Title: Understanding Value Propositions and Effects Ladders
Author: Philip Boxer
Category: Working paper
A supplier’s users are different in how they expect the supplier to respond to their demands. And the supplier’s users face the same challenge in relation to meeting the range of unique demands of their customers. There are things that a supplier’s user demands that are common across all of a supplier’s users, so that its market can be defined as those users with these common demands that it can supply. This common demand is a symmetric demand because there is symmetry between what the supplier is offering and how its market is defined in relation to its users.
But there is also an asymmetric component of a supplier’s users’ demands. Asymmetric demand is that component of what the user wants that is particular to their way of competing. It is what distinguishes the form of one user’s demand within a market from that of another user. A value deficit arises when there is a failure by the supplier to address this asymmetric component of a user’s demand. That is, a value deficit arises through a failure to address the needs of a user’s particular way of competing.
Such deficits will always arise in relation to users. But the effects of digitization on the efficiency and logistical reach of suppliers is also increasing the supplier’s ability to organize its response to the user’s demand more conveniently and relevantly. The balance of power between the symmetric and asymmetric components of demand is shifting towards having to address the value deficit explicitly in order to counteract fragmenting markets, if not to capture new forms of value. The general tendency to move ‘downstream’ requires suppliers to face difficult choices in how they balance the differing competitive challenges of the supply- and demand-sides of their business. Value propositions provide an approach to capturing these new forms of value.
In what follows, the relation of a supplier to its user is considered. Insofar as the supplier chooses to address the asymmetric nature of the user’s demand, it must understand the nature of the demands on the user by the user’s customers within the user’s context-of-use. This creates a parallel process for the supplier between working with its relation to the direct demands of its users, and working with the indirect demands of its users arising within each user’s context-of-use from the user’s relation to the demands if its customers.