Alex Osterwalder et al.
Review
I used to enjoy the illustration style and presentation of these books, but on re-reading they were a little frustrating. That said there’s a good introduction to value propositions and the discovery process hidden between the cartoons. However, the content duplication across this series can be frustrating, this book contains 10% of Business Model Generation and 30% of Testing Business Ideas. Don’t read them back to back.
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Key Takeaways
The 20% that gave me 80% of the value.
Value Proposition Design is a process that helps increase alignment in your team and the chance of success by gaining clarity on what customers want. It helps minimising the risk of failure and ultimately guides through a process of designing, testing, and delivering what customers want.
The Value Proposition Canvas (VPC) makes value propositions visible and tangible, expanding on the Value Propositions and Customer Segments elements of the Business Model Canvas.
The VPC has two sides: the Customer Profile, which clarifies your customer understanding, and the Value Map, which describes how you intend to create value for that customer. The goal is to achieve a fit between the two.
The Customer Profile consists of Customer Jobs (tasks, problems, or needs), Pains (annoyances, obstacles, or risks), and Gains (outcomes and benefits). Jobs can be functional, social, or supporting, and have varying importance. Pains and gains are ranked by severity and relevance, respectively.
The Value Map includes Products and Services, Pain Relievers (how products alleviate pains), and Gain Creators (how products create gains). Focus on the most relevant pains and gains where your products can make a difference.
Fit is achieved when customers are excited about your value proposition because it addresses important jobs, alleviates extreme pains, and creates essential gains. There are three stages of fit: Problem-Solution Fit, Product-Market Fit, and Business Model Fit.
Great value propositions are rooted in business models that provide tailored solutions, identifying unsatisfied needs, and focusing on doing a few things exceptionally well, aligning with customer success metrics, and differentiating from competitors.
When developing prototypes, make them visual and tangible, adopt a beginner's mindset, create alternatives, embrace uncertainty, start with low-fidelity prototypes, invite feedback, learn from failures, and track progress.
Starting points for value proposition design include zooming in or out, sparking ideas by fixing design constraints, bringing in inspiration and innovating from the customer profile. You can look for solutions for customer needs, or look for customer needs that match technology capabilities.
Understanding customers involves leveraging existing research, conducting interviews, observing customers, using products personally, engaging customers in co-creation, and implementing experimental approaches.
Making choices requires assessing your value proposition against key criteria, simulating the voice of the customer, understanding context and competition, mastering the art of critique, channeling different types of feedback, voting with dots, ranking prototypes, stress-testing your business model, and assessing your business model design across seven dimensions.
Testing reduces the risk and uncertainty of your value proposition ideas. Start with cheap experiments and increase spending as certainty grows. Test all aspects of your Value Proposition and Business Model Canvases.
Follow testing principles, such as realising evidence trumps opinion, learning faster by embracing failure, testing early, making outcomes measurable, and testing irreversible decisions with extra care.
The Customer Development Process involves searching (Customer Discovery and Validation) and executing (Customer Creation and Company Building). The Lean Startup Method generates a hypothesis, builds a test, measures, and learns.
Test key assumptions underlying your business model, such as access to partners, resources, and activities, customer acquisition and retention, channels, and revenue generation.
The testing process includes extracting and prioritising hypotheses, designing and prioritising tests, running experiments, capturing learnings, and making progress based on the results (pivot, learn more, or validate).
The speed and consistency of learning are crucial. Avoid false positives, false negatives, local maximums, exhausted maximums, and testing the wrong thing. Choose a mixture of experiment types to balance strengths and weaknesses and test interest, priorities, and willingness to pay.
Use the VPC to create internal alignment, measure and monitor performance indicators, and reinvent your value proposition constantly. Take the exploration of new value propositions seriously and reinvent yourself while sitll successful, don’t wait for a crisis to force you.
Deep Summary
Longer form notes, typically condensed, reworded and de-duplicated.
- Value Proposition design will help increase alignment in your team, and increase the chance of their success.
- The benefits of value proposition design include gaining clarity on what customers want, aligning your team, and minimising the risk of failure.
- Helps you design, test and deliver what customers want.
- The Value Proposition Canvas helps you design and test value propositions in an iterative search for what customers want.
- The Value Proposition Canvas (VPC) makes value propositions visible and tangible so they’re easier to discuss. It expands on two elements of the Business Model Canvas: Value Propositions and Customer Segments.
- Skills you'll need: Entrepreneurial Knowledge, Design Thinking, Customer Empathy, Experimentation
The Value Proposition Canvas (VPC):
- A value proposition describes the benefits customers can expect from your product.
- The VPC has two sides.
- The Customer Profile: helps you clarify your customer understanding by describing a specific customer segment in a more detailed way:
- Customer Jobs: what customers are trying to get done in life and work, expressed in their own words
- Gains: the outcomes customers want to achieve or the benefits they are seeking.
- Pains: bad outcomes, risks and obstacles related to customer jobs
- The Value Map: helps you describe how you intent to create value for that customer. It breaks down your value proposition into:
- Products and Services: all the products and services you sell
- Pain Relievers: how your products and services alleviate customer pains
- Gain Creators: how your products and services create customer gains
- The goal is to achieve a fit between your value map and customer profile.
1.1 The Customer Profile:
Steps to complete the customer profile:
- Select the customer segment
- Identify the customer jobs
- Identify customer pains
- Identify customer gains
- Prioritise jobs, pains and gains
Customer Jobs: describe things your customers are trying to get done. A job can be a task, a job or a need. The three main types of jobs are:
- Functional Jobs: trying to complete a specific task or solve a specific problem
- Social Jobs: trying to look good and gain status.
- Supporting Jobs: in the context of purchasing and consuming value either as consumers or professionals as one of three different roles: buyer of value, co-creator of value, transfer of value.
Jobs depend on the context in which they are performed, imposing certain constraints or limitations.
Not all jobs have the same importance to your customer. Some are important some are insignificant. Frequency can be an important factor, as can a job resulting in a desired or unwanted outcome.
Customer Pains: describe anything that annoys your customers before, during and after trying to get a job done (or something that prevents them from getting a job done). Three types of customer pains:
- Undesired outcomes, problems and characteristics can be functional, emotional or ancillary. They may also include characteristics they don’t like (e.g. boring, ugly).
- Obstacles things that prevent customers from getting started or making fast progress.
- Risks undesired potential outcomes
Pains have severity (extreme or moderate).
Customer Gains are the outcomes and benefits your customers want. Gains include functional utility, social gains, positive emotions and cost savings. Four types of gains:
- Required gains: gains without which a solution won’t work
- Expected gains: basic gains we expect from a solution
- Desired gains: gains that go beyond what we’d expect but that we’d love to have
- Unexpected gains: gains that go beyond expectations and desires (they won’t come up when you ask customers)
Gains have a relevance, essential or nice to have.
Ranking Jobs, Pains and Gains:
Ranking jobs, pains and gains is essential to design value propositions that address things customers really care about. Your understanding of what really matters to customers will improve with every customer interaction and experiment.
Rank jobs according to their importance, pains on their severity and gains on their relevance.
Common Mistakes:
- Combining multiple customer segments into a single profile.
- Confusing jobs to be done with outcomes.
- Only considering functional jobs, neglecting social and emotional aspects.
- Creating lists of jobs, pains, and gains biased by your own value proposition.
- Identifying too few jobs, pains, and gains.
- Using vague descriptions of pains and gains.
Best Practices:
- Create a Value Proposition Canvas for each customer segment.
- Distinguish between the tasks customers perform (jobs) and their desired outcomes (gains) and challenges (pains).
- Value social and emotional jobs alongside functional ones.
- Map out the customer's perspective without bias from your offering.
- A comprehensive customer profile should reflect a full range of jobs, pains, and gains.
- Detail pains and gains specifically, clarifying measures of success and failure.
To effectively distinguish between pains and gains in a customer profile, avoid mere opposites; get into specific expectations for gains and concrete barriers for pains.
Continuously ask "why" to understand the deeper motivations behind customer jobs, moving past surface-level desires to the core drivers of their behaviour.
1.2 Value Map
Product and Services: are what you offer, they help your customers with their jobs. Can include physical, intangible, digital or financial products. Not all products and services have the same relevance to your customers, mark them from essential to nice to have.
Pain Relievers alleviate customer pains. They address annoyances encountered by customers during job execution, aiming to minimise these discomforts. Great value propositions focus on a few pains that really matter to customers. Pain relievers can are measured in relevance (to the most important pains).
Gain Creators describe how your products create customer gains, explicitly outlining how you intend to produce outcomes and benefits that your customer expects, desires or would be surprised by, including functionality, utility, social gains, positive emotions, and cost savings.
Gain creators don’t need to address everything, just focus on the those that are relevant to customers and where your products can make a difference.
Gain creators can be measured by relevance, from essential to nice to have.
Common Mistakes:
- Listing all products/services instead of just those for a specific segment.
- Including products/services in pain reliever and gain creator fields unnecessarily.
- Offering pain relievers and gain creators irrelevant to customer's pains and gains.
- Trying to address all customer pains and gains.
Best Practices:
- Tailor products/services to create value for specific customer segments.
- Define pain relievers and gain creators with clear benefits like saving time or good design.
- Understand value is relative to customer's jobs, pains, and gains.
- Accept that not all customer pains and gains will be addressed; choose wisely.
1.3 Fit
You achieve fit when customers get excited about your value proposition, which happens when you address important jobs, alleviate extreme pains and create essential gains that customers care about.
Fit is hard to find and maintain, striving for fit is the essence of value proposition.
You can’t solve for everything. Focus on the gains and pains that are most important to your customers.
Let your customers be the judge of your value proposition. It matters what they think, not how much it resonates with you.
Go through the pain relievers and gain creators to check if they fit a customer job, pain or gain. Ask yourself, how well does your proposition really fit your customer?
There are three stages of fit:
- Problem-Solution Fit: you have a value proposition that customers are shown to care about, designed to address specific customer jobs, pains, and gains. It's an unproven stage focusing on prototyping and validating customer interest in the value proposition.
- Product-Market Fit: when there is tangible evidence that your products, services, pain relievers, and gain creators provide real customer value and are gaining market traction. It involves an iterative process of validating or invalidating your value proposition's assumptions in the real market.
- Business Model Fit: when your value proposition is embedded in a profitable and scalable business model. It requires a sustainable approach that balances creating customer value with generating revenue, ensuring the proposition can thrive without draining resources.
In B2B there are different customer profiles, each with different pains and gains. Identify the most important ones and sketch out a value proposition canvas for each of them. You might have to cater to influencers, recommenders, economic buyers, decision makers, end users and even saboteurs to be successful.
Focus on the jobs, pains and gains that drive customers. Remember these are context dependent, the same customer’s priorities will change in a different context. That’s why demographics are a less powerful predictor and to be used with caution.
"Understand your customers beyond your solution. Unearth the jobs, pains, and gains that matter to them in order to understand how to improve your value proposition or invent new ones."
The search for a value proposition that fits is an iterative process, not a sequential one. Test ideas quickly to learn, create better designs and test again.
2. Design
- Kick-start value proposition design with prototyping possibilities for one of your starting points.
- Shape your value propositions by understanding customers
- Select which ones you want to further explore by making choices and finding the right business model.
- Great value propositions are rooted in business models that excel at providing solutions tailored to the most significant jobs, pains, and gains of customers. They identify and address unsatisfied jobs, unresolved pains, and unrealised gains, focusing on doing a few things exceptionally well, including meeting emotional and social needs. Success is aligned with the customer’s own metrics, targeting areas of high value that customers are willing to pay for. Distinctiveness is key, differentiating from competitors on aspects that customers truly care about. The goal is not only to outdo competitors on at least one front but also to innovate in ways that are not easily replicated, ensuring a unique market position.
- When developing prototypes: it’s crucial to make them visual and tangible, as this fosters dialogue and learning. Adopting a beginner’s mindset allows for unbiased exploration and innovation. It’s essential to not become too attached to initial ideas and to be willing to create alternatives for a better end result. Embracing the uncertainty of the early stages, known as the "liquid state," without rushing to finalize ideas, sets the foundation for success. Start with low-fidelity prototypes and refine them through iteration based on acquired knowledge. Early exposure of your work invites critical feedback, which is invaluable for improvement. Learning is accelerated by failing early, often, and cheaply, embracing mistakes as part of the learning curve. Employing creative techniques can lead to groundbreaking prototypes that defy conventional norms. "Shrek models" or extreme prototypes can be particularly effective in sparking debate and gaining deeper insights. Throughout this iterative process, it is vital to keep track of learnings, insights, and overall progress to inform future developments.
Starting Points
- Spark ideas with design constraints (e.g. pick a business model and see how it would apply )
- Bring inspiration to the table (books and magazines) to generate fresh ideas
- Push a technology, and look for a problem. Or pull from customer needs, and find a solution.
Understanding customers
- 6 Research Techniques:
- Leverage existing research and data, and study comparative industries to inform strategy.
- Conduct interviews with potential customers to gain insights into their needs and behaviours.
- Observe customers in their natural environments to truly understand their interactions and challenges.
- Use the products and services personally to experience the customer journey and identify areas for improvement.
- Engage customers in the development process to co-create solutions that meet their needs.
- Implement experimental approaches to customer interactions to validate hypotheses and learn from real-world feedback.
- When conducting interviews, approach with a beginner's mind and listen more than you talk to truly understand the interviewee's perspective. Seek factual information about their behaviours rather than simply their opinions. Keep probing with 'why' to uncover their real motivations. Avoid selling or discussing solutions; instead, focus on understanding their struggles. Always request permission for potential follow-up conversations and ask for recommendations on others you should speak to.
- Keep a note of early evangelists (a Steve Blank term) they can help you gain a foothold in the market later. An early evangelist needs to:
- Have the problem or need
- Be aware they have the problem
- Be actively looking for a solution
- Put together a solution of some kind
- Has or can get budget.
Making choices
- 10 questions to assess your value proposition
- Embedded in a solid business model.
- Targets the most important jobs, extreme pains, and essential gains.
- Addresses unsatisfied jobs, unresolved pains, and unrealized gains.
- Excels in selected pain relievers and gain creators.
- Covers functional, emotional, and social customer jobs.
- Aligns with customer success metrics.
- Focuses on widely experienced jobs, pains, and gains or those with high customer value.
- Differentiates meaningfully from the competition.
- Outperforms competitors in at least one key aspect.
- Offers a solution that is challenging for competitors to copy.
- Simulate the voice of the customer (and other relevant actors) through role-play
- Understand key context (industry forces, macroeconomic forces, key trends, market forces)
- Factors of competition, how do you compare to your competitors
- List the factors of competition across the x axis of a plot
- The Y axis is then how well you compete
- Plot yourself and your competitors, or even an alternative solution
- Master the art of critique.
- Emphasize the importance of feedback in the development and evolution of ideas.
- Train and nurture a culture of constructive feedback for idea presenters.
- Prioritize customer and market realities over internal feedback for idea refinement.
- Foster a supportive environment for the sharing and discussion of new concepts.
- Structure feedback sessions to be productive, fact-based, and free from personal agendas.
- Integrate fun into feedback sessions to maintain a positive and creative atmosphere.
- Encourage the exploration of challenging ideas with an open mindset.
- Channel different types of feedback using Bono’s thinking hats:
- White: Information and data
- Black: Difficulties, weaknesses, dangers, risks
- Yellow: Plus points, why an idea is useful
- Green: Ideals, alternatives, possibilities, solutions to black hat problems
- Vote with dots to quickly show the preferences of a group, can prevent lengthy discussions.
- Decide on the criteria that are most important then rank prototypes against them.
- Stress test your business model with quick numbers.
- 7 dimensions to assess your business model design:
- Switching costs
- Recurring revenues
- Earning vs spending
- Game-changing cost structure vs competitors?
- Is your business model leveraging the work of others? (e.g. facebook)
- Scalability.
- Protection from competition
3. Test:
Reduce the risk and uncertainty of your value proposition ideas by deciding what to test. Select the right test and then. measure your porgress.
- Start experimenting to reduce risk. When you start exploring new ideas, you are in a space of maximum uncertainty. You don’t know if they’ll work.
- Test your ideas with cheap experiments to learn and systematically reduce uncertainty
- Then increase spending on experiments, prototypes, and pilots with growing certainty.
- Test all the aspects of your Value Proposition and Business Model Canvases.
Testing Principles:
- Realise that evidence trumps opinion.
- Learn faster and reduce risk by embracing failure.
- Test early; refine later.
- Experiments are a lens to understand reality, not reality itself.
- Balance learnings with vision.
- Identify idea killers by testing the most crucial assumptions.
- Understand customers first by testing jobs, pains, and gains.
- Make testing outcomes measurable for actionable insights.
- Accept that not all facts are equal; some evidence is more reliable than others.
- Test irreversible decisions with extra care to ensure they are well-informed.
The customer development processL
There are no facts in the building, you need to test your ideas with customers and stakeholders before you implement them.
The Customer Development Process:
- Search: Experiment and learn until you’ve validated which value propositions will sell and which business models will work
- Customer Discovery: Get out of the building to learn about your customers' jobs, pains, and gains. Investigate what you could offer them to alleviate pains and create gains.
- Customer Validation: Run experiments to test if customers value how your products and services intend to alleviate pains and create gains.
- Execute: Get into execution mode and scale.
- Customer Creation: Start building end-user demand. Drive customers to your sales channels and begin scaling the business.
- Company Building: Transition from a temporary organization designed to search and experiment to a structure focused on executing a validated model.
The Lean startup method: Generate a hypothesis → build (a test) → measure → learn
What to Test
- Do you have evidence showing: Which jobs, gains and pains matter most to your customers?
- Design experiments that give you evidence your product actually kills pains and creates gains that matter to your customers.
- Demonstrate that your products and services address customer needs and add value.
- Efficiently and quickly test value propositions to understand customer priorities, focusing on key issues without building out a full solution
- Design cost-effective experiments to test specific aspects, refining your offerings based on solid insights.
- You also need to test the key assumptions underlying your business model:
- Do you have evidence showing that you will have access to the partners required for your model to work?
- That you will have access to the resources required to create value?
- That you will be able to perform the activities required to create value?
- How you will succeed in acquiring and retaining customers?
- Through which channels will you be able to reach customers?
- That you can generate more revenue than costs incurred?
The Testing Process
- Extract hypothesis: use the canvases to identify what to test. What needs to be true for your idea to work but that hasn’t been fully validated yet?
- Prioritise hypothesis: rank hypothesis, what’s needs to be true for you to survive and thrive
- Design tests:
- Hypothesis: What do you believe?
- Test: What will you do to verify it?
- Metric: What will you measure will you measure?
- Criteria: What threshold counts as a success?
- Practicalities : Cost of running test, reliability of data, how critical is it, time required to measure.
- Prioritise tests: prioritise cheap and quick tests that tackle the most important hypothesis.
- Run the experiments: start your tests, if early tests are negative you might have to rethink
- Capture learnings: the hypothesis, the observation, the insight, the next actions
- Make progress: Next actions depend on which scenario:
- Idea Invalidated: Pivot by exploring new segments, propositions, or business models if initial tests fail. Look for new potential customers, value propositions, and business models in response to invalidated interest.
- Need to learn more: Seek further confirmation through additional tests if preliminary data suggests significant changes are needed. Deepen understanding by conducting more tests to uncover why certain trends are occurring or why potential customers are disinterested.
- Idea Validated: Move on to the next hypothesis for testing once current insights and data are reliable. Begin execution if the data and insights prove to be of high quality and reliable, acting on the findings
The speed and consistency of at which you learn is crucial. Early experiments should be fast and illuminating. The faster you iterate, the more you learn and the faster you succeed. Always be asking how can we learn twice as much in half the time?
Avoid false positives, false negatives, local maximums, exhausted maximums and testing the wrong thing.
Choose a mixture of experiment types to balance the strengths and weaknesses of each. Look to test interest and relevance → priorities and preferences → willingness to pay.
Types of test:
- Ad Tracking
- Unique link tracking
- MVP Catalog
- Illustrations, storyboards and scenarios
- Life-size experiments
- Landing page
- Split testing
- Innovation games
- Speed boat
- Product box
- Buy a feature
- Mock sales
- Presales
4. Evolve
- Use the Value Proposition Canvas to create alignment amongst internal teams about what customer jobs, pains and gains you’re focusing on.
- Use them to measure and monitor performance indicators one you’re in the market.
- Use the same tools to test, monitor and improve your value proposition.
- Reinvent your self constantly, take exploration of new value propositions seriously. Reinvent yourself whilst successful, don’t wait for a crisis to force you.