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Entrepreneurs with Denis Oakley

I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN

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Guide to the Value Proposition Business Model Canvas

Today we’re going to look at capturing your value proposition on the business model canvas. So far we’re showing the problems that we want to solve and the people who have them. Today we’re starting to move on to solutions – otherwise known as value propositions.

This is always a challenge in real life.

‘What problem are you solving ‘ I ask

‘We make widgets that enable you to go faster than light’

‘But why? What’s the problem?

‘What do you mean?’

If there’s not a problem-solution fit, it is SO difficult to grow a business. Trust me I’ve tried multiple times over the years.

Adding your value proposition to the business model canvas

I’m going to dive right in and put ‘Design business models’ down on the example business model canvas for the value proposition.

Here we add a value proposition onto the business model canvas
Here we add a value proposition onto the business model canvas

Is this right? Well, not exactly. It’s not that simple, but there’s a reason why we have about 10% of the business model canvas to write our solution on. Most people will take pages and pages, and write down too much.

Here we are focusing on the big picture. Capture in a few words how you solve the problem. A useful way of looking at it is to think of the problem as the why.

Why are we here? To solve the problem of businesses dying because they don’t have the right business model.

What are we going to do? Help them to design better business models.

How are we going to do it? Writing a daily blog post on how to do it and posting it on LinkedIn. That’s too much detail.

You can break it down a little bit more. Here’s an example.

Add more detail to the value proposition business model canvas

I mentor leaders, I advise companies on how to design disruptive business models, and I educate as many people as I can through blogging, videos and public speaking.

On the canvas, these value propositions appear as Mentor, advise and educate.

The value proposition is expanded for clarity - this is what we will do. The next level of expansion is how to do it - but that is too detailed to fit on a business model canvas
The value proposition is expanded for clarity – this is what we will do. The next level of expansion is how to do it – but that is too detailed to fit on a business model canvas

When I’ve worked with companies figuring this out I’ve found that if there is a lot to write here and it all seems important, there’s usually more depth that you haven’t uncovered. If you can’t take the value proposition to the customer and have them understand almost instantly it’s an early signal that you haven’t got a problem-solution fit.

If the value proposition (or group of value propositions) are so complex that it takes time to explain then you aren’t working at the right level of detail.

Testing the value proposition again customers and the problem

We need to run tests. Test 1 checks to see if the value proposition does what the customers need. Test 2 checks to see if the value proposition solves the problem
We need to run tests. Test 1 checks to see if the value proposition does what the customers need. Test 2 checks to see if the value proposition solves the problem

There are two tests to run at this stage.

Is the value proposition clear to the customer at a high level? We want them to ask ‘Do I need this?’ not ‘What is sie talking about?’

Does the value proposition solve a problem for the customer? Does it solve THE problem that we’ve already written down?

Let’s try this now.

I design business models for companies.

That’s pretty clear. The listener may not know what a business model is but the grammar is in a clear form so even if they need more, they can get 90% of the way themselves.

At the next level down, Denis designs business models for companies by advising, mentoring and educating them. Again it’s pretty robust.

Now for the second test.

Does this value proposition solve the problems that we care about?

If a company needs a business model because its old one isn’t working, will designing a new business model solve the problem.

A qualified yes. A new design is useful, perhaps critical, but they have to do something to change the company from how it is now, to where needs to be. The same logic applies to the other segment.

Iterate the problem, customer and VP until you get a fit

What do we do here? There’s a choice. You can tweak your value proposition so that you solve the problem in full. We could change my value proposition to ‘Transform business models’ or ‘Design and build business models. The value proposition is then promising to solve the whole problem.

Alternatively, we revise the problem or the customer segment to improve the fit.

Let’s try changing the problem. Companies that need to change their business models but have no skill/experience in designing new ones. That would work. We need to go back and validate this narrower problem definition

Alternatively, we narrow the customer segment and target companies who have failing business models but are competent in organisation change and transformation. That way if our value proposition is to design new business models they can then implement them.

If we fail the tests then we iterate, we change the customer segment, the problem and the value proposition until it works.
If we fail the tests then we iterate, we change the customer segment, the problem and the value proposition until it works.

As you can see this is a highly iterative process. As we add more pieces in we keep having to make small changes and adjustments.

[note: it’s always worth using the value proposition canvas to do a deep dive into the design of the value proposition]

I have never done a business model where we sketched it out and got it right the first time. By continually backchecking how the pieces fit together, like a jigsaw we’re asking lots of how what and why questions that increase our knowledge and understanding very quickly.

Going further when you have gaps between the value proposition and the problem you are solving, or what the customer wants, can seem attractive. You don’t have to do lots of rework. There’s always a big cost later as your marketing and sales don’t deliver the numbers you expect.

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Measure Business Model Performance with the BMC

Many people have come across the business model canvas and how it can be used for business model innovation or generation. In this article, I want to go beyond the basics and talk about how the business model canvas can be extended to help address a number of business issues by bringing clarity to them. The focus is on business model performance and ways to measure it.

Measuring business model performance

At the core of the business model canvas is the idea that all businesses are made up of 9 segments. These are

Put another way.

“We create this value proposition for these customers and we reach them through these marketing channel, and support them through these customer relationships to generate sales. To deliver this we need these key resources and key partners to undertake these key activities and they come with these costs.


So far so good. Pretty much any business can be sketched out in a few minutes using this template. Once done it allows some fascinating discussions as to how and why the business makes money (or does not) and what to do about it.


The rest of the article is going to move beyond this and look at ways that you can use the basic business model canvas to change your business quickly and effectively.


Performance measurement using the business model canvas


Once you have your business model canvas sketched out have the CEO and/or the management team go through and give each segment (or each item within a segment) a score out of 10. If you feel you are selling 100% of the time to your ideal customer, mark it as a 10. However, if customers have moved on and the value proposition no longer resonates with them then perhaps a score of 4 for the value proposition is appropriate. Finally, if you have revenues with margins much better than the competition, give it a good score. You get the idea.

Then use the Net Promoter Score, scoring mechanism. Everything that is a 9 or 10 is green. Everything, 7 or 8 is yellow. The rest are red. Colour it in.
Voila. You have a powerful visual health check of your business model.

Measure Business Model Performance with the BMC

Going back to the phrasing that we looked at earlier 

“We create this value proposition for these customers and we reach them through these marketing channel, and support them through these customer relationships to generate sales. To deliver this we need these key resources and key partners to undertake these key activities and they come with these costs”

Management thus has a very clear and easy way to consider the problems (or opportunities) that it is facing and a simple way to explain it to stakeholders.

This is based on manager’s subjective analysis, but can be linked to KPI’s and turned into a regular performance dashboard. This is similar to the balanced scorecard but focuses on the health of the business model and it’s ability to deliver profits. 

Measuring Threats to the business model

When working with clients I use a 60-page threat assessment workbook. This takes us through each of the 9 segments looking at key metrics and the issues that are impacting them. When a company is in a market that is being disrupted there are often many threats occurring at multiple different levels. It’s easy to fall prey to information overload. 

Measure Business Model Performance with the BMC
The 60 page workbook that we use to assess threats to your business model

In the process above I described how you can measure the corporate business model performance. Here we look at ‘measuring’ how threatened the business model is by market forces and disruption. Again each segment gets given a score and you can identify which parts of the business model are redlining, and which are stable for now.

The twist here is it’s not as simple as highlighting the problem areas. That’s because often many parts of the business model will work in harmony, or have epicentres driving, them as Alexander Osterwalder puts it in Business Model Generation. The marketing channels you chose are ineluctably linked to the audience you are targeting, for example. If the channels are working but the customer base is under threat, you need to be thinking about the marketing channels as well. Once you change customers, you’ll need new channels or at least significant change.


Again the business model canvas does not solve the problems that you are facing. What it does do is layout the threats in an intuitively understandable way. It’s easy to get and explain. That saves time and gets everyone thinking the same way. In turn that opens up the field for more imaginative solutions.

Looking for ways to change your Business Model Performance

A business model can look absolutely wonderful on a piece of paper or sketched out on a whiteboard. The reality is that there are lots of reasons why changing it is going to be as hard as steering an oal tanker with a paddle from a canoe.  Two of these issues are the innovative ability of the people within the company and the company’s architectural resistance to change. These can act as a big drag on your attempts to change the performance of your business model

I’m from an engineering background. Looking back at the railway industry over the last 30 years it seems that a lot of the innovative people are in the key partners and in the marketing parts of the business. The key engineering teams needed to deliver the trains on time are relatively stagnant.

Innovativeness Audits

Small businesses can quickly do innovativeness audits. Who are the most innovative people in the business? Which segments do they live in? Their numbers can be mapped onto the canvas. What this shows you is where the people willing and able to be changemakers and make change live. If there is no appetite for change in the people responsible for key segments, consider the value proposition for example, how can any business model change programme be successful? 

Rigidity Audits


The second issue is the structural rigidity of the business model itself. Most managers are hired for their competence in reducing cost and improving efficiency and effectiveness. Over tim this means that processes and systems become more specialised and less flexible. This lack of flexibility can make it very hard to change a business model. Imagine for example the impact that a power station has on the balance sheet of an electricity company. They need to write it off or sell it in order to change the business model. 


Again we can create a heat map of which parts of the business are easy to change, and which parts are rusted solid. Combining the people and the structural rigidity you then have a clear idea on how you can move forward, or at very least the problems that you are going to have to overcome in order to change your business model and get to where you want to be.

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How Well Do Your Value Propositions Align With Customer Needs?

This video is all about matching your value proposition to your customers’ needs. 

This is absolutely critical because if you are offering something that the customer does not want then everything else becomes a little hard. What happens more frequently is that over time the problems that customers face, and consequently their needs, diverge from what you offer.

Many times difficulties with sales and marketing are not due to your technical prowess but due to a misalignment between the need and the offer

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Are There Synergies Between Your Products and Services?

In this video I run another stress test on your business by thinking about the synergies that you have between your products and service.

When you have good synergies products and services work together to increase the value that your provide to your customers. When there are no synergies your operational and marketing costs increase significantly

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What are the Big Threats to Your Business Model?

Business Model ThreatsThe world is changing. Industries are being disrupted at a faster rate than at any point since the early industrial revolution. Disruption means that your business model will stop working. Customers will disappear, their needs will change, competitors will come out of nowhere and fight in ways that your sales, operations and manufacturing teams cannot hope to match. Business model threats abound. Millions of companies will disappear, so will the jobs of hundreds of millions of people.

That’s the bad news.

The good news is that this creates vast numbers of opportunities. Where you were once locked in intractable competition and saw margins become wafer thin there are now new paths to profitability. The clearest example of this is in the stock market where companies who have dominated the listings for decades are being replaced by companies that have grown at staggering rates for mere years.

And this is the Good News

The good news is that you can do something about it, change your strategy and take a share of growth that comes with all this change.

In this blog post I’m going to give you a set of questions that help you assess the business model threats that your company faces. Often it is easy to keep doing the same thing every day and, like a frog in ever warming water, get boiled alive before you realise it. These questions will help you avoid that threat, or bring it into stark perspective so that you can start looking at how to change your business model before it is too late.

What are the Big Threats to Your Business Model?In the list below I’ve asked 33 questions about business model threats suggesting ways that your company, your industry, your market and your customers can be disrupted. They all mean that things won’t carry on as they have before. They’ve all happened to someone else already. I’ve given examples for every single one. With your different perspective I’m sure you can provide even more. Let me know if you think I’ve missed some great questions or better examples. Let’s have a look at some business model threats

Value Proposition Threats

  • Are there substitute products and services available for what you provide?
  • Are you seeing more substitutes appearing?
    • E.g. Mobile phones destroyed fixed line telecom businesses
  • Are you seeing lots of substitutes arising?
    • E.g. Fintech is creativing thousands of competitors to the banking system
  • Where are you seeing competitors concentrating – price or value?
    • E.g. German discount chains are concentrating on price in the UK
  • Where are you seeing the new entrants concentrating – price or value?
    • E.g. Food delivery companies disrupt on both price and value (depending on their model)

Cost & Revenue Threats

  • How much are your margins threatened by your direct competitors?
    • E.g. Amazon threatening everythign retail
  • How much are margins threatened by new technology?
    • E.g. 4G destroying the margins on calls and SMS and making them virtually free
  • How much of your success is dependent on a single revenue stream?
    • E.g. Borders depending on the sale of books
  • Which of your revenue streams is most likley to disappear in the next five years? Why?
    • E.g. the internal combustion engine (in a slightly longer timescale) for most car manufacturers
  • Which of your revenue streams is most likley to persist for decades? Why is it so safe?
    • E.g. the Hoover Dam – Really? How will it be affected by the switch to renewables and micro generation?
  • Which of your costs are likley to become most unpredictable?
    • E.g. Oil and plastic costs as we move toward a post oil world
  • Which of your costs have the biggest risk of growing faster than the revenues they generate?
    • E.g. debt costs for banks as QE is unwound and interest rates rise (or not)

Infrastructure Threats

  • Which of your suppliers are most likley to be disrupted? What will that mean to you?
    • E.g. Intel being displaced by an increasing number of specialist chip design companies with niche strategies
  • How is the quality of your key resources going to change? Is that going to have more impact on you, your competitors or your disruptors?
    • E.g. inaccessibility of cobalt mines in Congo meaning poorer quality batteries for electric vehicle manufacturers
  • Which of your key activities might be disrupted?
    • E.g. drones bypassing the highway system for package delivery and making last mile logistic companies irrelevant
  • Which key activities are going to become harder to deliver? How will this change your competitive advantage?
    • E.g. data provision to advertisers as regulators enforce data privacy and rights to your own data
  • Which of your key partners is going to be disrupted first?
    • E.g. Moratorium on palm oil imports and use increases the cost of beauty and health products
  • What happens if your key partners change their business model to respond to threats? how will that affect your business?
    • E.g. If car manufacturers go electric what happens to all your gas stations?
  • How can your competitors collaborate with your key partners?
    • E.g. all analytics data comes from Facebook or Google giving all marketing agencies the same data to play with
  • What categories or classes of supplier are going to be disrupted?
    • E.g. All steel mills as China increased production 6 times in 10 years in the decade to 2012

Customer Focused Threats

  • Which groups of customers are disappearing or changing?
    • E.g. Children in South Korea
  • How saturated is your market and how is this changing?
    • E.g. the SME CRM market 2012+ saw thousands of new entrants
  • How are competitors threatening market share?
    • E.g. Uber offering cheaper, better and faster services than traditional taxis
  • How loyal are customers? How quickly will they defect if offered better price or quality?
    • Eg Altavista until 1998
  • How many customers will you lose if a new entrant offers your product or service at half your price? At double your quality?
    • E.g. Salesforce compared to Oracle (as a new entrant).
  • How will your competitors respond to disruption?
    • E.g. Google and Facebook buying any startups in the valley of death
  • How will competition intensify in your market?
    • E.g. Electricity prices in the UK after deregulation
  • Which of your channels are most vulnerable to your competitors?
    • E.g. Hollywood losing both cable channels and cinema with the rise of Netflix
  • Which of your channels are most vulnerable to new entrants?
    • E.g. Magazine adverts for beauty products to YouTube beauty influencers
  • Which channels are being abandoned by customers?
    • E.g. Newspapers in favour of online news
  • Which customer relationships are deteriorating?
    • E.g. Ad agencies with client as FMCG buy ads direct from Google or Facebook

Business Model Threats

  • Are the problems you solve still relevant to customers?
    • E.g. The music industry providing 10 of your favourite bands best songs in one easy vinyl package
  • What is the biggest threat to your USP or unfair advantage?
    • E.g. Antitrust regulation for Google and Facebook for getting their data for free.

If you’ve enjoyed this article on business model threats you may want to read this article on how to test your business model. Alternatively if you are worried about your business model being disrupted give me a call.

What are the Big Threats to Your Business Model?