Value Proposition, Explained on a Barber Shop

Current as of November 7, 2026. Quotations come from the published sources listed at the end; the working definition of a value proposition and the recommendations are ours, and are labeled. The barber shop is invented for this article to show the method; it is not a real business, and nothing about it is reported fact.

Any business can tell you what it sells. Saying, in one sentence, why a particular customer should choose it over every other way of getting the same job done is harder. That sentence is the value proposition, and it does more work than its reputation suggests: it decides which parts of the business have to be excellent and which only have to be good enough.

This article works the idea through on a business with nothing to hide behind, a small barber shop, from the promise to the capabilities that keep it. Then it shows the same method at a bank.

What a value proposition is

Our working definition, which builds on the sources below rather than quoting any of them: a value proposition is the specific benefit a business promises a chosen customer, net of what that customer gives up to get it, compared with the alternatives open to them. Three parts, and each one is a choice: who the customer is, what they get, and instead of what.

One early statement of the idea is a June 1988 McKinsey Staff Paper by Michael Lanning and Edward Michaels, A Business Is a Value Delivery System. Its opening summary reads: "Customers select the product they think is a superior value (benefits minus price)." It goes on to describe a business as "a system for superior value delivery: choosing a superior value proposition, and echoing it through the business system by providing and communicating it."

Two words in that summary carry most of the weight. Think: what counts is the value the customer perceives, not the value the business believes it offers. System: the promise is only as good as the business behind it. The rest of this article is about the second word. What a customer gives up includes time and effort as well as money, which is how a cheaper option can still lose (interpretation).

Meet the shop

Picture a shop with two chairs on a street near a commuter rail station. The owner could try to serve everyone who needs a haircut. That is not a value proposition; it is a location.

Instead, the owner picks one customer: an office worker nearby who wants a sharp, consistent cut and has only a lunch break to get it. The proposition, written as the owner would say it:

For people who work near the station: a haircut you can book in seconds, that starts on time, finishes inside your lunch break, and comes out the same way every visit.

Notice what it leaves out. It does not promise the cheapest cut on the street, the most fashionable one, or an afternoon of conversation. Other shops can have those customers. A proposition that no customer could turn down is one no competitor would notice, and choosing a customer means choosing which ones to lose.

Testing the promise with the Value Proposition Canvas

Strategyzer's Value Proposition Canvas is one way to check whether a promise matches a customer. Its two halves ask you to "Describe one customer segment: the jobs they are trying to get done, the pains they hit along the way, and the gains they are after," then to "List what you offer, then name the pains it relieves and the gains it creates." For the shop:

Strategyzer's page on the canvas also says something every owner should pin above the mirror: "Fit is a claim until customers confirm it." For this shop, confirmation looks like behavior, not compliments: customers who book again, slots that fill at lunch and sit empty mid-afternoon, and few walk-ins asking for a cut nobody has time to give.

What a value proposition is not

• A slogan. A line like great cuts, great prices cannot be tested and promises nothing in particular. A value proposition is specific enough to be wrong.
• A feature list. Online booking is a feature. Starting on time is the promise. Customers buy the second; the first is one way of keeping it.
• A promise to everyone. If the shop also courts customers who want a long, sociable appointment, its lunch-break slots will run late, and it will break the promise to the customer it chose.

From the promise to capabilities

A promise is kept by what the business can do. Business architecture calls those abilities capabilities. A 2018 presentation on business architecture in the TOGAF standard, published by The Open Group, uses this definition, which it credits to a 2006 white paper by Ulrich Homann: "A business capability is a particular ability or capacity that a business may possess or exchange to achieve a specific purpose or outcome." The same presentation is as clear about what one is not: "A business capability is not how, why or where a business uses the capability", and it advises that a capability's name is "Usually a noun vs. verb".

So the shop's capabilities are named for what it can do, not for who does it or with which tool:

• Appointment Management: designing slots, taking bookings, sending reminders, handling no-shows
• Hair Service Delivery: cutting, finishing and advising, to a consistent standard
• Client Record Management: keeping each customer's preferences and history
• Staff Management: scheduling, training and keeping barbers to the house standard
• Payment Acceptance: taking money quickly by card, phone or at booking
• Supplies and Equipment Management: stock, tools and their upkeep
• Marketing: telling the chosen customers the promise exists
• Premises Management: the shop itself, its lease, cleaning and safety
• Financial Management: bookkeeping, tax and cash

This is why capabilities are useful: they are the stable part of the picture. The owner can switch booking apps, hire a new barber or move two streets over, and the list above does not change. What changes is how well each capability performs, which is the question the next two sections answer (interpretation).

Each capability can be broken down further. Appointment Management, for instance, contains slot design, booking, reminders, rescheduling and no-show handling. The Open Group presentation advises decomposing capabilities several levels deep, depending on the size and complexity of the organization; the article What Is a Business Capability Model? covers how the levels work.

The value stream: how the promise is delivered

Capabilities say what the shop can do. A value stream says how those abilities combine to deliver something to a customer, in order. The Open Group presentation defines it this way: "A value stream is an end-to-end collection of value-adding activities that create an overall result for a customer, stakeholder, or end-user". Two points from its guidance slide matter here: "There must be a clearly defined triggering stakeholder", and "Value streams are not capabilities, nor components of capabilities".

The shop's main value stream is Get a Haircut. It is triggered by a customer who needs a cut, and it ends when they leave with one and their next visit is in hand:

Reading the table down the right-hand column is the useful part. The same capability shows up in several stages: Appointment Management is in three of six. That is the general pattern: value streams are few and customer-shaped, capabilities are reusable, and the cross-map between them shows where one weak capability can break several stages at once (interpretation). For running this exercise with a team, see How to Facilitate a Value Stream Mapping Workshop for a Bank.

Where the promise lands: which capabilities must be excellent

Here is what the value proposition was for all along. Put the promise next to the capabilities and ask, for each one, how much the promise depends on it. The answer is uneven, and it should be.

Both shops cut hair, and they share almost the same list of capabilities. They should invest in very different places. A lunch-break shop that spends on a showpiece interior while its booking system double-books has kept its costs and broken its promise (interpretation).

The table also works in reverse, as a diagnostic. When a customer complains, trace the complaint to a stage and the stage to a capability. A complaint that the customer waited and was late back to work is a check-in stage failure, and the capability behind it is Appointment Management or Staff Management, not the quality of the cut. Fixing the wrong capability is a reliable way to spend money without keeping the promise (interpretation).

The same method at a bank

Swap the shop for a bank and nothing about the method changes. Only the scale does.

Take a hypothetical bank whose promise to small-business owners is: open an account and make your first payment without visiting a branch. Its capability model will be far larger than the shop's. The Finantrix Banking and Payments Capability Matrix, for example, frames a bank by areas such as client and account management, payments and transaction processing, and financial crime and fraud management. The method is the same: find the capabilities the promise depends on, and make those excellent.

The bank meets a constraint the barber never does. In the United States, a binding Treasury regulation, 31 CFR 1020.220, requires each bank that must have an anti-money laundering program to run a Customer Identification Program, whose procedures "must enable the bank to form a reasonable belief that it knows the true identity of each customer". The bank collects identifying information before it opens the account, and the rule requires verification "within a reasonable time after the account is opened." So the onboarding stage, where the promise is kept, is also where identity checks begin, and a promise that the first payment can follow at once has to be reconciled with that verification. The promise lands on client onboarding and on financial crime management together, and the two must be excellent together; a bank that makes onboarding fast by making identity checks weak has not kept its promise, it has created a different problem (interpretation).

That is the value of doing this on paper first. In a barber shop, a mismatch between the promise and the capabilities costs a regular customer. In a bank, it can cost a regulatory finding as well.

Common mistakes

• Writing the proposition for everyone, so it chooses nothing
• Mistaking a feature for the promise: having an app is not a reason to choose you
• Never testing fit, so the proposition stays a claim
• Naming capabilities after departments or tools ("the front desk", "the booking app") rather than abilities
• Drawing value streams around internal teams instead of a triggering stakeholder
• Investing evenly across capabilities, so the ones the promise depends on get the same attention as the ones it does not

How we sourced this article: every quotation in it comes from the published documents listed below, and we keep saved copies of them. The working definition of a value proposition and everything marked (interpretation) are our own. The barber shop and the bank's promise are illustrations, not reports of real businesses. If you want to question a point, get in touch through our contact page.

Sources

1. Michael J. Lanning and Edward G. Michaels, "A Business Is a Value Delivery System", McKinsey Staff Paper No. 41, June 1988 (copy hosted by DPV Group)
2. Strategyzer, "The Value Proposition Canvas" (web page, accessed November 7, 2026)
3. Steve DuPont, "Advancement of Business Architecture in the TOGAF Ecosystem", The Open Group, September 2018 (OMG document basig/18-09-03)
4. 31 CFR 1020.220, Customer identification program requirements for banks (eCFR)