Proposition Framing - The Key to Competitive Differentiation
Updated: Jul 17, 2020
The approach to proposition framing depends on first defining the target market space and the applicable market-space-centric value chain. The key to this is accurately defining how value is created, ‘transferred’ and ultimately delivered to the customer and end-user (these may be different). Building this picture enables known players to be mapped against this value chain-it also enables gaps in provision to be identified and explored. It can also reveal where current players may no longer be relevant in the overall market space.
Once companies have accurately defined the market-space-centric value chain relevant for their business, they can use this to define their precise role: in particular, their proposition focus needs to reflect where in the value chain they intend to play, and just as importantly, where they do not intend to be active. This analysis will reveal whether their activity is focused on a narrow part of the value chain or whether their success depends on being active across several value chain components. Once companies have established this focus, they can assess the relative importance of their activities in different parts of the value chain. For example, a company may be focused on the creation of some software but may also be active in the deployment and support across the value chain, or the commercial strategy may depend on working with partners and suppliers to reach customers.
Once companies have defined their precise areas of focus in the market-space-centric value chain, they can use the same framework to identify competitors they need to deal with. Once they have defined these competitors, they can map these players against the same value chain. This approach allows them to understand the precise nature of competitors and also to rank them in terms of their potential impact; this analysis can sometimes reveal that other players who may have been perceived as competitors may indeed be potential partners or collaborators. The opposite can also be true, where this mapping exercise can reveal players who may turn out to be future competitors, for example, many digital media companies have discovered that channels to market are indeed turning into competitors (the BBC and Netflix relationship is a case in point)
The same approach can be used to identify potential partners and suppliers, based on a much clearer understanding of the overall market-space-centric value chain. This may also reveal players who can simultaneously be partners and competitors, which may require a more nuanced strategic response. Deciding where to focus and who to play with can have a significant impact on the time to market and the resources required to achieve this.
This structured approach holds the key to understanding competitive differentiation.
Christensen and others have talked in general terms about the source of differentiation based on generic strategies, but The Triple Chasm Model reveals is that the ultimately there are three main types of differentiation:
differentiation based on the strength in one specific part of the value chain, say a critical enabling technology which delivers a superior product performance;
differentiation based on integrating the value-add provided across multiple parts of the value chain, for example, combining products with services based on a new business model;
the most radical type of differentiation of course can arise from changing the nature of the market-space-centric value chain, which, for example, may hold the key to the successful delivery of personalised medicine.
This integrated approach to framing your proposition in the context of the overall market-space-centric value chain also provides a structured way of building in sustainability considerations at the heart of a proposition, rather than treating them as an afterthought.