No Compelling Value Proposition? No Business Needed!

Alex Osterwalder & team have created the definitive easy-to/must-uses guide on how to create a compelling value proposition - Value Proposition Design.  Yes, definitive.   Any business is first and foremost about the customer, even though it seems so many have forgotten that.  If you don’t have a compelling value proposition, you don’t need a business model because you won’t have a business. 

Value Proposition Design (#VPDesign) clearly teaches how to discover customers’ real needs – the needs they have for and by themselves, not the needs we want them to have or the needs we want to solve…even if they aren’t really the customers’.  The VPDesign toolkit – which is easy to follow, use and adopt – makes it difficult to retain your own biases and see reality.

It’s not just the words. The fabulous visual and symbolic style of the book makes it easy to follow, to use as a handbook and daily tool for prototyping, testing, iterating and creating meaningful and valuable solutions for customers. The icons are memorable and can become part of your team’s lexicon for thinking about customers. Just as in Business Model Generation, this book is a tool to use daily to think about your business – internally and externally. I’ve used the VPDesign extensively with entrepreneurs, intrapreneurs and for customers outside the organization and inside the organization.

So, you MUST get this book (and Business Model Generation) and start using it.  It will change how you view your business, your customers – for the better, in ways you can’t even begin to imagine.

In full disclosure, I helped co-create Alex & Yves’ first book, Business Model Generation, was a pre-reader for Value Proposition Design book and is a friend of Alex's.  And that's why I know, first-hand, how incredible and necessary these books are! Get them!!

Does HR Need a New Business Model?

Innovation requires rethinking how we do business. My guest post on ZDNet (Thank you, Michael Krigsman!), shares an approach for HR to re-examine how it serves the needs of Millennial workers, using the Business Model & Value Proposition Canvases. 

"...HR is in desperate need of a new business model. The combination of boomers retiring, Millennials expanding their presence in the workplace, intense competition for top talent, confusing and changing regulations, and new technology make HR ripe for change." Read on here.

Every Business Is Social (Like it or not)

Mali HealthGiven the great comments on last week’s post and a Huffington Post article on the subject by Matt Murrie, I thought a follow-up was in order.   The comments centered on two themes:

• Investment funding’s acceptance of “Social” as a viable type of business
• Business Modeling – social vs. regular

Investment:

Venture capitalists have traditionally funded for-profit businesses with a strong focus on ROI – Return on Investment vs. ROI_m – Return on Impact (ROI_m will be a forthcoming blog post).  To most, the two ROIs are either incompatible or irrelevant.  Foundations and other philanthropies have traditionally funded non-profits with a strong focus on the ROI_m.  Slowly investors are realizing this is an artificial distinction. 

• No matter what your business, if it’s not having an impact on the customer in a way that delights the customer, you won’t need to worry for long – thank you Darwinism. 
• The number of investors focused on maximizing both ROI and ROI_m  is increasing.  For instance, FSG and New Profit come to mind, with returns some ‘regular’ VCs would love.  Accelerators for social enterprises are helping fledging ventures sustainably scale, such as the SE Greenhouse. 
• The assumption that you have to be a non-profit to ‘do good’ is slowly becoming arcane.  While there are good reasons for some companies to remain non-profits, there is no reason that a socially-impact minded business cannot be for-profit.  The corporate designation B-Corp allows a company to blend doing well and doing good in a for-profit structure.  Examples include Method Products, Patagonia, Ben & Jerry’s and two of my favorites, Runa and Susty Party.

Business Model:

As an early adopter and co-creator of Alex Osterwalder’s Business Model Canvas (BMC), I use it the most.  A Social Business Model Canvas had been created specifically for social ventures, and there is a lot of value to looking at a business from this perspective.  The reason I prefer the BMC is its flexibility.  You can change the labels on the boxes and use colors to highlight differences. The BMC impels you to think about the sustainability of the business and the compelling value to the customer in a way traditional social businesses haven’t – as a real live business that has to compete for customers’ attention and resources just like everything else – including two of the biggest competitors – “Doing Nothing” and “Good Enough”.   Take a look at a canvas for Pencils of Promise.  Instead of Revenue, the box is labeled Outcomes & Outputs.  Outputs are things like revenue and profit. Outcomes are the difference you make for your customers – the real value you are delivering for them.  In the case of Pencils for Promise, both are important – if they are not having the impact they want – changing lives, educating kids, then what are they doing? Doesn't this also apply to any business - ultimately?

While the Social Business Model Canvas has a box for surplus – what you are doing with what’s left over, I posit that’s a question every company has to answer.  Any business hopefully has a surplus – at least eventually.  If some of that surplus is not reinvested in the company to support, enhance, add to their compelling value proposition, then the shareholders won’t be getting anything back either.  Perhaps a social business will choose to reinvest all of it’s surplus directly into the business while a for-profit may choose to give dividends, but that’s not a hard and fast rule for either type of company.  Reinvesting a surplus can be in all sorts of resources – equipment, material and perhaps most importantly, people. 

This is not an either/or issue – it’s an ‘and’.  Hopefully, over time, the distinctions between social and ‘regular’ businesses can fade, because I truly believe, any business of any sort that doesn’t focus on it’s impact on its customers, communities and the world, on it’s ROI_m   eventually won’t have any ROI anyway.