A value proposition is a promise of value to be delivered and a belief from the customer that value will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services.
Creating a value proposition is a part of business strategy. Kaplan and Norton say “Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.”
Developing a value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where Value = Benefits – Cost (cost includes risk).
Why cloud computing for calue proposition
- Faster time to market. Ability to deploy applications and business functionality quickly. In addition, the ability to quickly spin up a service allows the business the opportunity to test products, markets, and business processes quickly. This ensures the business can make informed decisions before making a larger investment and waiting for IT to implement required technology to pilot different solutions for the business. So, faster time to market – increasing revenue. Connecting with and acquiring customers more effectively with higher customer satisfaction – increasing revenue. Real-time information enabling more informed and faster business decisions – increasing revenue. So in general, when these technologies are applied with a plan that is aligned to the business strategy they should have the most important impact on the business – increase revenue.
- Increase productivity. Ready access to new applications and services, the ability to collaborate with customers and colleagues instantly, and on-demand access to critical information will increase the productivity of your workforce. This coud increase revenue as well.
- Reduce capital and ongoing maintenance costs. The financial analysis should be done on all investments, but in general, a cloud service will allow you to move from a capex to opex cash flow and will reduce maintenance costs as the service should typically be less than what it would cost you to deploy the technology internally. This could increase profits.
- Current technology. Most businesses skip one to two application releases due to the cost of upgrade and impact to the business. Cloud services will be kept current and you will always have the latest and greatest technology available to you to leverage in your business. This enables the first point.
- Ubiquitous access and global distribution and availability. For those of you that have been mobile or lived in remote offices, you know that you have not always been afforded the same level of service and functionality as the home office. Cloud applications can be distributed anywhere around the globe and have the same highly available service levels at any location. This gets back to increasing productivity.
Calculating or finding value proposition
An extremely simple method to determine value proposition for any business.
There are 9 possible combinations of a value proposition. Here they are:
More for Less
More for Same
More for More
Less for More
Less for Same
Less for Less
Same for More
Same for Less
Same for Same
Okay…I know this sounds confusing. I will make it simple in a moment. Let’s put this in perspective…
A street vendor and a chain like Starbucks, both offer coffee to its customer. Each of these vendors have a different value proposition for the same product i.e. Coffee. A street vendor demands less price for the coffee and in turn do not offer ambiance or a great customer experience. On the other hand, Starbucks’ offer a unique experience to every visitor with a great ambiance and courteous staff along with the coffee, so they charge more for the same coffee. So what do you think each of these businesses’ value propositions are?
Here is the answer…
Starbucks value proposition is More for More – It offers not just a Coffee but a whole experience that goes along with drinking coffee
Street vendors value proposition is Less for Less – It fulfills only the basic need i.e. coffee
Likewise, think about your business and what value proposition you offer. Try to brainstorm and find out if this value is really what your customers need…if not, you might not be on the right way!
It includes the following topics –
- Cloud economics
- Cost Matrix SLA and ROI