Every company I work with–especially at the owner and managerial levels–believes that their company has a unique value proposition. The importance of this proposition cannot be overstated. A value proposition is the core of the company’s strategy and market identify. A value proposition is a company’s center of gravity.
Rarely, however, is the value proposition as focused and as realistic as it needs to be. This is a significant opportunity for improvement. Lacking this lucidity, companies fall victim to the following fallacies:
- False differentiation. This occurs when companies define their superiority in terms that are unimportant to the customers (ex. “Our Technicians are NATE certified.”).
- Invisible differentiation. This occurs when companies define their superiority in ways that the customer is unwilling to pay for because they are unaware of them (ex. “We run nitrogen in our line sets.”).
- Fragile differentiation. This occurs when companies define their superiority based on service components that are easily imitated (ex. “We drug test our employees.”).
It’s common that a company suffers all three fallacies simultaneously. The fallacies lead to a question that I ask managers all the time: “Who are you and can you explain your value proposition succinctly and in jargon-free terms?” In my experience, most companies in the service industry do not have an actionalble definition of their value proposition. They don’t know who they are. Do they compete on the basis of cost? Do the compete on the basis of value-added services? Do they know who their best customers are? Are they premium sellers in the morning and discounters in the afternoon? It’s hard to be both.
Smart owners and managers are asking tough but important questions about their value proposition in order to ensure that strategy and operations are aligned, that their differentiation is truly different, and that their best customers glad pay a premium for a first-class experience. That begins with a candid evaluation of what a company truly stands for.