ICEC’2003

MODELLING VALUE PROPOSITIONS IN E-BUSINESS

Alexander Osterwalder
Yves Pigneur
University of Lausanne

Abstract
In this paper we provide a conceptual approach to modelling value propositions. We argue that
rigorous modelling in an ontological style could improve several aspects of business. Modelling and
mapping value propositions helps better understanding the value a company wants to offer its
customers and makes it communicable between various stakeholders. Using a common language
(ontology) in defining a company's offering brings manager's mental models into a common form.
Further, conceptually seized value propositions are comparable to the value propositions of a firm's
competitors because the follow a rigid framework and make it possible to identify the competitive
position of a firm's value proposition.
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1 INTRODUCTION

Traditionally, companies concentrated on positioning themselves in the right place on the value chain,
with the right products and market segments and the right value-added services. But through
globalization, rapidly changing markets and new technologies things have become more complex and
complicated. Companies increasingly organize in networks and offer bundles of products and services
as a group. Today the art of creating and co-producing value with others is clearly at the centre of
strategic tasks (Normann and Ramírez 1993). This is essentially due to the falling costs of ICT and the
increased connectivity of actors, which has opened up new possibilities for creating co-engineered
information goods and services, new information-based value-added services or information-rich
physical goods. Especially e-business value propositions tend to be complex and hard to communicate
in an easy way.
In this paper we argue that formal methods to seize value propositions are still missing, even though
much literature on (customer) value in general exists. But in order to build (software-based)
management, visualization and communication tools for modelling value propositions, formal models
must be applied. Therefore we provide a framework that conceptualizes the bundles of products and
services, in other word the value proposition, companies offer their customers. The advantages of
taking a rigid conceptual and formal approach to describing a firm's offer are multiple. Firstly, it
allows modelling and mapping a firm's value proposition that exists in informal ways, like
unstructured documents and manager's mental models. This makes a value proposition communicable
and easier to understand. Secondly, a better understanding of a company's offer by the stakeholders
involved (e.g. managers, process modellers and Information Systems (IS) people) allows a better
implementation. Conceptually seized value propositions are to a manager what a blueprint is to an
architect. But what seems obvious in architecture is not yet evident in business. Often people assigned
with implementing or changing parts of value propositions are left with a vague outline of the job they
should fulfil. Thirdly, conceptually seized and modelled value propositions are easier to compare to
the value propositions of a firm's competition. This is important in achieving a competitive advantage
through differentiation. Last, mapping and decomposing a company's offer of products and services
into its elementary parts makes it easier to experiment with new models. Especially ICT opens up a
range of new opportunities to include information based aspects into a value proposition and engineer
e-business value propositions.
Summarized, a formal approach to modelling value propositions allows managers to seize mental
models, understand and communicate value propositions, improve their implementation, compare
them to the competition and eventually foster innovation.
The paper is structured as follows. In the first section we argue why it is worth modelling value
propositions. In the next section we explain the link between the concept outlined in this paper and the
more general concept of business models. In the third and fourth section we outline the elements of the
concept, followed by their detailed description. The fifth section illustrates the value proposition
framework with a mini-case and the last section consists of the conclusion.

2 PRODUCT AND VALUE PROPOSITIONS - AN INTEGRAL PART OF A

BUSINESS MODEL

The value proposition concept that we explain in this paper is an integral part of the business model
framework outlined by Osterwalder and Pigneur (2002). A business model is a conceptual tool that
contains a set of elements and their relationships and allows expressing the business logic of a specific
firm. A conceptual approach to business model makes it possible to seize, model, understand, share
(Peterovic et al. 2001), observe over time, and, maybe even measure and simulate business models.
Some authors see it as a new unit of analysis and interesting tool for innovation (Stähler 2002).
According to Osterwalder and Pigneur a business model can be broken down into four simple pillars,
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which are the "what", the "who", the "how" (Markides 1999) and the "how much" of a firm. In other
words, these pillars allow to express what a company offers, who it targets with this, how this can be
realised and how much can be earned by doing it. These pillars can be translated into four main
business model elements that can then be further decomposed: Firstly, the product element, which
describes the value proposition of a firm. Secondly, the customer relationship element, which
describes how a firm gets in touch with its customers and what kind of relationships it wants to
establish with them. Thirdly, the infrastructure management element that describes what activities,
resources and partners are necessary to provide the first two elements. And finally, the financial
aspects element, which describes the revenue flows and the pricing mechanisms of a firm, or in other
words, how a company makes money through the other three elements (see figure 1). In this paper we
focus on the product element and propose a conceptualization.

Partnership Relationship
INFRASTRUCTURE CUSTOMER
MANAGEMENT RELATIONSHIP
Agreement Mechanism

PRODUCT
Capability Value Value Channel Customer
Configuration Proposition

Resource Activity Elementary Value Link Criterion

Proposition

Cost Profit/Loss Revenue

Structure Model
FINANCIAL
Account Pricing
ASPECTS

Figure 1: Business Model framework

3 PRODUCT

ICT has had a major impact on market offerings and thus on the product element outlined in this paper.
Offerings are increasingly complex and composed of several different elements, such as physical
products, informational products, services and complementary services. For example, Federal Express
extended their value proposition in 1994 when they launched their Website. They were the first to
offer online package status tracking, which allowed each and every customers to follow their package
on its delivery. While this has not profoundly changed the shipping industry, other sectors, such as the
music and film industry risk to be completely transformed because their products can be entirely
digitized. This forces them to rethink their value proposition or even their entire business model. Often,
companies that are not able to constantly innovate risk to fall into the commoditization trap because
successful products are rapidly copied by an ever more global competition. Of course innovation is no
guarantee for success, but recent research shows that superior market performers are essentially
companies that are able to innovate and constantly transform their value proposition (Kim and
Mauborgne 1997; Chen and Kai-Ling Ho 2002).
The product block of a business model covers all aspects of what a firm offers its customers. This
comprises not only the company's bundles of products and services but the manner in which it
differentiates itself from its competitors. We express this in an ontology of the value proposition,
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which consists of the VALUE PROPOSITION element and its ELEMENTARY VALUE
PROPOSITION(s) (see figure 2).

Capability Value Proposition Target Customer

setOf isA
Description
Reasoning
Elementary Value Life Cycle
Proposition Value Level
Price Level

Figure 2: Product

4 VALUE PROPOSITION

A VALUE PROPOSITION can be understood as the statements of benefits that are delivered by the
firm to its external constituencies (Bagchi and Tulskie 2000). We describe it as the definition of how
items of value, such as products and services as well as complementary value-added services, are
packaged and offered to fulfil customer needs(Kambil et al. 1997). The construct of the VALUE
PROPOSITION explained in this section is inspired by the works of (Kambil et al. 1997) and (Kim
and Mauborgne 2002). They both provide a starting point for a more conceptual approach to
modelling offerings.
As summarized in table 1, the VALUE PROPOSITION element is an overall view of a firm's bundle
of products and services that together represent value for a specific CUSTOMER SEGMENT. It
describes the way a firm differentiates itself from its competitors and is the reason why customers buy
from a certain firm and not from another.

Name of BM-Element VALUE PROPOSITION

Definition A VALUE PROPOSITION represents value for one or several TARGET
CUSTOMER(s) and is based on one or several CAPABILITY(ies). It can be
further decomposed into its set of ELEMENTARY VALUE PROPOSITION(s).
A VALUE PROPOSITION is characterized by its attributes DESCRIPTION,
REASONING, VALUE LEVEL and PRICE LEVEL (see figure 1 and 2).
Inherits from ELEMENTARY VALUE PROPOSITION
Related to Value for TARGET CUSTOMER (1-n)
Based on CAPABILITY (1-n)
Set of ELEMENTARY VALUE PROPOSITION(s) (0-n)
Cardinality 1-n
Attributes Inherited from the ELEMENTARY VALUE PROPOSITION
Table 1: value proposition
The VALUE PROPOSITION element gives an aggregated view of the value a company offers its
customers. Its components, the ELEMENTARY VALUE PROPOSITION(s), describe the different
aspects of a VALUE PROPOSITION. The ELEMENTARY VALUE PROPOSITION(s) can
themselves be decomposed again, which allows several levels of ELEMENTARY VALUE
PROPOSTION(s) (see figure 2). By outlining these different components a firm can better observe
how it situates itself compared to its competitors.
As summarized in table 2, an ELEMENTARY VALUE PROPOSITION describes a part of a firm's
bundle of products and services. It illustrates a specific product, service, or even product or service
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feature and outlines its assumed value to the customer. A set of ELEMENTARY VALUE
PROPOSITION(s) together represent a VALUE PROPOSITION.

Name of BM-Element ELEMENTARY VALUE PROPOSITION

Element of VALUE PROPOSITION
Definition An ELEMENTARY VALUE PROPOSITION is a part of an overall VALUE
PROPOSITION. It is characterized by its attributes DESCRIPTION,
REASONING, LIFE CYLCE, VALUE LEVEL and PRICE LEVEL.
Cardinality 1-n
Attributes Description
Reasoning
Life cycle
Value level
Price level
Table 2: Elementary Value proposition

4.1 Reasoning

This attribute captures the analysis of the VALUE PROPOSITION and the reasoning why it could be
valuable to the customer. Normally value is created either through use (e.g. driving a car), reduction of
the customer's risk (e.g. car insurance) or by making his life easier through reduction of his efforts (e.g.
home delivery of groceries).
Use. The bulk of value often derives from the actual use of a bundle of products and services and is
created when product attributes (e.g. features, design, value-added services, support) correspond to
customer needs. In other words value is produced when assumed customer value matches perceived
customer value after the consumption of a VALUE PROPOSITION.
Risk (based on (Kambil et al. 1997)). Value can be created by reducing the customer's risks. This can
simply be a financial fear that the price of a purchased good will change in the future (e.g. common in
commodity markets). This price risk could be neutralized with insurance contracts, buy-back
guarantees, or financial options. Another risk, the one that a product won't perform as predicted or
expected (e.g. obsolescence) represents a substantial problem to the customer. E-Business value
proposition often take account of these risk and add forums, trust tools and other ELEMENTARY
VALUE PROPOSITION(s) to reassure customers.
Efforts. Companies must think of new and innovative ways of making a customer's life as easy as
possible. Reducing his efforts through e-business means signifies creating value through lower search,
evaluation and acquisition costs, but also easier and cheaper maintenance, operations and training.

4.2 Value life cycle

A value proposition should be studied over its entire life cycle (Anderson and Narus 1998). Therefore
we create an attribute that captures the five stages of the value life cycle (see figure 3 inspired by (Ives
1999)). Value can be created at the moment of the value creation (e.g. customization/personalization
of a laptop), its appropriation (e.g. Amazon's one-click shopping), its consumption (e.g. listening to
music), its renewal (e.g. software updates) or its transfer (e.g. disposal of old computers, selling of
used books).
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VALUE PROPOSITION

Value creation Value appropriation Value consumption Value renewal Value transfer

Based on agile Value is also created The main value of a Value can be Value can be
manufacturing and by making the value proposition renewed or updated transferred after the
with the help of ICT appropriation phase comes from its after its customer loses his
companies can as smooth as possible actual use. Value is consumption, its interest in the value
integrate their and streamline maximized when the expiry, or after it proposition.
customers into the purchase and value proposition's becomes Sometimes value
value creation delivery to the attributes mach the obsolescent. Value becomes a burden
process and create customers customer's needs. can also be created when it has to be
additional value. satisfaction by adding new disposed (e.g. old
features to the refrigerators,
existing value computers)
proposition.

Figure 3: value life cycle

Value creation (requirements). Traditionally the customer has been more or less excluded from the
value creation process. Products and services were designed by the R&D and marketing department,
based on historical customer data and then thrown on the market. But through the help of ICT the
customer can become an important part of the value creation process (Piller 2002). The concept of
mass-customization and agile manufacturing (Maskell 2001) allow company's to integrate their
customers by letting them personalize or configure their value package. Numerous firms have
ELEMENTARY VALUE PROPOSITION(s) that include the customer in the value creation process.
Dell lets customers customize their PCs, servers and laptops. CMAX allows their customers design
their personal footgear over the Internet and get them delivered to their home. Adidas offers a
customized shoe brand, which allows them to charge up to 50 percent higher premiums (Piller and
Moeslein 2002). In the chip industry customers of manufacturers test and designs their chips, using
toolkits, simulation and digital prototypes (von Hippel 2001; Thomke and von Hippel 2002). In the
chemical industry International Flavors and Fragrances developed an Internet-based tool containing a
large data-base of flavour profiles. Customers can select and manipulate that information on a
computer screen and send their new design directly to an automated machine that will manufacture a
sample within minutes (Thomke and von Hippel 2002).
Value appropriation (acquisition). Value can also be created during the appropriation phase by
ameliorating and facilitating the customer's buying experience. The first step to improvement is
streamlining the transaction in itself. An often cited example of convenient buying of consumer goods
is Amazon.com's one-click shopping, which allows customers to purchase items through a single
mouse click on their Website. For more expensive and complex industrial goods ameliorating the
buying experience can include innovative price negotiation mechanisms, contract management,
convenient billing and payment or attractive financing mechanisms. The next step to creating value in
the appropriation phase is improving fulfilment. As outlined above, Federal Express improved their
VALUE PROPOSTION of delivering packages by offering an online tracking service. Some
companies go even further and build their entire VALUE PROPOSTION on fulfilment.
Value consumption (ownership). Probably the most traditional and best known phase of the value life
cycle is the value derived from consumption. This is the value that comes from the actual use of a
products and services. The dominant part of the VALUE PROPOSITION is often found at this stage
of the value life cycle. Some companies define a core bundle of value, a basket of basic products and
services, around which they “build” complementary value at additional cost. ABB and Microsoft have
dubbed this "naked solutions" or "naked systems" (Anderson and Narus 1995) around which they
wrap other services. However, as explained above ICT has opened up a lot of new opportunities for
creating information-based or information-enriched products and services (Evans and Wurster 1997).
Value renewal (ownership). In some cases it can be interesting to renew value after or during its
consumption. This can be necessary when value is used up (e.g. a retail store that is out of stock),
ICEC’2003

expires (e.g. expiry of a magazine subscription), becomes obsolescent (e.g. outdated machinery) or is
dysfunctional (e.g. need for a car service). Sometimes it may also be interesting to create additional
value by adding new features to an existing value proposition (e.g. new titles for a game console).
Finally, value renewal could also mean gradually updating value, as it is very common for software
products where software patches, general updates or major upgrades to newer versions increase
customer value.
Value transfer (retirement). At this last stage of the value life cycle, the customer has the possibility to
transfers the value he has acquired. He may want to do this because the VALUE PROPOSITION has
lost value for him, but he can still gain something by transferring this value. Amazon.com, for
example, lets its customers sell their used books over the same Website they sell new books from. In
other cases value may become a burden after its consumption, because it has do be disposed. This is
the case for refrigerators, computers and batteries, where sellers offer to take charge of disposal.

4.3 Customer Utility: Value level

Measuring the utility for the customer by measuring the value level of a company's offer allows a firm
to compare itself to its competitors. To do this we have created a qualitative value scale that relates to
the value offered by competitors rather than using a quantitative scale that ranges from low to high.
Our measure goes from me-too value (e.g. commodities), over innovative imitation (e.g. pocket pc)
and excellence (e.g. Swiss watches) to innovation (e.g. Viagra in the 90's).
Me-too. A me-too value level simply means that the value of the bundle of products and services the
firm offers its customers does not differentiate itself from the one of the competition's. However,
differentiation may still take place through a lower price, which is captured in the PRICE LEVEL
attribute of the VALUE PROPOSITION.
Innovative imitation. Innovative imitation means that a company imitates an existing VALUE
PROPOSTION, but improves value by adding innovative elements. Dell has done this when they
combined mass-market direct selling of PCs over the Internet with the possibility to personalize the
configuration of your PC. Traditionally, retailers only sold pre-configured PCs and customers had to
visit speciality stores if they wanted to personalize their PCs.
Excellence. Excellence means that value is pushed to its extremes. An illustrative example of value
perfection is the offer of the Switzerland based company Jet Aviation. They provide wealthy private
and business customers with a private jet service. The firm claims that it can meet customers travel
plans on demand within hours at any airport worldwide at any time. Of course this kind of offer comes
with a hefty fee.
Innovation. Innovation means that a firm introduces either a completely new product or service or a
revolutionary combination of products and services. Recent research has shown that consumers highly
valuate innovation and would be willing to pay for new value propositions (Nunes and Johnson 2002).
One of the keys to innovation is distinctiveness and impact, which often implies changing the rules of
the game and bringing new players into the fold who were not initially considered to be part of the
game (Chen and Kai-Ling Ho 2002). When Diners Club issued the first credit card to 200 customers in
1951, it launched a revolutionary change in payments that had a tremendous impact on the financial
industry. We place innovation at the high-end of the scale because it gives a firm a temporary
competitive advantage through incomparable products, incomparable services or new breakthrough
markets (Linder and Cantrell 2000). Of course, at some point unique value and premium rents to the
innovator will disappear, either through commoditization (e.g. automatic teller machines) or the
introduction of a superior technology (e.g. the fax machine being pushed aside by e-mail) (Ruggles
2002).
It can be interesting to plot a company's ELEMENTARY VALUE PROPOSITION(s) against the ones
of its competitor's to get a better picture of a firms position in the competitive landscape. In order to
achieve this, (Kim and Mauborgne 1997) have introduced the concept of the value curve (1997),
ICEC’2003

which they later called strategy canvas (2002). This allowed them to capture and visualize offerings on
a graph and visualize a company's competitive position.

4.4 Customer Utility: Price level

This attribute compares the value proposition's price to the one of the competition's. The scale goes
from free (e.g. online newspapers) over economy (e.g. Southwest, EasyJet, RyanAir) and market (e.g.
stocks) to high-end (e.g. Rolex).
Free. Some companies offer a VALUE PROPOSITION to the customer without asking for financial
compensation. They can do this because their business model is based on other sources of income.
One example are the free daily newspapers that are distributed to commuters in large agglomerations.
The income of these papers are essentially based on advertising and classified ads. Similar so-called
"free business models" have mushroomed during the summit of the Internet boom, but crashed
because of declining advertising revenues. Other companies offer free value and derive revenues from
these activities, such as selling customer information to marketers. Another completely different
example of free value in the software industry has mainly become possible because of the Internet.
Meant is so-called open-source software, like the operating system Linux or the Office Suite
OpenOffice, that are freely available for download over the Web.
Economy. This is the low-end of the scale where a company offers a price that is more attractive than
the one of the bulk of its competitors. Often, but necessarily this goes hand in hand with a lower value
level. In order to be able to offer attractive prices over a sustained period of time a firm has to
streamline other elements in its business model, such as its activity configuration or its complementary
revenue streams. Through attractive prices, made possible because of just-in-time production and
direct selling over the Internet, the computer seller Dell was able to achieve a dominant position in
computer retailing.
Market. Pricing at the market simply means little price demarcation from the rest of the market.
Nevertheless, a market price can still seem attractive if special features or attributes of the value
proposition signal additional value.
High-end. Represents the upper boundary of the price scale. High-end prices are usually found in
luxury goods, but also for new and innovative value propositions that still allow charging a premium
(Linder and Cantrell 2000).
By capturing the two elementary characteristics of an offering, the value level and the price level
(Anderson and Narus 1998), a company can draw a so-called value map (Kambil et al. 1997). This
helps defining its relative position in an industry along the price-value axis. Such a map also contains
the value frontier, which defines the maximum value (performance of a value proposition) currently
feasible for any given cost (minimum price of a value proposition). Market leaders will either extend
and rethink their position in the value map to differentiate themselves from their competitors or
radically innovate to shift the value frontier. The first strategy consists in extending the value frontier
towards the low-end, as has been demonstrated in the airline industry by Southwest in America or
easyJet and Ryanair in Europe. These three carriers have adopted a low-frills, low-cost service through
which they have become the most successful airlines of the industry. The second strategy is to extend
the value frontier towards the high end, as McKinsey, a strategy consulting company, has done during
the 1980s and 1990s. By only working with the very best people and only accepting customer projects
at the highest level of management, they have dominated high-level consulting for a very long time.
The third strategy is to shift the value frontier. This means providing the same level of value at a lower
price, or more value at the same price or even better more value at a lower price than the rest of the
industry. This can be achieved through business model innovation, most often based on technological
change (e.g. e-business). Dell Computer is a widely cited example of a company that offers its
customers high value at moderate prices. Through direct selling and online customer services Dell was
able to rapidly achieve a dominant market position in computer and server retailing.
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Something that must be considered is offering ELEMENTARY VALUE PROPOSITIONs for free
because they can have the sole function of complementing and making a core ELEMENTARY
VALUE PROPOSITION more attractive. The VALUE PROPOSITION of an online bookseller, for
instance, is composed of a multitude of ELEMENTARY VALUE PROPOSITIONs, such as the large
range of books, personalized book recommendations, excerpts and book critics. But the only costs the
customer finally has to bear is the book price and probably delivery charges. However, it makes a lot
of sense to price ELEMENTARY VALUE PROPOSITIONs because it allows a better comparison to
the competition's set of ELEMENTARY VALUE PROPOSITIONs that may be priced differently.
Further, companies increasingly start to offer so-called "naked solutions" or "naked systems" (i.e. core
ELEMENTARY VALUE PROPOSITIONs) to which customers can add further features according to
their requirements (i.e. complementary ELEMENTARY VALUE PROPOSITIONs) at an additional
cost (Anderson and Narus 1995). This essentially allows firms to offer a cheaper core VALUE
PROPOSITION.

5 MINI CASE: easyMoney.com

The main goal of conceptualizing VALUE PROPOSITIONs and decomposing them into their
ELEMENTARY OFFERINGs is a better understanding of the value a firm offers to its customers and
the possibility to compare them to a competitor's VALUE PROPOSITION. Further, it allows a firm to
understand where it could innovate and use ICT to add new information-based value components. The
strategic tools we can derive from this conceptualization are the strategy canvas (Kim and Mauborgne
2002), the value map (Kambil et al. 1997) and a combination of the two, by also considering the entire
value life cycle. We illustrate this with a mini case in the credit card industry.
easyMoney.com is a credit card company founded by Haji-Ioannou who has also created easyJet,
easyCar, easyInternetCafé, easyValue.com and easyCinema.com. Its value proposition consists of
customized credit cards at attractive prices. Through transparent pricing, clear product offerings, the
use of ICT and avoiding cross-subsidies between products and customers the credit card client only
pays for what he gets. Table 3 and figure 4 give an overview of the core ELEMENTARY VALUE
PROPOSITIONs of easyMoney.com. The data has been collected from the easyMoney.com website.
Card Builder Personalized credit card Online account

Description With the so-called Card The easyMoney.com Customers can handle
Builder customers can credit card is accepted at their account online and
select their own over 19.1 million receive their statements
individual combination of locations worldwide electronically. At every
interest rate, cashback displaying the moment they have an up
rewards, annual fee and MasterCard logo and is to date overview of their
servicing options. They financially attractive. account history.
build their own
personalized credit card

Reasoning A customized credit card By configuring his own Clients can conveniently
reduces the financial risk credit card the customer manage their accounts
of paying for options the benefits from attractive from their PC and profit
customer doesn’t need prices because he pays from lower handling
nor use. for what he gets. costs.

Value life cycle Value creation Value Consumption Value Consumption

Value level Innovation Innovation Innovation/me-too

Price level free economy free

Table 3: The core ELEMENTARY VALUE PROPOSITIONs of easyMoney.com

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VALUE
PROPOSITION

Value creation Value appropriation Value consumption Value renewal Value transfer

Card Builder allows Applications are The easyMoney The credit card An additional card
customers to design made via the credit card is features can be holder can be added
their individualized easyMoney.com accepted at over 19 changed up to 3
credit card tailored Website million locations times a year for free
to their needs
Clear offerings and Credit card costs are
transparent pricing low based and based
help customers find on the customer's
the right product profile
price

price
price

price
price

value value value value

Figure 4: easyMoney.com's value proposition

innovation
high-end

excellence

marke

value
t
Imitative
price

innovation
economy
me-too

free
Online account
management
Interest rates

Annual fees

Limits

Online
Card

Credit policy

Personalized
credit card
acceptance

correspondanc
e

easyMoney.com
Major credit cards

Figure 5: Strategy canvas easyMoney.com based on (Kim and Mauborgne 2002)

Figure 5 shows a simplified strategy canvas for easyMoney.com and visualizes where its main
differentiation can be found. Namely these are in price advantages and new innovative features, such
as the personalized credit card and the online account handling. The value map in figure 6 shows that
easyMoney.com has shifted the value frontier by offering innovative value to cheaper conditions. In
other words by applying a new business model supporting its value proposition it has modified the
competitive landscape.
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high-end

major credit cards

marke
price

economy
easyMoney.com

free
me-too Imitative excellence innovation
innovation
value

Figure 6: Value map easyMoney.com, based on (Kambil et al. 1997)

6 CONCLUSION

In this paper we explained in more detail the product pillar of the business model framework of
(Osterwalder and Pigneur 2002). We provide a conceptual approach to value propositions that allow
their modelling and mapping. Using such a systematic approach to value helps manager's bring their
mental models in a more structured form. This is particularly important in e-business, where value
propositions tend to be complex and difficult to communicate. Formally seizing value propositions
helps firms compare their value proposition to the one of their competitors and helps them find out
where they could innovate and include new information-based value elements into their value
proposition. The value proposition framework we outline in this paper is the basis for strategic
management tools, such as the strategy canvas (Kim and Mauborgne 2002) and the value map (Kambil
et al. 1997). In this paper we argue that formal methods to seize value propositions are still missing,
although some concepts can be found in literature. But in order to build (software-based) management,
visualization and communication tools for modelling value propositions, formal models must be
provided as a basis.

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