Logic Models

The Twitter-Elon Musk debate pushes “logic models” or “value propositions” into the popular press, along with core business, free cash flow, and EBITDA (earnings before interest, taxes, depreciation, and amortization). In this blog, we expand on the concept of “value propositions” we mentioned in our blog on Core Business.

Here’s what a notional, linear logic model looks this:

Figure 1 is also an example of a value chain. It illustrates how we transform inputs into outcomes or results.

Underlying a business is its theory of how it creates value. In our discussions of “The Bright Side of the Dismal Science: Vision, Mission & Purpose,” we highlighted that

We “owner-workers” are visionaries. We acquire assets and combine them to allow us to manifest a vision. We want to bring something into being.

Thus, we have an implicit or explicit value proposition that provides the foundation for our actions. Business owners have a “theory of their business.”

“The Value Network’s article — A Business Model of the Twitter Ecosystem — illustrates one of several ways Twitter creates value. See the following graphic.

Figure 2 represents the classic “network logic model.” Twitter “mediates exchanges” of information and monetizes those interactions. That’s one of several ways it creates value.

Here’s an example of a logic model we developed for a client.

Here the client takes an individual’s current (as-is) talent, skill, and experience levels through a series of activities supplemented by peer tutoring to create new (to-be) levels.

The client’s model represents a classic “value shop logic model.” Here the client creates customized solutions to unique problems. That’s their value added.

There are three generic value propositions – value chains, shops, and networks. Marketing91 expands these three generic types into 23.

Think of logic models or value propositions or theories of the business as “cause and effect statements.”

What’s your “logic model?”