A properly crafted value proposition is critical for successfully commercializing innovation. However, a great innovation can be doomed for failure when paired with a poorly positioned value proposition.

Geoffrey Moore posted the other day that innovating to be best in class is a waste. Moore’s research showed that there where three key sources to attractive returns - differentiation, neutralization, and productivity - and that best in class falls between differentiation and neautralization.

“It is not sufficiently differentiated to be unique, and thus it does not create bargaining power. But it goes well beyond the minimum acceptable standard, which means you have spent a bunch of resources beyond what you had to and achieved no economic return for so doing! That’s why “best in class” is a sucker bet. In essence, best-in-class projects should be classified as waste.”

Moore’s post complimented a good article in this months HBR on “Customer Value Propositions in Business Markets“. The article outlines the way to craft a resonating focus value statement that answers the question “what is most worthwhile for our firm to keep in mind about your offering?”. The author argues that the best value propositions consist of the one or two points of difference, and possibly a point of parity, whose improvement delivers the greatest value to the customer.

The conclusions of the articles are similar. The best innovations (value propositions) consist of a few key differences between your offering and the competition and aim to neatralize select other points (points of parity). When you aim to be best in class your level of differentiation is not enough to “create the bargaining power with customers that leads to higher revenues and margins”. When you structure your value proposition to highlight your best in class-ness, you end up diluting the differential points that are valuable.

If an innovation avoids the pitfalls of being best in class, and offers a sustained competitive advantage, a poorly articulated value proposition will present the product as, at best, best in class, erroding potential differences between products and possibly positioning the innovation for failure.

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Brent Edwards has a post on his Innovation Science about Moore’s post and argues that in the medical devices field “an increase in efficacy of a new treatment over current solutions can in large product success without requiring any of the three strategies that Moore defined“. I don’t think success is as easy as Brent makes it sound - to simply be better than the alternative. I believe the product would need to be different/better/unique enough from current offerings with respect to a valuable feature to justify an increase in price/change in product and that the difference needs to be articulated properly. Being better in all categories may not induce the desired result.

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