Value Exchange Canvas
A business is a platform for establishing value exchange.
This article is about how to get a new perspective on your business by simply looking at thé fundement: the value exchange. For this I came up with a tool inspired by the "Business Modal Canvas" that consists of clear building blocks that helps you to evaluate your current business, marketing and communication and to come up with new ideas to improve it.
Please do not confuse this canvas by the famous "Business Modal Canvas". It is something I created because I thought it was missing in the literature.
The figure above depictures a situation of two persons owning something valuable to one other. In history this would litally resolve in the exchange of goods, but for modern business there is of course almost always money on one side of the equation. We do this for the simple reason that ‘money -> product exchange’ is a lot more practical than pure goods exchange. You cannot easily store millions of breads or transport it to the other side of the world. With money you can. Furthermore with money you can trade with someone who doesn't need your stuff. If you would for example own only chickens how could you buy a bread if the bakery doesn't need chickens? With money humanity has created a virtual good that shares the same intrinsic value to anyone within a certain group.
This building block requires you to think about what the intrinsic values to be exchanged.
Still there is a lot more to say about the value exchange itself. Why would you buy a bread from that particular bakery? Why would you buy bread if you also could buy rice? There are infinite reasons why some value exhanges get established and why others not. In general three important conditions must to be met for any value exchange to be taken place. By understanding these you can ultimately grow your business.
So why would you and your customer choose for this particular exchange? The first rason to favor a certain exchange over another is that is unique benefits for both parties:
- A customer chooses to exchange his or her money for a bicycle from a certain reseller because it comes with benefits that competitors do not have. Maybe it is some extra service from the seller or the bike is just a bit cheaper.
- On the same time, if the bicycle reseller sells the bicycle for the same price he bought it from his suppliers, he would exchange value but not gain any profit. Financial profit is the obvious benefit businesses are seeking for. But there can be more. I argue that entrepreneurs need to think about other ways they can benefit from the deal apart from money. Like customers are selective, good entrepreneurs should be too. Entrepreneurs are just as important in the value exhange equation as customers are.
Futhermore it is important to note that benefits do not mean the same to every person. To create meaningful benefits an entrepreneur need to understand a customer completely. What are their needs and their problems? What can you do so customers benefit more from your exhanging more than from others? The beter the benefits you can add for your audience the more likely it is they will choose you and thereby the more (financial) benefits you can retrieve yourself. This is an essential part of value creation. Keep that in mind.
This building block requires you to think about how to create meaningful benefits for your customers and how to communicate them.
In order for every value exchange to establish there always must be a certain level of trust between both parties. If there is no trust-relationship it is simply impossible to do an exchange. Except of course if someone points a gun at you. “Give me your money or your life”.
This building block requires you to think about how to create a trust-relationship between your business and your audience and how you will communicate your trustworthiness.
The more trust we have in the other party, the more likely the exchange will take place. The more people already purchased your products the more people will follow and exchange their money for your product as well.
For Business-to-business keep in mind that businesses often buy from each others in order to delegate risk. It is often much less risky to outsource something to an expert than do it yourself, eventhough you can absolutely do it yourself. The more risk a customer outsources to another business the more important trust will be. When areas are riskier than others customers would require naturally more trusted and established parties while in other areas trust is minimally needed.
I furthermore believe that we conceptually do not buy from companies. In the end we buy always from other humans, and the more human you can make your business, the easier it is for others to simply trust you. So come up with a personal story instead of hiding yourself behind a template webshop. Ever wondered why brands exist? This is the answer! Because it’s the only way a big company with nameless employees can be namefull and by that human.
A brand is an artificial way to create a person we know that others trust.
The final condition for establishing a value exchange is the Proof block.
Proof acts opposite to trust. If there is no trust actual proof is required. The more trust the more less proof is required. If Apple (the company) simply puts their logo on a phone people buy it whether or not it has proven as a solid product. Therefore the younger the company is the more proof is required. The more established a company is the more it can rely on trust and loyalty. That's why branding matters for the long term!
This building block requires you to think about how to prove the value and benefits to your audience.
How can you improve these building blocks for your own business? I have created a template so you can start a brainstorm or discussion with others.