terminology - Meaning of "proposition" in "value proposition"

The concept of "value proposition" sounds a bit abstract to me.

Does the "proposition" in "value proposition" mean the same as in "business proposition"?

How is it different from "value creation"?

Answer

Yes, the meaning of "proposition" is similar in "value proposition" and "business proposition".

A "business proposition" is a (possibly informal) "business proposal", which the counter-party can decide to accept, decline, negotiate, or (possibly) use as leverage in their negotiations with other parties. The counter-party is more likely to accept the proposal if they think they will be better off taking the proposal.

A "value proposition" can refer to the aspects of a "business proposition" that provide benefits to the customer. These benefits can be both tangible and intangible. For example, reduced costs, reliable service, using prestigious technology, and convenient financing are all valuable to (some) customers.

A company that "offers a good value proposition" can charge a large fraction of that "perceived value".

So far, this explanation of "value proposition" is very similar to an explanation of "value creation". The key differences are:

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  "value proposition" emphasizes the seller's ability to "articulate" the value the seller provides. If your marketing and sales team cannot explain what makes their offer so good, it is not really part of the proposal, is it?

  
  



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  "value creation" emphasizes the actions taken to create the value, and especially the ability of the seller to capture that value. Many people create value: Engineers who make the system more reliable, financiers who come up with practical ways to finance deals, assembly technicians who don't make mistakes, customers who know what they are getting (and take advantage of the benefits), et cetera. A seller who successfully markets the product and gets a very good price has "created value". The seller (and their government) can measure the "value added" by subtracting the seller's costs from the seller's revenues.

  
  

In the United States, some business consultants talk about the value of a brand, or attribute the increase in the stock price of a company to the actions of the company's top managers. This results in managers taking credit for the increase in the value of the company, even if it is based on potential future profits from sales that have not happened yet! Such "value creation" can be followed by "value destruction" if the stock market goes down.