The Digital Transformation Playbook: Rethink Your Business for the Digital Age

Value Proposition Differential
Every disrupter requires a difference in value proposition that dramatically 
displaces value provided by the incumbent. That difference can come from 
many possible sources, which I call value proposition generatives (a term I 
am adapting from Kevin Kelly).
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Key value proposition generatives that are common to digital disrupt-
ers include the following:
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 Price: Digital business models often allow for the same product or ser-
vice to be offered at a substantially lower price.
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 Free or “freemium” offer: Research has shown that free offers stimu-
late many more customer trials than a low price, even a penny.
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Many 
new business models add customer value with a freemium offer, where 
some level of service is available for free but a premium paid version 
offers additional benefits.
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 Access: One of the most common generatives of a digital business model 
is the ability to access content or services remotely, anywhere, any time.

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 Simplicity: Many digital business models disrupt by removing friction 
from the sales process, making decision, purchase, and enjoyment of a 
product much simpler and easier.
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 Personalization: Customers prefer to have more choices to pick from 
(provided there are tools to assist) and the choice of a product or ser-
vice that fits their particular needs. Sometimes this personalization 
occurs through recommendation engines like Netflix’s; in other cases, 
a new business offers customers the chance to customize a product.
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 Aggregation: Many platform business models add value by aggregating 
many sellers for the customer to choose from.
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 Unbundling: A lot of digital innovation involves splitting apart tra-
ditional bundles—groups of products, services, or features that cus-
tomers needed to purchase together. The added value can come from 
letting the customer buy only the part they need or from focusing on 
and improving the one part of the bundle that matters most.
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 Integration (or rebundling): In the opposite direction, businesses can 
generate new customer value by bundling together services that are 
currently separate. (Think of the first iPhone customers, carrying one 
device rather than a phone, an MP3 player, and a personal digital assis-
tant.) The real value of integration comes when the various parts work 
together in a seamless way that was not possible when they were sepa-
rate. (Think of how your address book, maps, calendar, e-mail, phone 
calls, and texts all work together and interact in a smartphone.)
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 Social: The ability to share the experience of a product or service with 
others is increasingly valuable to many customers.
This list is not meant to be exhaustive. Other value proposition gen-
eratives that may be less tied to digital technologies include purpose (e.g., 
how each purchase from Warby Parker or Patagonia supports a social 
cause), authenticity (e.g., how Etsy allows shoppers to interact with and 
buy directly from craft artisans), or freedom from ownership (e.g., how 
Rent The Runway allows customers to rent a different designer dress each 
time they go out rather than owning any of them).
You will notice that the generatives above arise from many of the 
strategic concepts we have seen throughout the book—such as customers’ 
networked behavior, the path to purchase, the use of data for personaliza-
tion, and the aggregating value of platforms. All of them are applied in 
the service of adapting or inventing new value propositions, the subject 
of chapter 6.

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