produced within a specific time frame), production efficiency (how well the plant is utilizing its resources), cycle time (the time it takes to build a vehicle), quality, environmental impact, on-time delivery.

On the next level the plant’s press shop manager is targeted on (amongst others) stamping parts production volume, press utilization, planned and unplanned downtime, scrap rate, material utilization.

A Disruptor that successfully approached a press shop manager with, let's say an AI-based press optimization application increasing the output of good stamping parts, will not have a value proposition for the plant manager unless they can address plant-level targets, e.g., vehicle production volume. The improvement of the press shop output will not automatically translate into a higher number of vehicles produced unless the other departments (e.g., welding, painting, assembly) can manage a higher volume of parts coming out of the press shop. As a result, the Disruptor must demonstrate that their value proposition can improve the overall performance of the entire plant to address the plant manager.

Consequently, scaling out a value proposition requires to start with the priorities of the very top of an organization: the executive board. Their priorities are communicated internally to align the various parts of an organization, but nowadays they are also frequently communicated to the outside world in annual reports and on homepages as strategic initiatives an organization is focusing their attention and resources on.

Strategic initiatives consist of multiple programs spanning a multi-year horizon, enjoy executive sponsorship, and have substantial budgets assigned reaching into the billions at large organizations. If we can link our value proposition to a strategic initiative we help Economical Buyers tap into these sizable budgets.

Scaling out a value proposition therefore means to build it on Strategic Alliance level addressing the C-level with a joint vision to improve the value proposition for their customers. To use our example again:

Let's assume that there is a sustainability improvement initiative we can link to. Reducing the scrap rate of a press shop means we decrease the amount of raw material required to produce a vehicle. Rolling out this solution to all plants and all press shops can provide a major contribution to the entire organization's sustainability targets.

Do we take this message all the way up to the executive board? Certainly if we get a chance to, but even if not: helping the plant manager justify the investment into the AI Product as part of a bigger sustainability improvement will allow them to tap into the budget set aside for the initiative and establish the Disruptor on Solution rather than just Product level.

So this is how to scale out a value proposition:

Work from the customer backwards by starting with strategic initiatives they have already established. Build a Strategic Alliance value proposition (even though you might never have a chance to pitch it) for the C-level and break it down to the next (C-1) level. Use your existing relationship (in our example the press shop manager) to approach the Economical Buyer (in our example the plant manager) and demonstrate the link to the C-level (in our example the Sustainability initiative) value proposition.

This is what a Disruptor will achieve by scaling out the value proposition:

  1. Help their Economical Buyers tap into the large budgets linked to strategic initiatives.

  2. Build a higher-margin ecosystem attracting more and better quality partners.

  3. Capture a bigger portion of their customers’ Total Addressable Spend and ultimately a bigger market share.

  4. Extend their growth potential resulting in a higher market valuation.

  5. Widen their competitive moat beyond just the disruptive power of their offering.

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