Value Proposition Design

Value Proposition Design

Author

Alex Osterwalder et al.

Year
2014
image

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.

You Might Also Like

Curious about how are these recommendations generated? Learn more.

image

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.

image

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.
A Refresher on The Business Model Canvas
  • 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.
    1. 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
    2. 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:

  1. Select the customer segment
  2. Identify the customer jobs
  3. Identify customer pains
  4. Identify customer gains
  5. 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).

Trigger questions to tease out pains

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:

  1. Required gains: gains without which a solution won’t work
  2. Expected gains: basic gains we expect from a solution
  3. Desired gains: gains that go beyond what we’d expect but that we’d love to have
  4. 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.

Trigger questions to tease out gains:

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.