Business Model Alchemist

Last month I wrote about value proposition design and provided a word template and image to structure the description and design process for a company’s value proposition.

I also mentioned that I liked Kim & Mauborgne’s approach of the so-called “strategy canvas” to describe a company’s value proposition. I find their approach particularly interesting because it allows to (visually) compare one’s value proposition with that of competitors (I wrote more about their work in a review of their book “Blue Ocean Strategy“, which you can buy here.

In this post I am a little more practical and briefly describe the “strategy canvas” through a short example and provide a template that you can use to design your own canvases for your own value propositions and industries.

In the image above I outline a rough example of a strategy canvas in the telco industry by comparing the value propositions of Skype (a consumer VoIP software), a Swiss fixnet operator (Swisscom) and a mobile network operator (Orange). This is purely for illustrative purposes (so don’t criticize me on the content …

On the x-axis you find the key factors of competition/value differentiation (calling costs, chat/IM, SMS functionality, etc.). On the y-axis you find a rating of how each company performs regarding each key factor. For example, Skype has free (or very low) calling costs (rating = 0), while Swiss Mobile operators still have very high calling costs (rating = 6). Or, Skype performs relatively low in terms of mobility because it doesn’t really work on mobile phones yet and online on laptops or PDAs (rating = 4), while mobile phones are the embodiment of mobility (rating = 9).

Overall this gives a very nice picture of each company’s value proposition profile and putting them on the same graph allows for a nice comparison.

I made a simple generic strategy canvas design template in a MS Excel spreadsheet that you may want to use to visualize your value proposition and those of your competitors. When I apply the strategy canvas and the template in a consulting project I use the following project:

1. Assemble a group of people from different company backgrounds (e.g. top management, marketing, engineers, etc.) to discuss value propositions and strategic differentiators;
2. Let each person individually brainstorm and write down (approximately) 10 key factors of competition and differentiation regarding the company’s value proposition. Let them write each factor on a post-it note;
3. Stick all the post-it notes on a board/wall;
4. Re-group the post-it notes into groups of similar factors;
5. Reduce to 7-10 factors by getting the people to select the most important factors;
6. Then let them rate how the company’s value proposition performs on each of these factors (e.g. low price, wide distribution network, etc.);
7. Let the group define the core competitors;
8. Then let them rate their competitors’ value propositions performance on each of the factors;
9. Compare all the value propositions;
10. Discuss the visualization.