Intercontinental Networks, LLC

“Linking Technology, Business and Human Intellect”

Product Value Proposition: A Step by Step Approach

Ayman Nassar
President & Principal Consultant

April 2003

Intercontinental Networks, LLC

6020 Countless Stars Run
Clarksville, MD 21029 USA
Tel: 443.538.4121
info@intercontinentalnetworks.com
www.intercontinentalnetworks.com

© Copyright Intercontinental Networks, LLC. All Rights Reserved.

Intercontinental Networks, LLC
“Linking Technology, Business and Human Intellect”

E XECUTIVE S UMMARY
A solid understanding of value proposition is a key element to the success of any organization into today’s
competitive and challenging environment. Value is a relative concept and by understanding what an
organization’s stakeholders value the correct decisions could be executed at the correct times, saving huge
costs and bringing substantial revenue into the organization. Developing value is a continuous process and
requires a comprehensive view of the all aspects of the daily operations; it will also force the organization
into innovation and high quality standards. Successful development, measurement and promotion of value
proposition requires the support of the whole organization and must be viewed as a part of every process
in the organization.

I NTRODUCTION
Value is a term used, acted on, and lived out everyday by almost all of us; we deploy value analysis in
almost every aspect of our lives to an extent that its significance goes unnoticed. Whether at the grocery
store choosing between a brand name and a generic brand, or buying the newspaper, or shopping for a
new car, value is at the heart of the ultimate decision.

Will utilizing classical strategies enable a business to anticipate changes in its market or industry? Today’s
technology and customer requirements impose tremendous challenges on businesses, which need to
continuously innovate, design and develop new strategies to bring out true value to their stakeholders. So
what is value? And who are those stakeholders? To some businesses value means price of a product, to
others it triggers the thought of product quality.

The term “value” is relatively new in English language. According to the Oxford English Dictionary, the
term appeared in common usage during the fifteenth century as a verb [1]. It was used to estimate or
appraise an object of being worth, a specified sum or amount. More than a century and a half later the
term was used as a noun denoting worthiness of individuals in respect of rank or personal qualities.

The term “value” however has been known to man-kind for thousands of years, for example when
Prophet Joseph (peace be upon him) was imprisoned and two other imprisoned men asked him about their
dreams, he explained to them the dreams and referred to the religion the Creator has revealed upon him as
the “valuable religion” [2]. The word value also brings to some people’s mind the thought of ethics and
ethical business practices throughout the development of a product until the end of its life-cycle. The
term value is also used to denote a point in a variable range or in a function.

D EFINITION OF VALUE
Today value is used to refer to some relative usefulness of an object, in the case of a product or business;
it would be the relative benefit of acquiring this product, or of the existence of a particular business. For
example if a product costs 10 dollars to acquire and provides an output of X, and another product costs
10 dollars to acquire but provides an output of 2X, it can be deduced that the former product is less
valuable than the latter, as its return on investment is higher assuming that all other factors for example,
the cost of operation and maintenance are the same.

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Intercontinental Networks, LLC
“Linking Technology, Business and Human Intellect”

This is just one dimension of value, which is the relative measurement of the product attributes. Hence to
decide if a product is valuable or not, a set of attributes of that product must be compared with the same
corresponding set of attributes of other similar products in the same category. Examples of these
attributes are countless, one example could be output work delivered as referred to earlier.

Another dimension of value is conditions and factors in which the product is utilized or observed.
Products could have different values, based on different situations and incidents that occur as time
progresses, an umbrella on a rainy day has a much higher value than on a clear day.

A third dimension is the time, which means changes in the product value could vary with time due to
variations in any of the attributes or factors defining the product or observed by the product respectively.

We can hence define value to of a product to be a set of relative measurable characteristics and attributes
of a product under different conditions and subject to different factors, at a specific point in time. This
concept is illustrated in
Figure 1, which shows the main dimensions of value.

Conditions & Factors

Mode of operation
Environment
Competing
Economic condition
Energy
Money
Price
Processes and
Size
Procedures
Performance
Interests
Quality
Needs
Reliability
Ideas
Methods, Life-style
Attributes Resiliency
Novelty
Knowledge, Intellect
Catalyst/Driver
Disruptive
Retention and consumption
Recurring experiences
Life-time
Time

Figure 1. Three dimensions of value.

The specific attributes, factors and conditions will obviously vary from one product to another. The task
of the experienced product manager or executive is to identify the most relevant and important attributes
and factors, and to perform a value analysis based on those selected. The product manager will then assign
weights to each of the variables defined on the value chart. Also a range of values for each variable will be
defined. Comparisons are then made and measurements recorded. Measurements could then be repeated
at various points in time to study changes in the value of a product. A product manager can baseline the

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Intercontinental Networks, LLC
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value of a product at the point of product introduction and then periodically calculate the relative value of
the product to other similar products in the market place. This method allows the product manager to
quantitatively as well as qualitatively gauge the value of a product. The method can be adapted by the
product manager as wished by adding or removing variables as needed.

For example different customer scenarios can be developed and hence different conditions and factors.
The product manager can have a set of values for the same product at the same point in time which are
different depending on the customer, or the application in which the product is used in. This concept can
also be extended to include all stakeholders instead of just limiting it to customers, and to the organization
instead of just the product developed by the organization, in such case a CEO can achieve a comparative
study of the businesses’ value. It is crucial that product developers and business leaders view value in a
much bigger perspective than just the monetary aspect of their products and businesses respectively.

C AN VALUE B E D EVELOPED
As we can easily guess value can be created and developed. The means and methods could vary, but several
main aspects must be involved, mainly these are,

ƒ Innovation

ƒ Quality

ƒ Strategy

ƒ Management

ƒ Organization

To develop and create value an innovation process has to exist that is able to encompass all the
requirements of a product to fulfill the different variables identified in Figure 1.

An organization that focuses on value in every aspect of its operations and daily business will find itself
automatically strongly linking innovation and quality into all areas of the organization, and this can only be
accomplished by a value-aware management. This concept is outlined in Figure 2.

Key to developing value is a strong understanding of all the stakeholders of a organization and its
products, this includes, customers, suppliers, investors, employees, partners, society, policy makers and
others that have an interest in the product or organization.

A successful product manager or CEO must live the daily life of these stakeholders, and must understand
their needs, challenges and experience their daily operations or activities. This will provide a true
understanding to define the variables mentioned in
Figure 1 as they relate to the stakeholder.

This leads to the next step where the product manager also has to conduct a retention/consumption
analysis clearly defining and quantifying what a customer is left with after the product is consumed, which
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“Linking Technology, Business and Human Intellect”

is the value of the product. While developing value the product manager must work closely with the CEO
and other executives to include the overall situation, all processes, departments and actions involved in the
development of a product have to be included and then prioritized as needed.

Value-based
Management

Strategy

Innovation Quality

Organization

Figure 2 Basic blocks for value creation.

The value developer, whether a CEO or product manager should bear in mind that stakeholders loyalty
can be a contributor to value creation, and that they can be part of the value creation process, saving the
business huge costs and time. By listening to stakeholders a value developer can innovate processes that
allow the stakeholders to mass customize products or processes that offer stakeholders optimum value.

H OW C AN VALUE B E M EASURED
Measuring value of a product is a challenging task, yet a straight forward one. The product manager
quantifies the characteristics of the product of interest to the customer, and then compares these
measurements with other products taking into consideration the factors and conditions as explained
earlier. To successfully measure value of a product, a model should be developed which incorporates the
variables of interest, the model can be simplified by prioritizing the stakeholders, attributes and conditions.
This developed model will serve as a simple, yet powerful forecasting tool that can be used by executive
management to make go/no-go decisions, and also as a product improvement tool during and after the
development phase.

Measuring the value of a product is the only way a business can confidently know their position in the
market, and their competitive advantage, it also eases the tasks of the marketing and sales staff of the
organization by easily illustrating return on investment scenarios to the customer as well as other hidden
benefits not readily apparent to the customer or even to the product management team in many cases.

Another method to measure value is by collecting feedback from the customers and other stakeholders.
This could be a challenging task, as many customer would not want to sacrifice their privacy and internal
business operations confidentiality to assist their supplier, however innovative ways can be developed to
achieve the same feedback without forcing the customer into giving up to much details of its business.

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Intercontinental Networks, LLC
“Linking Technology, Business and Human Intellect”

C OMMUNICATING VALUE
Communicating value is much more than advertising, or even marketing, communicating value is a
continuous series of actions performed by the organization. Examples are, the way the public perceives the
organization’s commitment to environmental protection, the way the organization motivates its employees,
product advertising, branding, relationships, innovation and quality throughout every process and aspect
of daily operation.

An organization that can satisfy a dependent customer, and delight a free customer and make a liberated
customer love the product is an organization that is effectively communicating value.

R EFERENCES
[1] Michael Shenkman, “Value and Strategy: Competing Successfully in the Nineties”, Quorum Books,
1992.

[2] “The Quran”, Chapter 12 (Youseff), Verse 40.

S UGGESTED R EADING
Richard Boulton, Barry Libert & Steve Samek, “Cracking the Value Code: How Successful Businesses Are
Creating Wealth in the New Economy”, Harper Business, 2000.

Stefan Thomke and Eric von Hippel, “Customers as a New Way to Create Value”, Harvard Business
Review, April 2002.

Stan Maklan & Simon Knox, “Competing on Value”, Financial Times Pitman Publishing, 1998.

Lawerence Serven, “Value Planning: The New Approach to Building Value Every Day”, John Wiley &
Sons, 1998.

Will Murray, “Brand Storm: A Tale of Passion, Betrayal and Revenge”, Financial times Prentice Hall,
2000.

Ely Dahan and John Hauser, “ The Virtual Customer”, The Journal of Product Innovation Management,
vol. 19, pp. 332-353, Elsevier Publishing, 2002.

Roger Bean and Russell Radford, “The Business of Innovation”, American Management Association
Press, 2001.

Michel Robert, “Product Innovation Strategy Pure and Simple”, McGraw-Hill, 1995.

Jesper Kunde, “Unique Now or Never”, Financial Times Prentice Hall, 2002.

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Intercontinental Networks, LLC
“Linking Technology, Business and Human Intellect”

Larry Downes, “The Strategy Machine: Building Your Business One Idea at a Time”, Harper Business,
2002.

Gary Hamel and C. K. Prahald, “Competing For the Future”, Harvard Business School Press, 1996.

Robert Cooper, “Winning at New Products”, Persus Publishing, 2001.

A BOUT THE A UTHOR

Ayman Nassar is President of Intercontinental Networks, a consulting firm in the area of technology
management and business planning. His experience includes product management, systems engineering
and marketing. He advises small businesses, technology companies, entrepreneurs and startup
organizations on value proposition, positioning, technology management and innovation strategies. After
receiving his Masters Degree in Electrical Engineering he worked on numerous projects as a consultant for
Fortune 500 organizations in the area of requirements management and systems engineering. He has also
held senior product management and marketing positions at Ericsson. Mr. Nassar is a world-wide lecturer
and consultant speaking at incubators, small business forums, clients, Universities and workshops.

For more information on technology management and technology business development please contact Intercontinental
Networks at info@intercontinentalnetworks.com or call 443-538-4121.

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