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Value Proposition

Meaning for social enterprises

The term “value proposition” first appeared in 1988, when Edward Michaels and Michael Lanning mentioned it in a paper written for McKinsey&Co. Ever since then, anyone who has ever planned to start a new project, test a new product or launch a new business, surely came across this concept. But precisely, what is “value proposition” meaning? And how does it translate to social entrepreneurial contexts?

Value Proposition: meaning for traditional businesses

According to Investopedia, “value proposition” refers to the benefits a company promises to create and deliver to its customers. Written down as a statement, it points out the reasons why someone should buy a product/service from that business.

However, when it comes to the social sector, we believe a broader definition of “value proposition” is needed.

value proposition meaning

As a matter of fact, successful social enterprises like Specialisterne simultaneously create value for both customers and beneficiaries. By looking at such examples, value creation goes beyond target’s ability, interest or even willingness to pay. So, “value proposition” should get re-defined accordingly.

Value Proposition: meaning for social enterprises

As said, social businesses aim to create social and economic value at the same time. When it comes to defining “value proposition” within social contexts, the book “Value Proposition Design” might come in handy. Here, book’s author Alex Osterwalder breaks down this concept into three main pillars. According to Osterwalder, businesses can generate value for their audiences if they help them:

__ 1) complete tasks or get things done;

__ 2) solve problems or relieve pains;

__ 3) fulfill wishes or create gains.

Only then, they might consider using and eventually buying a product or service.

value proposition meaning

We believe this framework perfectly applies to social businesses too. In a way, Osterwalder seems to suggest that “value proposition” shouldn’t focus on “reasons to buy” something, but rather on the “reasons to use” it. A way broader definition and scope, that embraces both customer and beneficiary segments, moving past people’s ability or willingness to pay.

Conclusion

Michaels and Lanning first defined value proposition as “a statement of the benefits that the company will provide, along with the approximate price it will charge each customer segment for those benefits”. When it comes to social entrepreneurship, this definition turns out to be obsolete. In fact, social businesses create value for two very different segments: customers and beneficiaries. The first ones are able to pay for product and services, the latter ones usually are not.

So, value proposition in the social sector should be re-considered, in line with Osterwalder’s logic. A description of how a certain intervention can solve people’s problems, satisfy their wishes and help them get things done.


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