Capabilities

The company’s abilities – e.g. their “core competencies,” skills, knowledge, resources, and infrastructure – in other words, their “potential energy” – that are required and used to understand customer needs and create and deliver the ”Value Proposition(s)” – benefits and activities – that customers buy in order to solve their business problems and get the results they expect! A company’s competitive abilities are essentially the value it uses to create solutions to market problems, i.e. execute strategies.

Critical Issues

Non-performing or missing benefit or activity that keeps the business from successfully implementing their strategies and projects - e.g., a weakness in the company’s ability to execute effectively. Critical issues keep the company from attaining the value position they want in their targeted markets.

Value Proposition

A “value proposition” is a “promise” made to customers that benefits and activities offered for sale are going to solve their problems, satisfy their needs, and add value to their propositions. In other words, your company’s benefits and activities help deliver the results customers work for. A value proposition “consists” of, but not exclusively:

   - product and services,
   - costs to the company and the customer - in the form of
    “ownership,”
   - relationship building and management of customers,
    suppliers, partners, and alliances,
   - “on time delivery,”
   - asset utilization (e.g. capital and knowledge),
   - innovation,
   - advantages that help customer’s with their operations
   - brand,
   - price, and
   - time management.

A value proposition may not be made up of all the items
listed. The fact is, the items listed above are part of the TVP cache and are chosen to form a value proposition based on market and individual customer needs.

Total Value Proposition (TVP)

It’s all the aspects of business that compels customers to buy from the company and continue buying from the company. It represents everything all customers in all market segments find valuable about doing business with the company.

TVP is the source for all the “value propositions” companies use to attract different customers and customer segments.  It consists of value components - competitive value - such as: what customers experience directly – products and services, on time delivery, good two-way communication – and what they experience indirectly – a stable financial position (customers want companies they buy from to be around for awhile), well managed operations, and the ability to attract highly skilled personnel.

The make up of TVP is important because, generally speaking, all of a company’s customers don’t “value” all offerings the same way.  One customer may buy on price alone while another demands extended service. Different value propositions have to be developed to satisfy both requirements (if the company wants to attract both sets of customers). Just as important, the make up of the TVP has to be “flexible,” allowing for the addition and retirement of elements depending on strategy and market changes.

Competitive Value Index (CVI)

A measure that represents a company’s ability to 1) identify customer business objectives, risks, and constraints value opportunities (knowledge about customers), and 2) its ability to create and deliver the new found benefits and activities, associated with those opportunities, that have a high impact on the customer’s businesses and objectives (knowledge about itself and its capacity to execute effectively).

It represents the “amount” of competitive value, in the form of tangible and intangible assets, a company needs to develop to strengthen its value propositions. If “calculated” with vision, mission, objectives, and strategies in mind, obtaining a CVI can be a helpful predictor of whether or not its overall goals can be met.

Quality

   - Consistently meeting, or exceeding, results that all
    customers expect to experience, and
   - Ensuring customers don’t experience results they don’t
    expect…

…applying products and services to their customers’ "needs, wants, and issues."

Quality is now defined in terms of results. This doesn't mean we should ignore product and service characteristics since they can directly affect results. But the definition means we should also pay close attention to the performance of, for example, our company’s and customer’s capability levels (ability to perform and accomplish tasks and activities), processes (activities and tasks with a time frame component applied), and application of tools. These proposition building blocks have a profound affect on results.

Business Model

A Business Model, simply defined, is a representation of how the company will make money, covering the sources of revenue (market segments), how much and how often, methods of collection (channels), position in the market (competitors and complementary participants), the value proposition (customer problems solved), strategy (competitive advantages), the value creation structure, and other pieces depending on who’s doing the defining.

Business models may be simple to define but they are not simple in structure. Plus, some components of the model may drive the definition of the model itself or the model may drive the content of the, for example, core strategy. In other words, a business model can be refined, or redefined, by innovating a component, such as the value proposition. Or an innovative way of operating can drive the definition of a business model. There is no start and there is no end in its creation. It must be constantly innovated.

The two best business model explanations are by Larry Bossidy and Ram Charan in their Confronting Reality: Doing What Matters to Get Things Right book (New York: Crown Business, 2004) - diagram left, above (from page 79), and by Gary Hamel in his book Leading the Revolution (Boston: Harvard Business School Press, 2000) - see diagram to the bottom, left (from page 71).