A great business model always includes a carefully crafted value proposition. Our author shares a few simple ways to achieve that goal. [shutterstock: 177518723, phloxii]
This monthly column is a guide to SAP ecosystem opportunities, challenges and how to successfully manage them. It is based on the book “Profit from the SAP Ecosystem” by Synomic's Ralf Meyer and combines startup methodologies with proven SAP ecosystem best practices. Based on the experience from more than 50 SAP partner companies, 25 business models and 22 SAP partnership models. The author covers the SAP ecosystem, partner models, business model and value proposition design, SAP solution alignment, indirect-SAP-usage, partnering, go-to-market, strategy development and more.
While Business Model Generation and the Business Model Canvas shown last month are “generic” strategic management tools, it may make sense to adapt these to the SAP ecosystem specifics, as demonstrated in the “SAP ecosystem canvas” below, using StreamServe as an example.
While the business model design process focuses on the building blocks described above, it is best practice to then consider the external forces that may also impact your business success. In particular, these external drivers and forces include:
- Key trends such as the rise of the sharing economy
- Industry forces such as “everything-as-as-service”
- Market drivers such as the success of the discounters
- Macro-economic forces such as zero interest rates.
It is of course much easier to assess and design things you can directly influence like your customer segment and value proposition; whereas the developments that you cannot influence, like changes in market trends or new industry developments, may leave your best plans behind in the dust.
Even if you already have a close eye on your market, is it important to integrate and formalize this “industry and global trend checks” in your business model design process to avoid unpleasant surprises for your business as early as possible.
A good value proposition is both important for your Business Model and critical for successful go-to-market. Ultimately, it helps to reduce the risk of producing and selling products/services that are not relevant to the SAP ecosystem. Unfortunately, most organizations still tend to focus too much on products and technical features/details rather than on how they can create real value for their (prospective) customers.
Value Proposition Design is another methodology developed by Alexander Osterwalder and is a natural extension to the Business Model Canvas, which we covered in detail last month. You can use the Value Proposition Design and the “SAP Value Proposition Canvas” to discuss ideas and concepts across organizational boundaries, while aligning stakeholders from different areas, including management, product development, sales, marketing, and services as well as investors and partners.
The SAP Value Proposition Design Canvas zooms into two SAP Ecosystem Business Model Canvas areas, shown below:
- SAP Customer Segment (I): right-hand (sales-) side, visualizing jobs, pains and gains for specific customer segments you want to address.
- SAP Ecosystem Value Proposition (II): left-hand (build-) side, demonstrating how your products and services create value by easing customer pains and creating gains.
Organizations can either start the design process with the SAP Customer Segment (I) or alternatively with the SAP Ecosystem Value Proposition (II). Mainly, it is important to “step into your customer’s or partner’s shoes”.
In the SAP ecosystem, customer jobs are tasks that your customers want to complete, problems to be solved, or requirements to be satisfied. A pain as shown in the illustration above describes anything that prevents your customer from getting a job done, including potential risks if a job is not done or is poorly done. Gains are the outcomes and benefits your customer is looking for.
Below, you will find a list of “trigger” questions to identify potential customer jobs:
- What is the “make-or-break” job that your customer must complete to survive?
- What functional problems does your customer want to solve?
- What area is not yet properly addressed by SAP standard functionality?
- What would help the customer to more successfully leverage his SAP investment?
- What problems or innovations do you think your customer not yet aware of?
- Is your customer subject to special government regulations/legal requirements?
- How can you help your customer to become the benchmark among its competition?
- Do you have insight into your customer’s interaction with products or services throughout the entire lifespan?
Pain relievers describe how your products/services can appease specific customer pains, e.g. by reducing or eliminating issues that prevent them from completing jobs to be done. Gain creators outline how you produce benefits that your customer expects, desires, or would be happy for, including functional benefits, creating positive emotions or cost savings.
SAP Ecosystem Products and Services cover a variety of topics. This area is about aligning your offerings with your customer’s challenges, requirements and wishes. Good starting points for this phase of the design process include:
- Look for market trends (digital transformation).
- Look for new technology trends (like in-memory computing for real-real-time analytics).
- Stay up-to-date with new regulations (e.g. support of the unbundling process in the utility industry).
- Copy pioneering business models from other sectors or industries (e.g. sell your solution “as-a-service” or “everything-as-a-service”).
- Adapt your value proposition to new or underserved segments (e.g. the legal industry is still mostly paper based).
- Brainstorm for new value propositions based on new partnerships (e.g. provide SAP managed services together with your SAP PaaS or IaaS hosting partners).
- Substantially lower your customer prices by reducing your own cost structure (e.g. using nearshore resources or more automation).
- Base your product an open source solution and sell enterprise services and SLAs.
- Address specific needs of digital natives (e.g. offer mobile only or be the first to offer a solution).
Try to uncover SAP customer jobs that are different from what most value propositions currently focus on. Check out the SAP Solution Maps for some insights. Find new open jobs and address a more complete set of jobs. Help more people to do a job that is too complex or still too expensive to do. The SAP user groups and their SAP influencing process can also help to identify potential areas for this task. Solve your customer’s most extreme unresolved pain and focus on most essential unrealized gains and not on generic, hypothetical issues. Always define pain relievers and gain creators for specific, concrete customer profiles.
After SAP Ecosystem Value Proposition Design, you should revisit your SAP Ecosystem Business Model Canvas and add missing information and/or adjust previous assumptions with your new findings. Based on the value proposition you can perform additional checks and “iterations” to further optimize your plans. The following infographic shows how Value Proposition Design ties in directly with the Business Model/SAP Ecosystem Canvas:
Business model design is increasingly becoming a proven methodology in the SAP community, as well, and is used by many partners, customers and SAP itself. After numerous workshops with large enterprises, local and international SMEs, institutes and startups, we can confirm that this methodology is very helpful from a strategic perspective.
Surprisingly, even participants in business model/value proposition design workshops from mature organizations – where management believes that everybody is on the same page – often agree that there was, in fact, a lack of joint understanding and alignment before introduction to this method.
Thus, in addition to a carefully designed business model, organizations and stakeholders also gain a common/better understanding and joint commitment to what is discussed and decided.