Month: January 2007

Value Propositions

As January draws to a close I look back on a busy month of travel that took me to three continents and visits to a wide range of clients in both the for-profit and not-for-profit sectors. A common theme no matter what type of organization is value for time, energy, and resources spent. We want more value in each of our transactions. As a result, regardless of how the metrics of time, energy, and resources are defined, they represent the ways in which comparisons between alternatives are drawn, distinctions and differentiations of one to another are determined, and ultimately, decisions to choose are made based on which alternative offers the greatest value. Does one alternative take less time than another? Does it take more physical effort, require specialized skills, or is it informed by direct experience? Does it cost more to rent, lease, buy, or contract, or does it tie-up more capital? These and related questions are at the heart of determining value.

Of course, what we are looking for from others who might help us are ways in which their input provides value. In other words, we look for what Geoffrey Moore terms the “value proposition” as the impetus to choose from what is presented to us for consideration including choosing nothing at all if it does not improve our current situation. (For further reference, consider the following books authored by Mr. Moore: CROSSING THE CHASM and INSIDE THE TORNADO, and his blog Dealing with Darwin) Essentially, the value proposition presents ways we can use our time, energy, and resources in pursuit of our endeavors. Our task is to evaluate whether one value proposition is better than what we are already doing or is best among other value propositions available. Knowing what constitutes a value proposition guides us in our evaluation of various alternatives.

Basically, value propositions surface in three ways: information, packages, and integrated solutions.

Let’s take information. Go to any blog, like this one, or website that features certain products, services, or points of view and what you see and read are testimonials with references. The authors describe the context in or circumstances under which their experiences occurred, including probable causes / root cause if a problem and contributing / off-setting factors if an opportunity; they document the results; and they offer an evaluation of the various factors and actions that made a difference one way or the other. The idea is that if we can match our circumstances with theirs we will be in position to make a more informed decision using the results of their approaches as guidelines. The value comes in not repeating the mistakes of others or duplicating what worked well by taking the same steps they did. The value proposition of time and energy spent going to a particular information source versus another is based on accuracy, timeliness, and relevance. For that reason one blog is more popular than another, one search engine is tapped more frequently than another, and one reference website is consulted more often than another.

The problem with information alone is I have to find it, first; then read it and see how it fits my situation; then act upon it. This can and often does consume considerable time. And it may very well be worth the effort. However, if I am dealing with a complex system where there are multiple dimensions to take into consideration, a complete package is preferable.

Here’s an example: let’s say I want a high-speed Internet access with a secure wireless router to do online banking transactions from my laptop. Also, I have been reading about VOIP and that service sounds interesting, maybe even a Wi-Fi phone to be independent of a computer. In addition, I have a cable TV service that includes Internet access as an option. Oh, and I have land-line phone service in the office that also includes a DSL option. But then the company providing my cell phone service offers wireless connectivity for my laptop through a wireless card. Of course, there are parts of the world where there is no cell phone coverage and land line service is spotty at best. For these there are satellite phones and high-speed Internet access.

With all these choices, how does one proceed? As one can well imagine, there is a wealth of information about each and every combination of service and product. The time and energy required researching these and putting together a cost-effective and reasonably performing bundle is ENORMOUS. Can’t someone do it for me?

Therein lies the next level of value proposition – the package. Most organizations providing a variety of products and services catalogue their offerings into generalized buckets that fit together logically and purposefully. Their interest is to reduce the time customers spend making a decision and is cost-effective and satisfying, operationally; the package functions as intended. The organization that presents a value proposition with the least outlay of costs, the fewest ongoing transactions and the greatest degree of “fit” and satisfaction wins the prize!

Despite excellent bundling and packaging strategies guided by Customer Relationship Management (CRM) practices the customer must choose among an array of options and alternatives to fulfill all the requirements of a business or personal application. Companies can engage in customer segmentation schemes to better target their package toward particular customer groups and reduce the customer’s involvement. Also, they can provide opportunities for customers to interact with representatives online or by phone to better tailor a package to meet specific and often unique requirements. Still, the customer remains the integrator who exercises the final step in putting a solution together that truly matches the unique context in which it fulfills its mandate. Packaging efforts fall short of the goal which is for an organization to design, deliver, and maintain a totally integrated solution that meets and exceeds the needs of the customer WITHOUT the customer having to be directly involved.

The strongest value proposition is the one in which the customer does not have to decide what is the best solution overall or which are the best components to include in the total solution. The organization becomes the integrator of choice for the customer. To be relieved of having to spend time, energy, and resources to develop, implement, and maintain an integrated solution is of supreme value to the customer.

This suggests a three-stage progression of value propositions organizations can use as a scorecard to see whether they are on the way to becoming the integrator or is the customer relegated to remain so:

Step one: is the information you provide accurate, timely, and relevant?

Step two: does the package of products and services you offer indicate you understand the customer’s needs and circumstances and does the package function as promised?

Step three: does the integrated solution you provide merit the trust and confidence of the customer that you are making choices in the customer’s best interest?

As might be expected, the third step is not easily reached. Only those who have the intelligence, means, moxie, and integrity to warrant such trust earn this right. However, it should be the goal of all who serve others through organizations of any type. How does your organization stack up?

Are you in position to offer a better value proposition for the customer?

Originally posted to New Media Explorer by Steve Bosserman on Tuesday, January 30, 2007

Food Systems and Distances Traveled

Food is an essential requirement for life. A certain degree of psychological preoccupation is prompted if there are risks associated with getting the need for food met. As a result, securing food is one of the fundamental building blocks in Abraham Maslow’s “hierarchy of needs.”

Distance from the source of food is a sticky wicket for food consumers. We are left in the hands of government regulations, enforcement agencies, businesses, and various special interest groups in between us and the food we need for survival, health, and well-being. Questions range from plant and animal genetics to methods of production, processing, and preparing foods, to the logistical systems that transport, store, and stock what we eat as it moves from the point of production to the point of consumption.

So how far is it from the point of production to the point of consumption? According to a 2003 study, “Checking the Food Odometer: Comparing Food Miles for Local versus Conventional Produce Sales to Iowa Institutions,” by Rich Pirog at Iowa State University it can be further than one might think. For a synopsis of Pirog’s study, please read Consumers Prefer Locally Grown Foods published by the WK Kellogg Foundation.

Drawing from Pirog’s report, Jane Black offers the following analysis in her article in Slate entitled, “What’s in a number? How the press got the idea that food travels 1,500 miles from farm to plate:” 1

All statistics, of course, are based on a series of assumptions. And Pirog is quick to point out that whether or not the 1,500-mile figure applies to everyone and everything—or how it’s been misused—it has raised consciousness about where food comes from. It sends a message: It matters what you buy, and where you buy it.

The graphic below illustrates some of the critical relationships in the current, globalized food system relative to distances food travels.

Essentially, the diagram is a continuum from local to global with regional and continental “zones” setup to offer arbitrary hash marks at the 100, 1,000, and 10,000 mile intervals in between. Clearly, the distribution of distance favors production, processing, and preparation encompassing more than 1,000 miles. Also, the interplay of production, processing and preparation, and consumption is embedded within a logistical system that supports the movement of plant and animal materials from one location to another while transferring from one production / processing stage to another.

This diagram does not attempt to quantify the complete distance traveled, but offer a way to visualize the approximate distribution of mileage when looking at the overall food system. While Pirog’s report focuses solely on fresh produce and excludes various stages of processing between production and consumption, if one included the distances incurred by these additional steps the total mileage traveled would be considerably further. Also, due to the economies of scale favored by globalized operations, processing and preparation are centralized in specific locations that enjoy advantages of lower cost labor or closer proximity to large scale production operations. This adds to total distance traveled when completing the cycle to the consumer.

In his book, PERMACULTURE: A BEGINNER’S GUIDE, Graham Burnett offers a diagram entitled, “The Industrialization of Tea” that captures the notion of distance in the globalized food system and its consequences. When the total costs of fossil fuel consumption is treated as an externality and there is relative assurance that globalized food sources are secure and can provide safe food at low cost the food system functions effectively. But what if the formula changes due to increased fuel costs? What if we cannot assure food security and safety? What is an alternative? Mr. Graham begins to explore this question by providing a second diagram, “The Permaculture Cup of Tea,” posted on the same website.

In carrying the philosophy of a “permaculture cup of tea” further, the diagram below follows the same general format as the previous graphic, only the food system is more localized than globalized.

Now, 60 % of the food system functions within an area under 1,000 miles of the point of consumption. While this stops far short of 100% under 1,000 miles, it does suggest that simply moving a mere 30% of the total food system output from over 1,000 miles to under will have a profound impact on the issues like fuel consumption, food security and safety, and community sustainability, health, and well-being. But how much difference would this really make?

While there are no data to tell us for sure, there are reports from studies in related fields that offer some insight. In The New York Times article by Matthew Wald published December 30, 2006 entitled “Travel Habits Must Change to Make a Big Difference in Energy Consumption,” the author states,

…picking a large sport utility vehicle that goes two miles farther on a gallon of gasoline than the least-efficient SUV’s would have an impact on emissions of global warming gases about five times larger than replacing five 60-watt incandescent bulbs. The dollar savings would be about 10 times larger. And the more-efficient light bulbs would have a negligible effect on oil consumption.

This suggests that shifting the 30% of the current food system activity to under 1,000 miles from the point of consumption would make a substantial difference.

There is a business case in this for sure; but how would one go about putting the business model together that leads to viable business plans and startups in localized agriculture? The key is in designing a framework that ties the critical elements of food production, processing and preparation; renewable energy and environmental remediation; logistical systems; and community sustainability together into a set of dynamic, interactive, and adaptive relationships. And that will be the topic for subsequent postings…

Wishing you all the very best in 2007!

Originally posted to New Media Explorer by Steve Bosserman on Tuesday, January 2, 2007

  1. The original article, “The Issues: Buy Local,” is no longer available online ↩