The Systemic Nature of the Value PropositionUsing CATWOE to define the value proposition for a Lean Startup. Lean Liverpool 13th Dec 2012.

C is for CUSTOMER—the principal beneficiary and for whom the system exists

A is for ACTORS—those with knowledge and skill underpinning service to C

*T is for TRANSFORMATION —the effect/benefit felt by the customer

Places emphasis on the functionality of the system from the customer POV*

W is for WORLDVIEW or values of the actors involved (manager dominant)

O is for OWNERSHIP—the person or entity able to stop the system

E is for ENVIRONMENT—the context (e.g. physical, regulatory) of operation

CATWOE-Mnemonic

Part of the soft systems method of system or organisational analysis, design (business model) with a view to improving performance

used to generate a concise statement of core purpose also called the root definition which contains the value proposition.

The model of an organisation/enterprise cascades from its core purpose or reason for existing

It has to be customer focused

Enterprise System

Customer System

Supplier Enterprise

System

Conventional use of CATWOE to define separate systems

Customer System

Transformation becomes the beneficial effect on the customer system-value proposition

Unconventional use of CATWOE to define the value proposition

Enterprise System

Core Purpose

Activity 1

Activity2

Activity 3

CATWOE and Business Model Canvas

actors

actors

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actors

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Resources othrResources

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Illustration of CATWOE in action…1

ABC Ltd is a company based in Merseyside (E) owned by Mr Y (O) and provides an excellent service (W), at a profit (W), to manufacturers (C) requiring the application of performance enhancing surface coatings (T) to metallic substrates (components) used in high value added machinery and systems (for example aircraft parts). The core purpose is, therefore, not to make or manufacture, but to increase the performance of components through the application of a surface coating.

ABC described itself as a manufacturer, involved in metal coating.

Illustration of CATWOE in action…2

This company considered itself a hat manufacturer, but they also imported hats and supplied to retailers through a wholesaling activity. They mostly made hats to order, but they also make hats for stock. Hats fell into three categories: uniform hats, leisure hats, technical hats (H&S) related. They also designed hats.

A company owned by its MD (O) and embedded in Merseyside (E) that makes a profit (W) and created employment (W) by designing, making, and otherwise supplying head wear as a functional element of a uniform set of clothes so satisfying a user’s desire or need for dress uniformity (C) as an integral part of establishing or building an identity (T). This definition excludes hats designed for specific ‘technical’ functions because they require different actors to design and make them, and may be marketed to customers with special needs. CATWOE analysis suggests this aspect of the business should be pursued as a distinct but complementary business.

Business core purpose should be expressed or captured in a single sentence,

CATWOE and Discovering Revenue StreamsActivity 1 Activity 2

What’s the common factor? Cleaner teeth? Oral hygiene? Oral Care?

Value proposition is improved oral hygiene, giving healthier teeth and gums for longer.

Innovation- Multiple revenue streams

Marx and the manipulation of the value proposition

Karl Marx distinguished between

Exchange-value and Use-value

Product design

Advertisingcopy

packaging

Enhance the value proposition and increasethe exchange-value

THE PROMISE OF USE-VALUE

THE PROMISE OF USE-VALUE