The Systemic Nature of Osterwalder's Value Proposition


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NB. To see slide transitions download. This is another presentation made for Lean Liverpool on 13th Dec 2012. It follows on from the previous presentation in which CATWOE was introduced as a means of defining the value proposition. This goes deeper and also looks at the increases in corporate innovation and revenue streams that flow from realising the true purpose of an enterprise and its value proposition. We also have some fun with David Beckham's package and the Wondabra

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  • This presentation expands on the use of CATWOE, which was briefly introduced at November’s Lean Liverpool presentation on why Osterwalder’s canvas is unequalled.
  • * This is the way I define transformation. In the original use of CATWOE, the transformations are activities or processes within a system boundary.
  • Once CATWOE has been used to define the system’s root definition or core purpose it’s time to think about the activities required to realise it. Once the activities have been identified, and only at that stage, the human and other resources required can be estimated. When that has been done it will be possble to work out the costs involved. In this way, CATWOE can be mapped onto the Business Model Canvas. Articulating or defining the value proposition using CATWOE will make it easier to articulate benefits to the potential customer and thus make it easier to estimate a price for your product and then the total revenue for the business.
  • This definition omits the actors to make it easier to take in, but it was found that only one person in the company had the right level of knowledge and experience to deliver the service, so it realised it had to deepen the expertise/comptence of its Actors.
  • Again it was convenient to leave out the actors here but again the process of creating the root definition helped the MD and other directors to appreciate that expertise was not in making (production) but in designing for manufacture, a competence that lay primarily with the ageing MD.
  • This case appears in the work of Gary Hamel and C.K. Prahalad on Core Competency and Strategic Intent. The treatment here is not the same as the original in which there’s no reference to CATWOE or systems thinking of any kind, even though it is implicit (if you know systems thinking). The basics of this story appear in the book ‘Competing for the Future (1994) and an accompanying video from Harvard Business School.
  • This slide illustrates the avalanche of inventions and innovations that colgate (proctor and gamble) delivered following the relaisation that its toothpaste manufacturing business was in fact an oral hygiene improvement business. All these products are designed to improve oral hygiene which keeps teeth and gums healthier for longer, so helping you keep your good looks for longer.
  • Ditto, a revenue stream based on educating dentists.
  • Some fun. The value proposition is not a simple idea, and it is perfectly obvious that companies have manipulated the value proposition so providing only the promise of use-value. The y-fronts example comes from a book on commodity aesthetics by W.F. Huag written many years ago. Every reader will know how product design, packaging and promotional text boost expectations and the promise of use-value or utility, only to disappoint in use. The wondabra is my best example.
  • The Systemic Nature of Osterwalder's Value Proposition

    1. 1. The Systemic Nature of theValue PropositionUsing CATWOE to define the value proposition for aLean Startup. Lean Liverpool 13th Dec 2012.
    2. 2. CATWOE-MnemonicC is for CUSTOMER—the principal beneficiary and for whom the system existsA is for ACTORS—those with knowledge and skill underpinning service to C*T is for TRANSFORMATION —the effect/benefit felt by the customerPlaces emphasis on the functionality of the system from the customer POV*W is for WORLDVIEW or values of the actors involved (manager dominant)O is for OWNERSHIP—the person or entity able to stop the systemE is for ENVIRONMENT—the context (e.g. physical, regulatory) of operation
    3. 3. Part of the soft systems method of system or organisationalanalysis, design (business model) with a view to improvingperformanceused to generate a concise statement of core purpose alsocalled the root definition which contains the valueproposition.The model of an organisation/enterprise cascades from itscore purpose or reason for existingIt has to be customer focused
    4. 4. Conventional use of CATWOE to define separate systems Supplier Enterprise Customer Enterprise System System SystemUnconventional use of CATWOEto define the value proposition Customer Enterprise System System Transformation becomes the beneficial effect on the customer system-value proposition
    5. 5. CATWOE and Business Model Canvas Core Purpose Activity Activity 1 Activity 3 2actors actors Resources Resources actors actors othr Resources actors actors actors othr Resources actors actors actors othr othr actors actors actors actors Resources Resources Resources Resources othr Resources othr Resources othr othr Resources othr othr Resources othr othr
    6. 6. Illustration of CATWOE in action…1 ABC described itself as a manufacturer, involved in metal coating.ABC Ltd is a company based in Merseyside (E) owned by Mr Y (O) and providesan excellent service (W), at a profit (W), to manufacturers (C) requiring theapplication of performance enhancing surface coatings (T) to metallic substrates(components) used in high value added machinery and systems (for example aircraftparts).The core purpose is, therefore, not to make or manufacture, but toincrease the performance of components through the application of asurface coating.
    7. 7. Illustration of CATWOE in action…2This company considered itself a hat manufacturer, but they also imported hats andsupplied to retailers through a wholesaling activity. They mostly made hats to order,but they also make hats for stock. Hats fell into three categories: uniform hats, leisurehats, technical hats (H&S) related. They also designed hats. A company owned by its MD (O) and embedded in Merseyside (E) that makes a profit (W) and created employment (W) by designing, making, and otherwise supplying head wear as a functional element of a uniform set of clothes so satisfying a user’s desire or need for dress uniformity (C) as an integral part of establishing or building an identity (T). This definition excludes hats designed for specific ‘technical’ functions because they require different actors to design and make them, and may be marketed to customers with special needs. CATWOE analysis suggests this aspect of the business should be pursued as a distinct but complementary business. Business core purpose should be expressed or captured in a single sentence,
    8. 8. CATWOE and Discovering Revenue StreamsActivity 1 Activity 2 What’s the common factor? Cleaner teeth? Oral hygiene? Oral Care? Value proposition is improved oral hygiene, giving healthier teeth and gums for longer.
    9. 9. Innovation- Multiple revenue streams
    10. 10. Marx and the manipulation of the value proposition Karl Marx distinguished between Exchange-value and Use-value Product Advertising packaging design copyEnhance the value proposition and increase the exchange-value