Value

Proposition

Design

Cover image: Pilot Interactive Cover design: Alan Smith and Trish Papadakos This book is printed on acid-free paper. ∞

Copyright © 2014 by Alexander Osterwalder, Yves Pigneur, Alan Smith, Greg Bernarda, and Patricia Papadakos. All rights reserved.

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10 9 8 7 6 5 4 3 2 1

How to create products and

services customers want.

Get started with…

Value

Proposition

Design

strategyzer.com/vpd

Written by

Alex Osterwalder

Yves Pigneur

Greg Bernarda

Alan Smith

Designed by

Trish Papadakos

1. Canvas

2. Design

1.1 Customer Profi le 10

2.1 Prototyping Possibilities 74

1.2 Value Map 26

2.2 Starting Points 86

1.3 Fit 40

2.3 Understanding Customers 104

2.4 Making Choices 120

2.5 Finding the Right Business Model 142

2.6 Designing in Established Organizations 158

TO

VATION

OBSER

TESTING

ASSESSMENT

7 QUESTIONS

FROM

TESTING

S

TOTYPING

STARTING POINT

PRO

DEL

BUSINESS MO

FAILED

3. Test

4. Evolve

3.1 What to Test 188

Create Alignment 260

3.2 Testing Step-by-Step 196

Measure & Monitor 262

3.3 Experiment Library 214

Improve Relentlessly 264

3.4 Bringing It All Together 238

Reinvent Yourself Constantly 266

Taobao: Reinventing (E-)Commerce 268

Glossary 276

Core Team 278

Prereaders 279

Bios 280

Index 282

CESS

SUC

G

HYPOTHESIS

D

You’ll love Value Proposition

Design if you’ve been…

BLAH,

LAH

BLAH

VI

BLAH…

LAH

BL

BLAH

INTRO

BLAH

OM / VPD /

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TE

STRA

Overwhelmed by the task of true

Frustrated by unproductive

value creation

meetings and misaligned teams

Sometimes you feel like…

You have experienced teams that…

ǃɲ There should be better tools available to help you create value ǃɲ Lacked a shared language and a shared understanding of for your customers and your business.

customer value creation.

ǃɲ You might be pursuing the wrong tasks and you feel insecure ǃɲ Got bogged down by unproductive meetings with tons of about the next steps.

unstructured “blah blah blah” conversations.

ǃɲ It’s diffi cult to learn what customers really want.

ǃɲ Worked without clear processes and tools.

ǃɲ The information and data you get from (potential) customers is ǃɲ Were focused mainly on technologies, products, and features overwhelming and you don’t know how to best organize it.

rather than customers.

ǃɲ It’s challenging to go beyond products and features toward a ǃɲ Conducted meetings that drained energy and ended without a deep understanding of customer value creation.

clear outcome.

ǃɲ You lack the big picture of how all the puzzle pieces fi t ǃɲ Were misaligned.

together.

VII

INTRO

OM / VPD /

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STRA

Involved in bold shiny projects

that blew up

Disappointed

You have seen projects that…

by the failure

ǃɲ Were big bold bets that failed and wasted a lot money.

ǃɲ Put energy into polishing and refi ning a business plan until it of a good idea.

perpetuated the illusion that it could actually work.

ǃɲ Spent a lot of time building detailed spreadsheets that were Get “From Failure to Success” poster

completely made up and turned out to be wrong.

ǃɲ Spent more time developing and debating ideas rather than testing them with customers and stakeholders.

ǃɲ Let opinions dominate over facts from the fi eld.

ǃɲ Lacked clear processes and tools to minimize risk.

ǃɲ Used processes suited for running a business rather than ones for developing new ideas.

Value Proposition Design

will help you successfully…

VIII

INTRO

OM / VPD /

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Leverage the experience and skills

of your team

Equip your team with a shared language to overcome “blah blah Understand the patterns

blah,” conduct more strategic conversations, run creative exer-of value creation

cises, and get aligned. This will lead to more enjoyable meetings that are full of energy and produce actionable outcomes beyond Organize information about what customers want in a simple a focus on technology, products, and features toward creating way that makes the patterns of value creation easily visible. As value for your customers and your business.

a result, you will more eff ectively design value propositions and profi table business models that directly target your customers’

Get your team aligned.

most pressing and important jobs, pains, and gains.

Gain clarity.

IX

INTRO

OM / VPD /

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Design, test,

STRA

Avoid wasting time with ideas that

and deliver what

won’t work

customers want.

Relentlessly test the most important hypotheses underlying your business ideas in order to reduce the risk of failure. This will Get “From Failure to Success” poster

allow you to pursue big bold ideas without having to break the bank. Your processes to shape new ideas will be fi t for the task and complement your existing processes that help you run your business.

Minimize the risk of a fl op.

Our Value Proposition

to You

How to create products and

services customers want.

Get started with…

X

The links you see on the

Value

Proposition

side of every page point

Design

gn

strategyzer.com/vpd

INTRO

Written by

Alex Osterwalder

Yves Pigneur

Greg Bernarda

Series

to resources in the online

Alan Smith

Sequel to

Business Model Generation

Designed by

International Bestseller

Trish Papadakos

30+ Languages

OM / VPD /

companion.

VPD Book

+

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VPD Online Companion

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Watch for the

STRA

Strategyzer logo

and follow the link to

2

3

online exercises,

tools/templates,

posters, and more.

Note: To gain access to these exclusive online portions of Value Proposition Design, you'll need to prove you own the book. Keep the book near you to help you answer the secret questions and verify your ownership!

Web App + Online Courses

Go further with pro tools and courses

Helps create

products and

services

people want

Integrates with

other business

Minimizes risk

methods

of (big) failure

XI

Integrated with the

Helps

Apply

Business Model Canvas

understand

what matters

INTRO

to customers

Succeed!

OM / VPD /

Helps

Proven and eff ective

shape ideas

suite of business tools

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Access to advanced

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material and knowledge

STRA

Engaging online

multimedia content

Software-

supported

Practical, visual, +

methodology

enjoyable format

Shared language

to communicate

and collaborate

Share with and

learn from peers

Enables practice + skills

Brief, clear,

(self-)assessment

and applicable

Instructions

content avoids

to get started

confusion

Learn

The Tools and Process of

Value Proposition Design

XII

Zoom out

INTRO

OM / VPD /

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TE

STRA

Zoom in

Canvas

Design / Test

Tools

Search

The heart of Value Proposition Design is about applying Tools to the messy Search for value propositions that customers want and then keeping them aligned with what customers want in Post search.

Value Proposition Design shows you how to use the Value XIII

Proposition Canvas to Design and Test great value propositions in an iterative search for what customers want. Value proposition design is a never-ending process in which you INTRO

need to Evolve your value proposition(s) constantly to keep it relevant to customers.

OM / VPD /

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STRA

Progress

Manage the messy and nonlinear

process of value proposition design and

reduce risk by systematically applying

adequate tools and processes.

Evolve

Post search

Design Squiggle adapted from Damien Newman, Central

An Integrated

Zoom out

Suite of Tools

The Value Proposition Canvas is the

tool at the center of this book. It makes

XIV

value propositions visible and tangible

and thus easier to discuss and manage.

It perfectly integrates with the Business

INTRO

Model Canvas and the Environment

Map, two tools that are discussed in

detail in Business Model Generation,*

the sister book to this one. Together,

OM / VPD /

they shape the foundation of a suite

of business tools.

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STRA

The Value Proposition Canvas zooms

into the details of two of the building

blocks of the Business Model Canvas.

Zoom in

* Business Model Generation, Osterwalder and Pigneur, 2010.

The

Environment Map

XV

helps you understand the context

in which you create.

INTRO

OM / VPD /

The

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Business Model Canvas

TE

STRA

helps you

create value for your business.

The

Value Proposition Canvas

helps you

create value for your customer.

Refresher: The Business Model Canvas XVI

Embed your value proposition in a

Customer Segments

segment. It is how an organization

INTRO

viable business model to capture value

are the groups of people and/or orga-

captures value with a price that

for your organization. To do so, you

nizations a company or organization

customers are willing to pay.

can use the Business Model Canvas, a

aims to reach and create value for

tool to describe how your organization

with a dedicated value proposition.

Key Resources

OM / VPD /

creates, delivers, and captures value.

are the most important assets

The Business Model Canvas and Value

Value Propositions

required to offer and deliver the previ-

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Proposition Canvas perfectly integrate,

are based on a bundle of products

ously described elements.

TE

with the latter being like a plug-in to

and services that create value for a

the former that allows you to zoom

customer segment.

Key Activities

STRA

into the details of how you are creating

are the most important activities an

value for customers.

Channels

organization needs to perform well.

describe how a value proposition is

The refresher of the Business Model

communicated and delivered to a

Key Partnerships

Canvas on this spread is sufficient to

customer segment through commu-

shows the network of suppliers

work through this book and create

nication, distribution, and sales

and partners that bring in external

great value propositions. Go to the

channels.

resources and activities.

online resources if you are interested

in more or get Business Model

Customer Relationships

Cost Structure

Generation,* the sister publication to outline what type of relationship is

describes all costs incurred to oper-

this book.

established and maintained with

ate a business model.

each customer segment, and they

explain how customers are acquired

Profit

and retained.

is calculated by subtracting the

total of all costs in the cost structure Revenue Streams

from the total of all revenue streams.

result from a value proposition

successfully offered to a customer

* Business Model Generation, Osterwalder and Pigneur, 2010.

Designed for:

Designed by:

Date:

Version:

The Business Model Canvas

Key Partners

Key Activities

Value Propositions

Customer Relationships

Customer Segments

XVII

INTRO

OM / VPD /

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Key Resources

Channels

TE

STRA

Cost Structure

Revenue Streams

designed by: Business Model Foundry AG

The makers of Business Model Generation and Strategyzer This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

Download detailed Business Model Canvas Explanation and the Business Model Canvas pdf

Value Proposition

Design works for…

Are you creating something from scratch on your own or New Ventures

are you part of an existing organization? Some things will Individuals or teams setting out to

XVIII

be easier and some harder depending on your strategic create a great value proposition

playground.

and business model from scratch

A start-up entrepreneur deals with diff erent constraints than a project INTRO

leader for a new venture within an existing organization. The tools presented in this book apply to both contexts. Depending on your starting point you will execute them in a diff erent way to leverage diff erent strengths and overcome diff erent obstacles.

OM / VPD /

Main challenges

Main opportunities

ǃɲ Produce proof that your ideas can

ǃɲ Use speedy decision making and

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work on a limited budget.

agility to your advantage.

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ǃɲ Manage involvement of investors

ǃɲ Leverage the motivation of owner-

(if you scale your ideas).

ship as a driver for success.

STRA

ǃɲ Risk running out of money before

fi nding the right value proposition

and business model.

Unit C

Unit B

Unit A

Established

Organizations

Teams within existing companies

XIX

setting out to improve or invent value

propositions and business models

Main challenges

Process

ǃɲ Get buy-in from top

INTRO

Get “Innovating in Established

management.

Organizations” poster

ǃɲ Get access to existing resources.

ǃɲ Manage cannibalization.

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Main opportunities

ǃɲ Overcome risk aversion.

ǃɲ Build on existing value proposi-

ǃɲ Overcome rigid and slow

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tions and business models.

processes.

G

ǃɲ Leverage existing assets (sales,

ǃɲ Produce big wins to move the

TE

channels, brand, etc.).

needle.

STRA

ǃɲ Build portfolios of business

ǃɲ Manage career risk of innovators.

models and value propositions.

Use Value Proposition

Design to…

invent and improve value propositions. The tools we will study work for managing and renewing value propositions XX

(and business models) just as much as for creating new ones. Put the value proposition and business model to work to create a shared language of value creation in your orga-INTRO

nization. Use them to continuously invent and improve value propositions that meet customer profi les, which is an under-taking that never ends.

OM / VPD /

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Unit C

Unit B

Unit A

Process

Invent

Invent new value propositions that people want with business models that work.

XXI

INTRO

OM / VPD /

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TE

STRA

Improve

Manage, measure, challenge, improve, and renew existing value propositions and business models.

Assess

Your Value

Proposition

XXII

Design Skills

Complete our online test and assess

INTRO

whether you have the attitude and

skills required to systematically be

successful at value proposition design.

Take the test before and after working

OM / VPD /

through Value Proposition Design to

measure your progress.

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Take your skills test online

STRA

Entrepreneurial

Tool

Knowledge

Skills

You enjoy trying out new things. You don’t see the You systematically use the Value Proposition risk of failing as a threat but an opportunity to Canvas, Business Model Canvas, and other tools learn and progress. You easily navigate between and processes in your search for great value prop-the strategic and the tactical.

ositions and business models.

XXIII

INTRO

OM / VPD /

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Design Thinking

Customer

Experimentation

Skills

Empathy

Skills

You explore multiple alternatives before pick-You relentlessly take a customer perspective and You systematically seek evidence that supports ing and refining a particular direction. You are are even better at listening to customers than your ideas and tests your vision. You experiment comfortable with the nonlinear and iterative selling to them.

at the earliest stages to learn what works and nature of value creation.

what doesn’t.

Sell Your Colleagues on

concerned that we don’t have

a methodology to track our

Value Proposition Design

progress on the development

of that new value proposition

and business model.

XXIV

INTRO

worried that we focus too much on

astonished at how poorly

products and features instead of

aligned product development,

creating value for customers.

sales, and marketing are

surprised at how often we

OM / VPD /

when it comes to developing

make stuff nobody wants,

new value propositions.

despite our good ideas and

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good intentions.

TE

STRA

I am…

really disappointed by

how much we talked

blown away by how

about value propositions

unclear that last

amazed by how many

and business models at

presentation on that

resources we wasted when

our last meeting without

new value proposi-

that great idea in that last

really getting tangible

tion and business

business plan turned out to

results.

model was.

be a flop because we didn’t

test it.

concerned that our product

surprised that we invest

development process doesn’t

so much in research and

not sure if everybody in

use a more customer-focused

development (R&D), but fail

our team has a shared

methodology.

to invest in developing the

understanding of what a good

right value propositions and

value proposition actually is.

business models.

So, what if

we tried out the

XXV

Value Proposition

Canvas (and Business

INTRO

Model Canvas) in our

next project?

OM / VPD /

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STRA

The Value Proposition Canvas

Value Proposition

Customer Segment

Gain Creators

Gains

Products

& Services

Customer

Job(s)

Pain Relievers

Pains

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer strategyzer.com

Designed by:

Date:

Version:

Designed for:

The Business Model Canvas

Customer Segments

Value Propositions

Customer Relationships

Key Activities

Key Partners

Channels

Key Resources

Revenue Streams

Cost Structure

designed by: Business Model Foundry AG

The makers of Business Model Generation and Strategyzer strategyzer.com

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

Get a slide deck with 10 arguments to use with the Value Proposition and Business Model Canvases

can

vas

1

The Value Proposition Canvas has two sides.

With the Customer Profile p. 10 you clarify

your customer understanding. With the

Value Map p. 26 you describe how you intend

to create value for that customer. You

achieve Fit p. 40 between the two when one

meets the other.

6

.0 1

AS /

CANV

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F

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Create Value

The set of value proposition benefits that you design to attract customers.

DEF·I·NI·TION

VALUE PROPOSITION

Describes the benefits customers can

expect from your products and services.

7

.0 1

AS /

CANV

it

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Observe Customers

The set of customer characteristics that you assume, observe, and verify in the market.

Gain Creators describe how your products and services

create customer gains.

8

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Value

AS /

CANV

Map

The Value (Proposition) Map describes

the features of a specific value proposition OM / VPD /

in your business model in a more structured and detailed way. It breaks your value

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Fit

G

proposition down into products and services, TE

pain relievers, and gain creators.

STRA

This is a list of all the

Products and Services

a value proposition is

built around.

Pain Relievers describe how

your products and services

alleviate customer pains.

Gains describe the outcomes customers want to achieve or

the concrete benefits they are

seeking.

9

Customer

.0 1

Profile

AS /

CANV

The Customer (Segment) Profile describes

a specific customer segment in your

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business model in a more structured

and detailed way. It breaks the customer

Fit

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down into its jobs, pains, and gains.

G

TE

STRA

Customer Jobs describe

what customers are trying

to get done in their work and

in their lives, as expressed in

their own words.

Pains describe bad outcomes,

risks, and obstacles related to

customer jobs.

You achieve Fit when your value map meets your customer profile—when your products and services produce pain relievers and gain creators that match one or more of the jobs, pains, and gains that are important to your customer.

10

.

Customer

Profile

Customer Jobs

Jobs describe the things your customers are

Supporting jobs

trying to get done in their work or in their life.

Customers also perform supporting jobs in the 12

A customer job could be the tasks they are trying context of purchasing and consuming value either to perform and complete, the problems they

as consumers or as professionals. These jobs arise

.1 1

are trying to solve, or the needs they are trying from three different roles:

to satisfy. Make sure you take the customer’s AS /

perspective when investigating jobs. What you ǃɲ BUYER OF VALUE: jobs related to buying

CANV

think of as important from your perspective might value, such as comparing offers, deciding which not be a job customers are actually trying to get products to buy, standing in a checkout line, done.*

completing a purchase, or taking delivery of Distinguish between three main types of

a product or service.

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customer jobs to be done and supporting jobs: ǃɲ COCREATOR OF VALUE: jobs related to

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Functional jobs

cocreating value with your organization, such TE

When your customers try to perform or complete as posting product reviews and feedback or

a specific task or solve a specific problem, even participating in the design of a product STRA

for example, mow the lawn, eat healthy as a

or service.

consumer, write a report, or help clients as a professional.

ǃɲ TRANSFERRER OF VALUE: jobs related to the end of a value proposition’s life cycle, such as Social jobs

canceling a subscription, disposing of a product, When your customers want to look good or gain transferring it to others, or reselling it.

power or status. These jobs describe how customers want to be perceived by others, for example, look trendy as a consumer or be perceived as competent as a professional.

Personal/emotional jobs

When your customers seek a specific emotional

* The jobs to be done concept was developed independently state, such as feeling good or secure, for example, by several business thinkers including Anthony Ulwick of the consulting firm Strategyn , consultants Rick Pedi and Bob seeking peace of mind regarding one’s invest-Moesta, and Professor Denise Nitterhouse of DePaul University.

ments as a consumer or achieving the feeling of It was popularized by Clay Christensen and his consulting firm Innosight and Anthony Ulwick’s Strategyn .

job security at one’s workplace.

Job context

Customer jobs often depend on the specific

context in which they are performed. The context 13

may impose certain constraints or limitations.

.1

For example, calling somebody on the fly is

1

different when you are traveling on a train than AS /

when you are driving a car. Likewise, going to the movies with your kids is different than going with CANV

your partner.

Job importance

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It is important to acknowledge

+

that not all jobs have the same

Important

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importance to your customer. Some

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matter more in a customer’s work

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or life because failing to get them

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done could have serious ramifi-

cations. Some are insignificant

-

Insignificant

because the customer cares about other things more. Sometimes a customer will deem a job crucial because it occurs frequently or because it will result in a desired or unwanted outcome.

Download trigger questions to help find customer jobs

Customer Pains

Pains describe anything that annoys your custom-Risks (undesired potential outcomes)

ers before, during, and after trying to get a job What could go wrong and have important neg-14

done or simply prevents them from getting a job ative consequences (e.g., “I might lose credibility done. Pains also describe risks, that is, potential when using this type of solution,” or “A security

.1 1

bad outcomes, related to getting a job done badly breach would be disastrous for us”).

or not at all.

AS /

Pain severity

CANV

Seek to identify three types of customer pains and A customer pain can be extreme or

+

how severe customers find them:

moderate, similar to how jobs can

Extreme

be important or insignificant to the

Undesired outcomes, problems,

customer.

OM / VPD /

and characteristics

Pains are functional (e.g., a solution doesn’t work, YZER.CG

-

Moderate

doesn’t work well, or has negative side effects), TE

social (“I look bad doing this”), emotional (“I feel bad every time I do this”), or ancillary (“It’s annoy-STRA

ing to go to the store for this”). This may also Tip: Make pains concrete.

involve undesired characteristics customers don’t To clearly differentiate jobs, pains, and gains, like (e.g., “Running at the gym is boring,” or “This describe them as concretely as possible. For design is ugly”).

example, when a customer says “waiting in line was a waste of time,” ask after how many minutes Obstacles

exactly it began to feel like wasted time. That way These are things that prevent customers from you can note “wasting more than x minutes stand-even getting started with a job or that slow them ing in line.” When you understand how exactly down (e.g., “I lack the time to get this job done customers measure pain severity, you can design accurately,” or “I can’t afford any of the existing better pain relievers in your value proposition.

solutions”).

The following list of trigger questions can help you think of different potential customer pains:

ǃɲ How do your customers define too costly?

Takes a lot of time, costs too much money,

or requires substantial efforts?

ǃɲ What makes your customers feel bad? What

15

are their frustrations, annoyances, or things

.1

that give them a headache?

1

ǃɲ How are current value propositions underperAS /

forming for your customers? Which features

are they missing? Are there performance issues CANV

that annoy them or malfunctions they cite?

ǃɲ What are the main difficulties and challenges your customers encounter? Do they understand OM / VPD /

how things work, have difficulties getting certain things done, or resist particular jobs for specific YZER.C

reasons?

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ǃɲ What negative social consequences do your TE

customers encounter or fear? Are they afraid of STRA

a loss of face, power, trust, or status?

ǃɲ What risks do your customers fear? Are they afraid of financial, social, or technical risks, or are they asking themselves what could go wrong?

ǃɲ What’s keeping your customers awake at night?

What are their big issues, concerns, and worries?

ǃɲ What common mistakes do your customers

make? Are they using a solution the wrong way?

ǃɲ What barriers are keeping your customers from adopting a value proposition? Are there upfront investment costs, a steep learning curve, or other obstacles preventing adoption?

Download trigger questions

Customer Gains

Gains describe the outcomes and benefits your Unexpected gains

customers want. Some gains are required,

These are gains that go beyond customer expec-16

expected, or desired by customers, and some

tations and desires. They wouldn’t even come would surprise them. Gains include functional up with them if you asked them. Before Apple

.1 1

utility, social gains, positive emotions, and cost brought touch screens and the App Store to the savings.

mainstream, nobody really thought of them as AS /

part of a phone.

CANV

Seek to identify four types of customer gains in terms of outcomes and benefits:

Gain relevance

A customer gain can feel essential

+

Required gains

or nice to have, just like pains can

Essential

OM / VPD /

These are gains without which a solution wouldn’t feel extreme or moderate to them.

work. For example, the most basic expectation YZER.CG

that we have from a smartphone is that we can TE

make a call with it.

Nic

STRA

-

e to have

Expected gains

These are relatively basic gains that we expect Tip: Make gains concrete.

from a solution, even if it could work without them.

As with pains, it’s better to describe gains as For example, since Apple launched the iPhone, we concretely as possible to clearly differentiate expect phones to be well-designed and look good.

jobs, pains, and gains from one another. Ask how much they’d expect or dream of when a customer Desired gains

indicates “better performance” as a desired gain.

These are gains that go beyond what we expect That way you can note “would love an increased from a solution but would love to have if we could.

performance of more than x.” When you under-These are usually gains that customers would stand how exactly customers measure gains (i.e., come up with if you asked them. For example, we outcomes and benefits), you can design better desire smartphones to be seamlessly integrated gain creators in your value proposition.

with our other devices.

The following list of trigger questions can help you think of different potential customer gains:

ǃɲ Which savings would make your customers

happy? Which savings in terms of time, money, and effort would they value?

ǃɲ What quality levels do they expect, and what 17

would they wish for more or less of?

.1

ǃɲ How do current value propositions delight your 1

customers? Which specific features do they

AS /

enjoy? What performance and quality do they

expect?

CANV

ǃɲ What would make your customers’ jobs or lives easier? Could there be a flatter learning curve, more services, or lower costs of ownership?

OM / VPD /

ǃɲ What positive social consequences do your customers desire? What makes them look good?

YZER.C

What increases their power or their status?

G

ǃɲ What are customers looking for most? Are they TE

searching for good design, guarantees, specific STRA

or more features?

ǃɲ What do customers dream about? What do

they aspire to achieve, or what would be a big relief to them?

ǃɲ How do your customers measure success and failure? How do they gauge performance or cost?

ǃɲ What would increase your customers’ likelihood of adopting a value proposition? Do they desire lower cost, less investment, lower risk, or better quality?

Download trigger questions

Profi le of a

“Business Book Reader”

We chose to use potential readers of this book to illustrate Gains are benefi ts, results, and

the customer profi le. We deliberately went beyond jobs, characteristics that custom-18

pains, and gains merely related to reading books, since we ers require or desire. They are

intended to design an innovative and more holistic value outcomes of jobs or wanted char-

.1 1

proposition for businesspeople in general.

acteristics of a value proposition

that help customers get a job

AS /

The customer profi le sketched out on the right is informed by several inter-done well.

CANV

views we conducted and thousands of interactions we had with workshop participants. However, it is not mandatory to start with preexisting customer knowledge. You may begin exploring ideas by sketching out a profi le based The more tangible and specifi c

on what you believe your potential customers look like. This is an excellent you make pains and gains, the

OM / VPD /

starting point to prepare customer interviews and tests regarding your better. For example, “examples

assumptions about customer jobs, pains, and gains.

from my industry” is more

YZER.CG

concrete than “relevant to my

TE

context.” Ask customers how they

measure gains and pains. Inves-

STRA

tigate how they measure success

or failure of a job they want to

get done.

Make sure you deeply under-

stand your customer. If you have

only a few sticky notes on your

profi le, that probably indicates a

lack of customer understanding.

Unearth as many jobs, pains, and

gains as you can. Search beyond

those directly related to your

value proposition.

get

clear

leads to

recognized

indicators

results

by team

You should know your customers’

to measure

can apply

(ideally quick

social and emotional jobs in addi-

progress

with

wins)

confi dence

tion to their functional jobs, which

19

look good

easy to

buy-in from

are usually easier to identify.

connect with

with

understand

help when

leadership

.1

like-minded

colleagues,

stuck

+ team

1

people

boss, clients

applicable

helps me

AS /

helps with

ideas

communicate

leads to

promotion or

make things

my ideas

better

improve skill

CANV

pay raise

people want

clearly

collaboration set + advance

home run

career

concrete

Make sure you go beyond a

value

tips (e.g., to

fi nd, learn,

convince

propositions

improve

+ apply

superfi cial understanding of jobs.

reduce risk)

biz book

others about

or build

OM / VPD /

methods

Why do customers want to “learn

reader

preferred

a business

(generic)

methods

new knowledge”? It might be that

collaborate

too much

YZER.C

make

they want to bring new methods

with others

G

lack of time

theory

communicate

decisions

or help them

into their organization. Ask “why”

TE

getting stuck

+ sell ideas

with

in career or

several times to get to the most

confi dence

STRA

making

jeopardizing “translating”

run

dealing

important jobs.

things

it

methods to

“day job”

with risk +

own context

stay

nobody

well

uncertainty

up to date

wants

going down

management

assess +

lack of

wrong path

boring

Make sure you don’t just consider

“not

reduce risk

sufficient

getting it” content that's

jobs, pains, and gains related to

budget

hard to work

wasting time

a value proposition or product in

through

being

with ideas

no clear path

mind. Identify those (e.g., “Busi-

associated

that don't

to applying

with a big

work

ness books are too long”) as well

method

failure

as other extreme pains (e.g., “lack

of time” or “get boss’s attention”).

Ranking Jobs,

Pains, and Gains

Although individual customer preferences vary, you need to get a sense of customer priorities. Investigate which jobs the 20

majority consider important or insignificant. Find out which pains they find extreme versus merely moderate. Learn which

.1 1

gains they find essential and which are simply nice to have.

AS /

Ranking jobs, pains, and gains is essential in order to design value proposi-CANV

tions that address things customers really care about. Of course, it’s difficult to unearth what really matters to customers, but your understanding will improve with every customer interaction and experiment.

It doesn’t matter if you start out with a ranking that is based on what you OM / VPD /

think is important to your potential customers as long as you strive to test that ranking until it truly reflects priorities from the customer’s perspective.

YZER.CG

TE

STRA

Job importance

Pain severity

Gain relevance

Rank jobs according to their

Rank pains according to

Rank gains according to

importance to customers.

how extreme they are in the

how essential they are in

customers’ eyes.

the customers’ eyes.

+

+

+

Important

Extreme

Essential

21

.1 1

getting stuck

helps with

home run

AS /

in career or

improve skill

promotion or

value

jeopardizing

set + advance

being

pay raise

propositions

it

CANV

career

look good

associated

with

with a big

leads to

buy-in from

colleagues,

going down

failure

results

run

leadership

boss, clients

wrong path

(ideally quick

“day job”

lack of

+ team

wins)

OM / VPD /

well

make

sufficient

decisions

helps me

management

budget

get

with

communicate

improve

“not

recognized

YZER.C

confidence

making

my ideas

G

or build a

getting it”

by team

things

clearly

TE

business

communicate

nobody

clear

dealing with

+ sell ideas

wants

help when

indicators

STRA

risk +

assess and

stuck

to measure

uncertainty

reduce risk

progress

lack of time

make things

wasting time

connect with

people want

with ideas

applicable

collaborate

like-minded

that don't

ideas

with others

people

work

no clear path

or help them

convince

to applying

others about

method

leads to

preferred

“translating”

can apply

find, learn,

better

methods

methods to

with

boring

+ apply

own context

confidence

collaboration

content that's

methods

stay

hard to work

up to date

concrete

too much

through

easy to

tips (e.g., to

theory

understand

reduce risk)

Insignificant

Moderate

Nice to have

-

-

-

Step into Your

EXERCISE

Customers’ Shoes

Instructions

Map the profi le of one of your currently existing customer segments to practice using the customer OBJECTIVE

OUTCOME

profi le. If you are working on a new idea, sketch out Visualize what matters to your

One page actionable customer

the customer segment you intend to create value for.

22

customers in a shareable format

profi le

1. Download the Customer Profi le Canvas.

.1 1

How good is your understanding of your customers’ jobs, 2. Grab a set of small sticky notes.

pains, and gains? Map out a customer profi le.

3. Map out your customer profi le.

AS /

CANV

OM / VPD /

+ + +

YZER.CG

TE

STRA

- - -

1

2

3

4

5

Select customer

Identify customer jobs.

Identify customer

Identify customer

Prioritize jobs, pains,

segment.

Ask what tasks your

pains.

gains.

and gains.

Select a customer

customers are trying to

What pains do your

What outcomes and

Order jobs, pains, and

segment that you want

complete. Map out all of

customers have? Write

benefi ts do your custom-

gains in a column, each

to profi le.

their jobs by writing each

down as many as you

ers want to achieve?

with the most import-

one on an individual

can come up with,

Write down as many

ant jobs, most extreme

sticky note.

including obstacles and

gains as you can come

pains, and essential

risks.

up with.

gains on top and the

moderate pains and

nice-to-have gains at the

bottom.

Do this exercise online

Customer Profile

EXERCISE

23

.1 1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer Download the Customer Profile pdf

Best Practices for Mapping Avoid frequently committed mistakes

Jobs, Pains, and Gains

when profiling a customer, and instead

follow these best practices.

24

C

× ommon Mistakes

.1 1

Mixing several

Mixing jobs and

Focusing on functional

Listing jobs, pains, and

Identifying too few jobs,

Being too vague in

customer segments

outcomes.

jobs only and forgetting

gains with your value

pains, and gains.

descriptions of pains

AS /

into one profile.

social and emotional

proposition in mind.

and gains.

CANV

jobs.

OM / VPD /

Best Pr

√

actices

Make a Value

Jobs are the tasks

Sometimes social or

When you map your

A good customer profile

Make pains and gains

YZER.CG

Proposition Canvas for

customers are trying to

emotional jobs are even

customer, you should

is full of sticky notes,

tangible and concrete.

TE

every different customer perform, the problems more important than the proceed like an anthro-because most customers Rather than just writing segment. If you sell to

they are trying to solve,

“visible” functional jobs.

pologist and “forget”

have a lot of pains and

“salary increase” in

STRA

companies, ask yourself

or the needs they are

“Looking good in front of what you are offering.

expect or desire a lot of

gains, specify how

if you have different

trying to satisfy, whereas others” might be more For example, a business

gains. Map out all your

much of an increase a

types of customers

gains are the concrete

important than finding a publisher should not (potential) customers’

customer is seeking.

within each company

outcomes they want to

great technical solution

map jobs, pains, and

important jobs, extreme

Rather than writing

(e.g., users, buyers).

achieve—or avoid and

that helps complete the

gains merely related to

pains, and essential

“takes too long” in

eliminate in the case of

job effectively.

books, because a reader gains.

pains, indicate how long

pains.

has the choice between

“too long” actually is.

business books, consul-

This will allow you to

tants, YouTube videos, or

understand how exactly

even completing an MBA

customers measure

program or training. Go

success and failure.

beyond the jobs, pains,

and gains you intend

or hope to address with

your value proposition.

Pains vs. Gains

Ask “why” several times until you

When you get started with the customer profile, really understand your customers’

25

you might simply put the same ideas in pains and jobs to be done.

.1

gains as opposites of each other. For example, Another issue when you get started with the

1

if one of the customers’ jobs to be done is “earn customer profile is that you might settle with AS /

more money,” you might start by adding “salary a superficial understanding of your customer’s increase” to gains and “salary decrease” to pains.

jobs. To avoid this, you need to ask yourself why CANV

a customer wants to perform a certain job to dig Here’s a better way to do it:

deeper toward the real motivations.

ǃɲ Find out precisely how much more money the For example, why might a customer want to

OM / VPD /

customer expects to earn so it feels like a gain learn a foreign language? Maybe because the

and investigate what decrease would feel like

“real” customer job to be done is to improve his YZER.C

a pain.

CV. Why does he want to improve his CV? Maybe G

ǃɲ In the pains, add the barriers that prevent or because he wants to earn more money.

TE

make it difficult to get a job done. In our exam-Don’t settle until you really understand the STRA

ple the pain might be “my employer doesn’t

underlying jobs to be done that really drive give raises.”

customers.

ǃɲ In the pains, add the risks related to not getting the job done. In our example the pain could be

“might not be able to afford my child’s future college tuition.”

26

.2

Value Map

28

.2 1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

Products

and Services

This is simply a list of what you offer.

Your value proposition is likely to be composed 29

Think of it as all the items your cus-

of various types of products and services:

.2

tomers can see in your shop window

1

—metaphorically speaking. It’s an

Physical/tangible

AS /

enumeration of all the products and

Goods, such as manufactured products.

services your value proposition builds

CANV

on. This bundle of products and services

Intangible

helps your customers complete either

Products such as copyrights or services such functional, social, or emotional jobs or

as after-sales assistance.

OM / VPD /

helps them satisfy basic needs. It is

crucial to acknowledge that products

Digital

YZER.C

and services don’t create value alone—

Products such as music downloads or services G

only in relationship to a specific cus-

such as online recommendations.

TE

tomer segment and their jobs, pains,

STRA

and gains.

Financial

Products such as investment funds and

Your list of products and services may

insurances or services such as the financing also include supporting ones that

of a purchase.

help your customers perform the roles

of buyer (those that help customers

Relevance

compare offers, decide, and buy),

It is essential to acknowledge that

+

co-creator (those that help custom-

Essential

not all products and services have

ers co-design value propositions), and

the same relevance to your custom-

transferrer (those that help customers

ers. Some products and services are

dispose of a product).

essential to your value proposition; Nice to have some are merely nice to have.

-

30

.2 1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

Pain Relievers

Pain relievers describe how exactly

The following list of trigger questions can help you Relevance

your products and services alleviate

think of different ways your products and services A pain reliever can be more or less

+

specific customer pains. They explicitly

may help your customers alleviate pains.

valuable to the customer. Make sure Essential 31

outline how you intend to eliminate or

you differentiate between essential

.2

reduce some of the things that annoy

Ask yourself: Could your products and services…

pain relievers and ones that are

1

your customers before, during, or after

nice to have. The former relieve

AS /

they are trying to complete a job or

Nice to have

ǃɲ produce savings? In terms of time, money, or extreme issues, often in a radical

way, and create a lot of value. The

-

that prevent them from doing so.

efforts.

CANV

ǃɲ make your customers feel better? By killing frus-latter merely relieve moderate pains.

Great value propositions focus on pains

trations, annoyances, and other things that give that matter to customers, in particular

customers a headache.

OM / VPD /

extreme pains. You don’t need to come

ǃɲ fix underperforming solutions? By introducing new up with a pain reliever for every pain

features, better performance, or enhanced quality.

YZER.C

you’ve identified in the customer

ǃɲ put an end to difficulties and challenges your G

profile—no value proposition can do

customers encounter? By making things easier or TE

this. Great value propositions often

eliminating obstacles.

STRA

focus only on few pains that they

ǃɲ wipe out negative social consequences your alleviate extremely well.

customers encounter or fear? In terms of loss of face or lost power, trust, or status.

ǃɲ eliminate risks your customers fear? In terms of financial, social, technical risks, or things that could potentially go wrong.

ǃɲ help your customers better sleep at night?

By addressing significant issues, diminishing concerns, or eliminating worries.

ǃɲ limit or eradicate common mistakes customers make? By helping them use a solution the right way.

ǃɲ eliminate barriers that are keeping your customer from adopting value propositions? Introducing lower or no upfront investment costs, a flatter learning curve, or eliminating other obstacles preventing adoption.

Download trigger questions

32

.2 1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

Gain Creators

Gain creators describe how your prod-

The following list of trigger questions can help ǃɲ help make adoption easier? Through lower cost, ucts and services create customer

you think of different ways your products and fewer investments, lower risk, better quality, gains. They explicitly outline how

services may help your customers obtain

improved performance, or better design.

33

you intend to produce outcomes and

required, expected, desired, or unexpected

.2

benefits that your customer expects,

outcomes and benefits.

Relevance

1

desires, or would be surprised by,

A gain creator can produce more or

+

AS /

including functional utility, social gains,

Ask yourself: Could your products and services…

less relevant outcomes and benefits

Essential

positive emotions, and cost savings.

for the customer just like we have

CANV

ǃɲ create savings that please your customers?

seen for pain relievers. Make sure

As with pain relievers, gain creators

In terms of time, money, and effort.

you differentiate between essential

don’t need to address every gain

ǃɲ produce outcomes your customers expect or and nice to have gain creators.

Nice to have

OM / VPD /

identified in the customer profile.

that exceed their expectations? By offering

-

Focus on those that are relevant to

quality levels, more of something, or less of YZER.C

customers and where your products

something.

G

and services can make a difference.

ǃɲ outperform current value propositions and TE

delight your customers? Regarding specific

STRA

features, performance, or quality.

ǃɲ make your customers’ work or life easier? Via better usability, accessibility, more services, or lower cost of ownership.

ǃɲ create positive social consequences? By

making them look good or producing an

increase in power or status.

ǃɲ do something specific that customers are

looking for? In terms of good design, guarantees, or specific or more features.

ǃɲ fulfill a desire customers dream about? By helping them achieve their aspirations or

getting relief from a hardship?

ǃɲ produce positive outcomes matching your

customers’ success and failure criteria? In

terms of better performance or lower cost.

Download trigger questions

Mapping the

Value Proposition

of Value

helps create

proven +

share with

helps shape

products

eff ective

and learn

ideas

+ services

suite of busi-

34

Proposition

from peers

people want

ness tools

software-

.2

step-by-step helps under-

supported

shared

1

Design

instructions

stand what

methodology

language to

AS /

to get

matters to

communicate

enables

Remarkable value propositions focus

started

customers

+ collaborate

Value

practice +

CANV

on jobs, pains, and gains that mat-

Proposition

Book

skills (self-)

ter to customers and achieve those

Canvas

assessment

access to

exceedingly well. Again, you should not

advanced

try to address all customer pains and

material +

OM / VPD /

online exer-

exclusive

knowlege

gains. Focus on those that will make a

cises, tools,

value

online

templates,

proposition

diff erence for your customer.

companion

YZER.C

community

design

practical,

G

visual, +

TE

enjoyable

STRA

Web app

online course

format

It’s okay to aggregate several

(upsell)

(upsell)

integrates

minimizes

value propositions into one.

with other

risk of (big)

business

failure

methods

“Naked” list of the products

engaging

integrated

and services that your value

brief, clear,

online

with

proposition builds on to

+ applicable

multimedia

Business

content

target a specifi c customer

content

Model Canvas

segment.

Pain relievers outline how exactly your

products and services kill customer

pains. Each pain reliever addresses at

least one or more pains or gains. Don’t

add products or services here.

Gain creators highlight how exactly

your products and services help

customers achieve gains. Each gain

creator addresses at least one or

35

more pains or gains. Don’t add prod-

.2

ucts or services here.

1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

Formal Map

of how we believe

the products and

services around this

book create value

for customers

Map How

The Value Map

EXERCISE

Your Products

and Services

36

Create Value

.2 1

OBJECTIVE

OUTCOME

AS /

Describe explicitly

1 page map of value

CANV

how your products

creation

and services create

value

OM / VPD /

Instructions

Sketch out the value map of one of your existing YZER.CG

value propositions. For example, use one that TE

targets the customer segment you profiled in the previous exercise. It’s easier to get started with an STRA

existing value proposition. However, if you don’t have one yet, sketch out how you intend to create value with a new idea. We will cover the creation of new value propositions more specifically later on in this book.

For now:

1. Grab the customer profile you previously

completed.

2. Download the value map.

3. Grab a set of small sticky notes.

4. Map out how you create value for your customers.

Copyright Business Model Foundry AG

Download the Value Map pdf

The makers of Business Model Generation and Strategyzer

EXERCISE

37

.2 1

AS /

CANV

OM / VPD /

+ + +

YZER.CG

TE

STRA

- - -

1

2

3

4

List products and services.

Outline pain relievers.

Outline gain creators.

Rank by order of importance.

List all the products and services of

Outline how your products and

Explain how your products and

Rank products and services, pain

your existing value proposition.

services currently help customers alle-

services currently create expected

relievers, and gain creators accord-

viate pains by eliminating undesired

or desired outcomes and benefi ts for

ing to how essential they are to

outcomes, obstacles, or risks. Use one

customers. Use one sticky note per

customers.

sticky note per pain reliever.

gain creator.

Do this exercise online

?

38

Pain relievers vs. Gain creators

What is the difference with the pains

.2 1

Pain relievers and gain creators both create value and gains in the customer profile?

for the customer in different ways. The difference Pain relievers and gain creators are distinctly AS /

is that the former specifically addresses pains different from pains and gains. You have control CANV

in the customer profile, while the latter specifi-over the former, whereas you don’t have control cally addresses gains. It is okay if either of them over the latter. You decide (i.e., design) how you addresses pains and gains at the same time.

intend to create value by addressing specific jobs, The main goal of these two areas is to make the pains, and gains. You don’t decide over which OM / VPD /

customer value creation of your products and jobs, pains, and gains the customer has. And no services explicit.

value proposition addresses all of a customer’s YZER.CG

jobs, pains, and gains. The best ones address TE

those that matter most to customers and do so extremely well.

STRA

Best Practices for

Mapping Value Creation

39

.2

C

× ommon Mistakes

1

AS /

List all your products and services

Add products and services to the pain Offer pain relievers and gain creators Make the unrealistic attempt to

CANV

rather than just those targeted at a

reliever and gain creator fields.

that have nothing to do with the pains address all customer pains and specific segment.

and gains in the customer profile.

gains.

OM / VPD /

Best Pr

√

actices

YZER.CG

Products and services create value

Pain relievers and gain creators are

Remember that products and services Realize that great value propositions TE

only in relationship to a specific

explanations or characteristics that

don’t create value in absolute terms.

are about making choices regard-

STRA

customer segment. List only the

make the value creation of your

It is always relative to customers’ jobs, ing which jobs, pains, and gains to bundle of products and services that

products and services explicit. Exam-

pains, and gains.

address and which to forgo. No value

jointly form a value proposition for a

ples include “helps save time” and

proposition addresses all of them.

specific customer segment.

“well-designed.”

If your value map indicates so, it’s

probably because you’re not honest

about all the jobs, pains, and gains

that should be in your customer

profile.

40

.3

Fit

Customers expect and desire a lot from products and services, yet they also know they can’t have it all. Focus on those gains that matter most to customers and make a difference.

42

.3 1

AS /

Fit

CANV

You achieve fit when customers get

excited about your value proposition,

which happens when you address

important jobs, alleviate extreme

OM / VPD /

pains, and create essential gains

that customers care about. As we will

YZER.C

Fit

G

explain throughout this book, fit is

TE

hard to find and maintain. Striving for

fit is the essence of value proposition

STRA

design.

Customers have a lot of pains. No organization can reasonably address all of them. Focus on those headaches that matter most and are insufficiently addressed.

Are you

addressing

essential

customer

43

gains?

.3 1

AS /

Your customers are the judge,

CANV

jury, and executioner of your

value proposition. They will be

merciless if you don’t find fit!

OM / VPD /

Fit

YZER.CG

TE

STRA

Are you

addressing

extreme

customer

pains?

Fit?

When we designed the value proposition

for this book, we strived to address some

of the most important jobs, pains, and

√

√

√

√

helps create

proven +

share with

gains that potential customers have and

helps shape

products

effective

and learn

ideas

+ services

suite of busi-

44

that are insufficiently addressed by current from peers

√

people want

ness tools

software-

business book formats.

.3

√

√

√

step-by-step helps under-

supported

shared

1

instructions

stand what

methodology

language to

AS /

to get

matters to

communicate

√

enables

√

√

started

customers

+ collaborate

Value

practice +

CANV

Proposition

Book

skills (self-)

Canvas

assessment

√

access to

advanced

material +

√

OM / VPD /

online exer-√

exclusive

knowlege

cises, tools,

value

online

templates,

proposition

companion

YZER.C

community

design

√

practical,

G

visual, +

TE

√

√

enjoyable

STRA

Web app

online course

format

(upsell)

(upsell)

√ integrates √

minimizes

√

with other

risk of (big)

business

failure

methods

√

√

√

engaging

integrated

brief, clear,

online

with

Check marks signify that prod-

+ applicable

multimedia

Business

content

ucts and services relieve pains

content

Model Canvas

or create gains and directly

address one of the customersˇ

jobs, pains, or gains.

clear

√

indicators

to measure

×

get

√ leads to progress

leads to

√

recognized

results

√

results

by team

(ideally quick

can apply

(ideally quick

wins)

with

wins)

√

× confidence

45

look good

×

√

×

easy to

buy-in from connect with

with

understand

help when

leadership +

.3

like-minded

colleagues,

stuck

team

√

1

people

boss, clients

√

×

applicable

helps me

√

√

AS /

helps with

ideas

communicate

leads to

√

promotion or

make things

my ideas

better

improve skill

CANV

pay raise

people want

clearly

collaboration set + advance

√

√

home run

career

×

concrete

convince

value

√

√

tips (e.g. to

others about

propositions

find, learn,

improve

reduce risk)

biz book

preferred

OM / VPD /

apply

or build

reader

methods

methods

a business

√

√

×

(generic)

√

√ collaborate

too much

YZER.C

make

with others

G

lack of time

theory

communicate

decisions

×

or help them

TE

getting stuck

+ sell ideas

with

in career or

boring

√

√

confidence

√

×

STRA

making

jeopardizing

dealing

content that's

run

×

things

it

with risk +

hard to work

“day job”

stay

×

nobody

uncertainty

through

well

up to date

wants

√

×

×

√

going down

management

assess +

lack of

wrong path

×

“not

sufficient

“translating” reduce risk

getting it”

budget

methods to

Xs show which jobs, pains,

√

wasting time

√

own context

and gains the value proposition

with ideas

no clear path

does not address.

that don't

to applying

work

method

Check

EXERCISE

Your Fit

OBJECTIVE

OUTCOME

Verify if you are

Connection between

46

addressing what mat-

your products and

ters to customers

services and customer

.3 1

jobs, pains, and gains

AS /

Do this exercise online

CANV

1

Instructions

OM / VPD /

Bring in the Value Proposition Map and Customer Segment Profi le you completed earlier. Go through YZER.CG

pain relievers and gain creators one by one, and TE

check to see whether they fi t a customer job, pain, or gain. Put a check mark on each one that does.

STRA

EXERCISE

47

.3 1

AS /

CANV

2

Outcome

OM / VPD /

If a pain reliever or gain creator doesn’t fit anything, it may not be creating customer value.

YZER.C

Don’t worry if you haven’t checked all pains/

G

gains—you can’t satisfy them all. Ask yourself, TE

how well does your value proposition really fit STRA

your customer?

Download the Value Proposition Canvas pdf

3

Business Model Fit

48

Three Kinds of Fit

.3 1

Searching for Fit is the process of

AS /

designing value propositions around

CANV

products and services that meet jobs,

pains, and gains that customers really

care about. Fit between what a com-

pany off ers and what customers want

OM / VPD /

2

is the number one requirement of a

successful value proposition.

Product-Market Fit

YZER.CG

TE

Fit happens in three stages. The fi rst

occurs when you identify relevant

STRA

customer jobs, pains, and gains you

believe you can address with your

value proposition. The second occurs

when customers positively react to

your value proposition and it gets

traction in the market. The start-up

movement calls these problem-

solution fi t and product-market fi t,

respectively. The third occurs when

you fi nd a business model that is

scalable and profi table.

Get “Fit” poster

1

Problem-Solution Fit

On Paper

In the Market

In the Bank

49

.3 1

1. Problem-Solution Fit

2. Product-Market Fit

3. Business Model Fit

AS /

Problem-solution fi t takes place when you

Product-market fi t takes place when you

Business model fi t takes place when you

ǃɲ Have evidence that customers care about

ǃɲ Have evidence that your products and services, ǃɲ Have evidence that your value proposition CANV

certain jobs, pains, and gains.

pain relievers, and gain creators are actually can be embedded in a profi table and scal-

ǃɲ Designed a value proposition that addresses creating customer value and getting traction in able business model.

those jobs, pains, and gains.

the market.

OM / VPD /

A great value proposition without a great

At this stage you don’t yet have evidence that During this second phase, you strive to validate or business model may mean suboptimal fi nancial YZER.C

customers actually care about your value

invalidate the assumptions underlying your value success or even lead to failure. No value prop-G

proposition.

proposition. You will inevitably learn that many osition—however great—can survive without a

TE

This is when you strive to identify the jobs, of your early ideas simply don’t create customer sound business model.

STRA

pains, and gains that are most relevant to

value (i.e., customers don’t care) and will have to The search for business model fi t entails a customers and design value propositions accord-design new value propositions. Finding this second laborious back and forth between designing a ingly. You prototype multiple alternative value type of fi t is a long and iterative process; it doesn’t value proposition that creates value for custom-propositions to come up with the ones that

happen overnight.

ers and a business model that creates value

produce the best fi t. The fi t you achieve is not for your organization. You don’t have business yet proven and exists mainly on paper. Your next model fi t until you can generate more revenues steps are to provide evidence that customers care with your value proposition than you incur costs about your value proposition or start over with to create and deliver it (or “them” in the case of designing a new one.

platform models with more than one interde-

pendent value propositions).

Customer

Profi les in B2B

+Unbundled

Value propositions in business-to-

Value propositions to stakeholders within the business business (B2B) transactions typically

50

involve several stakeholders in the

search, evaluation, purchase, and

Infl uencers

Recommenders Economic buyers Decision makers End users

Saboteurs

.3 1

use of a product or service. Each one

has a diff erent profi le with diff erent

AS /

jobs, pains, and gains. Stakeholders

CANV

can tilt the purchasing decision in one

direction or another. Identify the most

important ones and sketch out a Value

Proposition Canvas for each one of

OM / VPD /

them.

YZER.CG

Profi les vary according to the sector

TE

and size of organization, but they

typically include the following roles:

STRA

Aggregated

Value Proposition

Business Segment

Organizations are

customers that are

composed of diff erent

stakeholders who all

have diff erent jobs,

pains, and gains.

Consider making a

Value Proposition

Canvas for each one.

Adapted from Steve Blank, The Four Steps to the Epiphany, 2006.

Unbundling

the Family

Influencers

End Users

51

Individuals or groups whose opinions might count The ultimate beneficiaries of a product or service.

Value propositions to the consumer may also

.3

and whom the decision maker might listen to, For a business customer, end users can either involve several stakeholders in the search, evalu-1

even in an informal way.

be within their own organization (a manufacturer ation, purchase, and use of a product or service.

AS /

buying software for its designers), or they can be For example, consider a family that intends to Recommenders

external customers (a device manufacturer buying buy a game console. In this situation, there is CANV

The people carrying out the search and evalua-chips for the smartphones it sells to consumers).

also a difference between the economic buyer, tion process and who make a formal recommen-End users may be passive or active, depending the influencer, the decision maker, the users, dation for or against a purchase.

on how much say they have in the decision and and the saboteurs. It therefore makes sense to OM / VPD /

purchase process.

sketch out a different Value Proposition Canvas Economic Buyers

for each stakeholder.

YZER.C

The individual or group who controls the budget Saboteurs

G

and who makes the actual purchase. Their

The people and groups who can obstruct or derail TE

concerns are typically about financial perfor-the process of searching, evaluating, and purchas-STRA

mance and budgetary efficiency.

ing a product or a service.

In some cases, the economic buyer may sit

outside an organization, such as a government Decision makers typically sit inside the customer’s paying for the basic medical supply in nursing organization, whereas Influencers, recommenders, homes for elderly citizens.

economic buyers, end users, and saboteurs can sit inside or outside the organization.

Decision Makers

The person or group ultimately responsible for the choice of a product/service and for ordering the purchase decision. Decision makers usually have ultimate authority over the budget.

Multiple Fits

Some business models work only

Intermediary

with a combination of several value

When a business sells a product or service

Chinese fi rm Haier sells home appliances and propositions and customer segments.

through an intermediary, it eff ectively needs to electronics to households globally. It does this In these situations, you require fi t

cater to two customers: the end customer and largely through retailers such as Carrefour, 52

between each value proposition and its

the intermediary itself. Without a clear value Walmart, and others. To be successful, Haier respective customer segment for the

proposition to the intermediary, the off er might needs to craft an appealing value proposition

.3 1

business model to work.

not reach the end customer at all, or at least not both to households (the end customer) and to with the same impact.

intermediary distributors.

AS /

Two common illustrations of multiple

CANV

fi ts are intermediary and platform business models.

OM / VPD /

Haier

Haier has a value proposition to

YZER.CG

the end customer, households.

TE

STRA

Haier has a value proposition to their intermediary customer, the retailers, who are also the main channel for the end customer.

53

.3 1

AS /

CANV

OM / VPD /

Platforms

Airbnb

YZER.C

Platforms function only when two or more actors G

interact and draw value within the same inter-TE

dependent business model. Platforms are called STRA

double-sided when there are two such actors

and multisided when there are more than two.

A platform exists only when all sides are present Stay

Rent

in the model.

Airbnb is an example of a double-sided platform.

It is a website that connects local residents with extra space to rent out and travelers looking for alternatives to hotels as a place to stay. In such a case, the business model needs to hold two value propositions, one for local residents (called hosts) and one for travelers.

Going to the Movies

Let us walk through the concepts of the Value Proposition He could start with the value proposition’s fea-Canvas with another simple example. Imagine the owner of tures and get excited about the latest generation a movie theater chain wants to design new value proposi-of big screens, state-of-the-art display technol-tions for his customers.

ogies, tasty snacks, social happenings, urban 54

experiences, and so on. But, of course, those only really matter if customers care about them. So he

.3 1

sets out to better understand what his customers truly want.

AS /

Traditionally he’d sketch out psychodemo-

CANV

graphic profiles of his customer segments. But this time he decides to complement this type of What drives the moviegoer?

segmentation with customer profiles that highlight a customer’s jobs, pains, and gains.

OM / VPD /

YZER.C

haven't spent

G

comfortable

much money

TE

friends'

reviews

STRA

not having

feeling

missed

get

Tip: A (potential)

included in

something

entertained

customer exists

organized

the story

independently of

everything in

advance

share with

your value proposition.

someone

relax

When you sketch out

your customer’s profile,

limited

learn from

?

don’t just focus on

long

options

waste of

another

escape real

commute

time

place

jobs, pains, and gains

life

related to your value

not able

expensive

crowded,

proposition. Keep it

to get

long queues

babysitter

broad to understand

what really drives your

no convenient

hurts my

story too

What should the new value

show times

eyes

customers.

complex

bad parking

proposition look like?

A Movie Theater’s Business Model Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

Source

movies

Mass market

Movie

Immersive

distributors

Run facilities

storytelling

55

experience

Moviegoers

.3

Key Resources

Channels

1

Theaters

Food

(good

AS /

distributors

location)

Theaters

Display

CANV

Online

equipment

ticketing

Cost Structure

Revenue Streams

Staff

Food &

OM / VPD /

drinks

Food & drinks

Movie rights

Ticket sales

(margins)

Rent

YZER.CG

TE

STRA

The new approach: focusing on the jobs,

The traditional approach:

pains, and gains that drive customers

psychodemographic profi les

By sketching out a customer profi le, you aim to Traditional psychodemographic profi les group uncover what really drives people, rather than just consumers into categories that have the same describing their socioeconomic characteristics.

socioeconomic characteristics.

You investigate what they’re trying to achieve, their underlying motives, their objectives, and JANE MOVIEGOER

Movie Behavior:

what’s holding them back. Doing so will broaden 20-30 years old

ǃɲ Prefers action movies

your horizon and likely uncover new or better Upper middle class

ǃɲ Likes popcorn and soda

opportunities to satisfy customers.

Earns $100K/year

ǃɲ Does not like waiting in

Married, 2 children

line

ǃɲ Buys tickets online

ǃɲ Goes once a month

Same Customer,

Diff erent Contexts

Priorities change depending on a cus-

tomer’s context. Taking this context into

56

account before you think of a value

proposition for that customer is crucial.

.3 1

With the jobs-to-be-done approach, you uncover AS /

the motivations of diff erent customer segments.

CANV

Yet, depending on the context, some jobs will become more important or matter less than

others.

In fact, the context in which a person fi nds OM / VPD /

himself or herself often changes the nature of the jobs that the person aims to accomplish.

YZER.CG

For example, the clientele of a restaurant is TE

likely to use very diff erent criteria to evaluate their dining experience at lunch versus at dinner.

STRA

Likewise a mobile phone user will have diff erent job requirements when using the phone in a car, in a meeting, or at home. Hence, the features of your value proposition will be diff erent depending on which context(s) you are focusing.

In our example, the context

in which our moviegoer fi nds

herself will infl uence which jobs

matter more or less to her.

Add contextual elements to your

customer profi les if necessary.

They might serve as constraints for

designing value propositions later on.

57

.3 1

AS /

CANV

OM / VPD /

aff ordable

safe

visual story

accurate

for group

environment

both enjoyed

is easy to

YZER.C

story

G

moment

remember

leads to

TE

2 hr = right

kids are

great

deepen

share

can consult

length of

happy and

occupy kids

conversation

expertise

moment of

Internet for

STRA

time

calm

fun

more info

show off

relax

lack of light

knowledge

noise in the

during busy

connect with

to take notes can't control with friends

room

waiting in line

weekend

each other

speed

manage kids'

attention

not able

to get

not intimate

can't capture too shallow

not all kids

babysitter

enough

and share

for serious

are happy

learning

The kids’ afternoon off Date

night

Personal research

When? Wednesday afternoon

When? Saturday evening

When? Any time

Where? Leaving from home

Where? Leaving from home

Where? Leaving from home

With whom? Kids and maybe their friends With whom? Partner

With whom? Alone

Constraints? After school, before dinner time Constraints? Kids taken care of (if parents) Constraints? Needs to be able to take notes

Same Customer,

Diff erent Solutions

In today’s hypercompetitive world, customers are surrounded by an ocean of tempting value propo-58

sitions that all compete for the same limited slots of attention.

.3 1

Very

diff erent value propositions may address

similar jobs, pains, and gains. For example, our AS /

movie theater chain competes for customer atten-CANV

tion not only with other movie theaters but also with a broad range of alternative options: renting a movie at home, going out to dinner, visiting a spa, or maybe even attending an online virtual art OM / VPD /

exhibit with 3D glasses.

Strive to understand what your customers

YZER.CG

really care about. Investigate their jobs, pains, TE

and gains beyond what your own value proposition directly addresses in order to imagine totally STRA

new or substantially improved ones.

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.

movie

home

website

comfort

big screen

& surround

largest

sound

library

movies on big

screen

movie home

rentals

instant

59

advanced

access

online

.3

control of

1

duo seats

booking

experience

AS /

CANV

ideal for

both enjoyed

conversation

moment

leads to

OM / VPD /

great

share

moment of

Open slot for which

conversation

fun

YZER.C

dinner in

potentially very diff erent

G

town

value propositions are

connect with

TE

waiting in line

competing

each other

STRA

intimate

not able

setting

to get

babysitter not intimate

enough

home

ideal for

comfort

conversation

intellectually

stimulating

spa for

online visual

couples

art exhibit

instant

stress relief

access

choose time

no babysitter

to go

needed

60

.3 1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

Lessons Learned

Customer Profile

Value Map

Fit

Use the customer profile to visualize

Use the value map to make explicit

Problem-solution fit: Evidence that

what matters to customers. Specify

how you believe your products and

customers care about the jobs, pains,

their jobs, pains, and gains. Communi-

services will ease pains and create

and gains you intend to address with

cate the profile across your organiza-

gains. Communicate the map across

your value proposition. Product-market

tion as a one-page actionable

your organization as a one-page

fit: Evidence that customers want your

document that creates a shared

document that creates a shared

value proposition. Business model fit:

customer understanding. Apply it as

understanding of how you intend to

Evidence that the business model for

a “scoreboard” to track if assumed

create value. Apply it as a “score-

your value proposition is scalable and

customer jobs, pains, and gains exist

board” to track if your products actu-

profitable.

when you talk to real customers.

ally ease pains and gains when you

test them with customers.

The Value Proposition Canvas 61

Value Proposition

Customer Segment

.3 1

AS /

CANV

Gain Creators

Gains

OM / VPD /

YZER.CG

Products

Customer

TE

& Services

Job(s)

STRA

Pain Relievers

Pains

strategyzer.com

Download the Value Proposition Canvas pdf

Design, Test, Repeat

The search for value propositions

that meet customer jobs, pains, and

gains is a continuous back and forth

62

between designing prototypes and

testing them. The process is iterative

.3 1

rather than sequential. The goal of

Value Proposition Design is to test

AS /

ideas as quickly as possible in order to

CANV

learn, create better designs, and test

design

again.

OM / VPD /

YZER.CG

TE

STRA

63

.3 1

AS /

CANV

OM / VPD /

YZER.CG

TE

STRA

test

des

sign

2

Kick-start value proposition design with Prototyping Possibilities p. 74 for one of

your Starting Points p. 86. Shape your value propositions by Understanding Customers

p. 104, then select which ones you want

to further explore by Making Choices p. 120

and Finding the Right Business Model p. 142.

If you are an existing company, discover

the particularities of Designing in

Established Organizations p. 158.

VATION

OBSER

FROM

TESTING

S

STARTING POINT

P

TO

TESTING

ASSESSMENT

7 QUESTIONS

TOTYPING

PRO

DEL

BUSINESS MO

FAILED

Shaping Your Ideas

Design is the activity of turning your ideas into value proposition prototypes. It is a continuous cycle of prototyping, researching customers, and reshaping your ideas. Design may start with prototyping or with customer discovery. The 70

design activity feeds into the testing activity that we explore in the next chapter (see section 3. Test, → p. 172).

.0 2

DESIGN /

OM / VPD /

YZER.CG

Ideas, Starting Points,

Prototype Possibilities

Understand Customers

TE

and Insights

→ p. 74

→ p. 104

→ p. 86

STRA

Shape your ideas with quick, cheap, and rough Inform your ideas and prototypes with early

Starting points for new or improved value

prototypes. Make them tangible with napkin

customer research. Plough through available data propositions may come from anywhere. It could sketches → p. 80, ad-libs → p. 82, and Value

→ p. 108, talk to customers → p. 110, and immerse be from your customer insights → p. 116, from Proposition Canvases → p. 84. Don’t get attached yourself in their world → p. 114. Don’t show exploration of prototypes → p. 76, or from many to a prototype too early. Keep your prototypes customers your value proposition prototypes too other sources → p. 88. Be sure not to fall in love light so you can explore possibilities, easily early. Use early research to deeply understand with your early ideas, because they are certain throw them away again, and then find the best your customers’ jobs, pains, and gains. Unearth to transform radically during prototyping → p. 76, ones that survive a rigorous testing process with what really matters to them to prototype value customer research → p. 104, and testing → p. 172.

customers → p. 240.

propositions that are likely to survive rigorous testing with customers → p. 172.

Prototyping Possibilities 71

.0 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Ideas and Starting Points

Understanding Customers

10 Characteristics of

Great Value Propositions

Stop for an instant and reflect on the characteristics of great value propositions before reading about how to design them 72

in this chapter. We offer 10 characteristics to get you started.

Don’t hesitate to add your own. Great Value Propositions….

.0 2

Get “10 Characteristics of Great Value Propositions” poster DESIGN /

OM / VPD /

YZER.CG

TE

STRA

1

2

3

4

5

Are embedded in great

Focus on the jobs, pains,

Focus on unsatisfied

Target few jobs, pains,

Go beyond functional

business models

and gains that matter

jobs, unresolved pains,

and gains, but do so

jobs and address emo-

most to customers

and unrealized gains

extremely well

tional and social jobs

73

.0 2

DESIGN /

OM / VPD /

SCORE

YZER.CG

TE

STRA

6

7

8

9

10

Align with how custom-

Focus on jobs, pains,

Differentiate from

Outperform competition

Are difficult to copy

ers measure success

and gains that a lot

competition on jobs,

substantially on at

of people have or that

pains, and gains that

least one dimension

some will pay a lot of

customers care about

money for

74

2.

Prototyping

Possibilities

TOTYPING

PRO

What’s Prototyping?

Use the activity of making quick and rough study models of your idea to explore alternatives, shape your value proposition, and fi nd the best opportunities. Prototyping is common in the design professions for physical artifacts. We apply 76

it to the concept of value propositions to rapidly explore possibilities before testing and building real products and

.1 2

services.

DESIGN /

OM / VPD /

DEF·I·NI·TION

YZER.CG

Prototyping

TE

The practice of building quick,

Our ______ help(s) ______ who

inexpensive, and rough study

STRA

models to learn about the desir-

want to _______ by _______ and

ability, feasibility, and viability

of alternative value propositions

_______ . ( unlike _______ )

and business models.

Napkin Sketches

Ad-libs

→

p. 80

→

p. 82

Quickly explore radically

diff erent directions for the

Make alternatives tangible with napkin

Pinpoint how diff erent alternatives

same idea with the following

sketches. Use a single sketch for every

create value by fi lling in the blanks in

prototyping techniques before

potential direction your idea could

short ad-libs.

refi ning one in particular.

take.

Tips

ǃɲ Spend a maximum of 5 to 15 minutes on

sketching out your early prototypes.

ǃɲ Always use a visible timer and stick to a predefi ned time frame.

ǃɲ Don’t discuss too long which one of several possible directions to prototype. Prototype

several of them quickly and then compare.

77

ǃɲ Remember constantly that prototyping is

.1

an exploratory tool. Don’t spend time on the 2

details of a prototype that is likely to change radically anyway.

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Value Proposition Canvases

Representation of

Minimum Viable Product

→

p. 84

a Value Proposition

→

p. 222

→

p. 234

Flesh out possible directions with the

Build a minimum feature set that

Value Proposition Canvas. Understand

Help customers and partners under-

brings your value proposition to life

which jobs, pains, and gains each

stand potential value propositions by

and allows testing it with customers

alternative is addressing.

bringing them to life without building

and partners.

them.

More in section 3. Test, →

p. 172

10 Prototyping Principles Unlock the power of prototyping. Resist the temptation of spending time and energy refi ning one direction only.

Rather, use the principles described here to explore multiple directions with the same amount of time and energy. You 78

will learn more and discover better value propositions.

.1 2

Get “10 Prototyping Principles” poster

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

1

2

3

4

5

Make it visual

Embrace a

Don’t fall in love

Feel comfortable

Start with low fi delity,

and tangible.

beginner’s mind.

with fi rst ideas—

in a “liquid state.”

iterate, and refi ne.

These kinds of prototypes

Prototype “what can’t be

create alternatives.

Early in the process the right

Refi ned prototypes are hard

spark conversations and

done.” Explore with a fresh

Refi ning your idea(s) too

direction is unclear. It’s a

to throw away. Keep them

learning. Don’t regress into

mind-set. Don’t let existing

early prevents you from

liquid state. Don’t panic and

rough, quick, and cheap.

the land of blah blah blah.

knowledge get in the way

creating and exploring alter-

solidify things too early.

Refi ne with increasing knowl-

of exploration.

natives. Don’t fall in love too

edge about what works and

quickly.

what doesn’t.

79

.1 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

6

7

8

9

10

Expose your work early

Learn faster by failing

Use creativity

Create “Shrek models.”

Track learnings,

—seek criticism.

early, often, and

techniques.

Shrek models are extreme or

insights, and progress.

Seek feedback early and

cheaply.

Use creativity techniques

outrageous prototypes that

Keep track of all your alter-

often before refi ning. Don’t

Fear of failure holds people

to explore groundbreaking

you are unlikely to build. Use

native prototypes, learnings,

take negative feedback

back from exploring. Over-

prototypes. Dare to break

them to spark debate and

and insights. You might use

personally. It’s worth gold to

come that with a culture of

out of how things are usually

learning.

earlier ideas and insights

improve your prototype.

rough and quick prototyping

done in your company or

later in the process.

that keeps failure cheap and

industry.

leads to faster learning.

Make Ideas Visible

PROCESS

with Napkin Sketches

OBJECTIVE

OUTCOME

Quickly visualize ideas for value

Alternative prototypes in the form

80

propositions

of napkin sketches

.1 2

The Self-Service

Napkin sketches are a rough representation of a value prop-Shop of _________

osition or business model and highlight only the core idea, not how it works. They are rough enough to fi t on the back of DESIGN /

a napkin and still communicate the idea. Use them early in your prototyping process to explore and discuss alternatives.

OM / VPD /

YZER.CG

What is a napkin sketch?

our clients get individual components

TE

Napkin sketches are a cheap way to make your The best napkin

from our shop and assemble the

product later on themselves

ideas more tangible and shareable. They avoid STRA

going into the details of how an idea works to steer sketches…

clear of getting hung up with implementation issues.

Contain only one core idea or direction

The Private Bank o

What is it used for?

(ideas can be merged later).

f ____

Use napkin sketches to quickly share and evaluate ideas during the early value proposition Explain what an idea is about, not how

design process. Their roughness is deliberate so it will work (no processes or business

you can throw ideas away without regret and

models yet!).

explore alternatives. You may also use them to gather early feedback from customers.

Keep things simple enough to get it in

a glance (details are for more refi ned

Caveat

prototypes later on).

Make sure people understand that napkin

every one of our clients has a persona

advisor who o

l

sketches are an exploratory tool. You will kill or Can be pitched in 10 to 30 seconds.

ff ers tailor-made advice

and ser

vices

transform many of the sketched out ideas during the prototyping and testing process.

4

Display

PROCESS

All napkin sketches are exposed in a sort of gallery on the wall. You should now have a nice diversity of alternative directions.

3

Pitch · 30 sec per group

5

81

One team member of each break-out group takes

.1

the stage and pitches the (large) napkin sketches.

Dotmocracy · 10–15 min (ideally over a

2

Each pitch should be no longer than 30 seconds—

break)

just enough to outline what the idea is about, Participants get 10 stickers to vote for their favor-not to explain how it works! Make sure there is ite ideas. They can give all votes to one idea or DESIGN /

suffi cient diversity across the groups or else send distribute them among several napkin sketches.

everybody back to the drawing board.

This is not a decision-making mechanism. It is a process that highlights the ideas that participants OM / VPD /

are most excited about. →

p. 138

YZER.CG

TE

STRA

2

1

Draw · 12–15 min

Brainstorm ·

6

15–20 min

Participants split into break-out groups, and each Use diff erent brainstorming techniques, such as group quickly picks three ideas for three alterna-Prototype

trigger questions →

p. 15, 17, 31, 33 or “what if”

tive value propositions. They draw a napkin sketch Break-out groups continue by sketching out a questions to generate a large quantity of possi-for each one on a fl ip chart. Making two or three value proposition canvas for the one napkin

ble directions for interesting value propositions.

sketches increases diversity and reduces the risk sketch out of their three that got most votes.

Don’t worry about choice at this stage. Quantity of endless discussions.

Potentially redistribute the napkin sketches that is better than quality. These are quick and dirty got most votes among the different groups.

prototypes that will change inevitably.

Create Possibilities

EXERCISE

Quickly with Ad-Libs

Ad-libs are a great way to quickly shape alternative directions for your value proposition. They force you to pinpoint OBJECTIVE

OUTCOME

how exactly you are going to create value. Prototype Quickly shape potential value

Alternative prototypes in the form

three to five different directions by filling out the blanks in 82

proposition directions

of “pitchable” sentences

the ad-lib below.

.1 2

Download the template

DESIGN /

OM / VPD /

YZER.C

Our ______ help(s) ______ who

G

TE

products and services

customer segment

STRA

want to _______ by _______ and

jobs to be done

your own verb (e.g., reducing, avoiding) Tip

_______ . ( Add at the beginning unlike _______ ) or end of sentence:

your own verb (e.g., increasing, enabling) competing value proposition

EXERCISE

83

.1 2

DESIGN /

Our ___

business

book

_ help(s) ____ w

OM / VPD /

professionals

ho

YZER.CG

TE

STRA

want to ____ b

improve

making stuff

or build

avoiding

nobody

a business

y ______ a

wants

nd

clear

______ .

indicators

creating

to measure

progress

Flesh out Ideas with

PROCESS

Value Proposition

Canvases

84

OBJECTIVE

OUTCOME

Sketch explicitly how

Alternative prototypes

.1 2

different ideas create

in the form of Value

customer value

Proposition Canvases

DESIGN /

Use the Value Proposition Canvas to

sketch out quick alternative proto-

types, just like you would with napkin

sketches or ad-libs. Don’t just work

OM / VPD /

with the canvas to refine final ideas,

but use it as an exploratory tool until

YZER.CG

you find the right direction.

TE

STRA

PROCESS

85

.1 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Use a visible timer to constrain the time

you spend working on a specifi c proto-

type. Keep early prototypes short.

Don't be afraid to prototype radical direc-

tions, even if you know you are unlikely to

pursue them. Explore and learn.

86

2.2

Starting Points

S

STARTING POINT

Where to Start

Zoom out

Contrary to popular belief, great new

value propositions don’t always have

Imitate and “import” a pioneering

to start with the customer. They do,

model from another sector or industry?

however, always have to end with

88

addressing jobs, pains, or gains that

Create value based on a new technol-

customers care about.

ogy trend or turn a new regulation to

.2 2

your advantage?

On this spread we offer 16 trigger areas to get started with new or improved value propositions.

Come up with a new value proposition

DESIGN /

They start from either the customer, your existing that your competitors can’t copy?

value propositions, your business models, your environment, or business models and value propositions from other industries and sectors.

Come up with a new value proposition

OM / VPD /

based on a new partnership?

Get “Innovation Starting Points” poster

YZER.CG

Build on your existing activities and

TE

STRA

Could you…

resources, including patents, infra-

structure, skills, user base?

Dramatically alter your cost structure

to lower your prices substantially?

Create a new gain creator for a given

customer profile?

Imagine a new product or service?

Create a new pain reliever for a given

customer profile?

Zoom in

Your Business Model Environment Adapt your value proposition to a

89

new or underserved segment such as

.2

the rising middle class in emerging

2

markets?

Design a value proposition for a

DESIGN /

new macroeconomic trend such as

rising healthcare costs in the Western

hemisphere?

OM / VPD /

Your Current Business Model(s)

Leverage your existing relationships

YZER.C

and channels to offer customers a new

G

TE

value proposition?

STRA

Give away your core product for free

or increase your prices by a multiple?

Your Value Proposition(s)

Focus on your customers’ most

essential unrealized gain?

Uncover a new unsatisfied job?

Solve your customers' most extreme

unresolved pain?

Spark Ideas with

PROCESS

Design Constraints

Use design constraints to force people to think about OBJECTIVE

OUTCOME

innovative value propositions embedded in great business Force yourself to think outside

Ideas that differ from your “usual”

90

models. We outline five constraints of businesses whose of the box

value propositions and business

value proposition and business model you can copy into models

.2 2

your own arena. Don’t hesitate to come up with other ones.

DESIGN /

Trend-

setting

Service

activities

+

Activity

OM / VPD /

+Subscrip-

Brand

tion

Recurring

Revenues

Revenues

YZER.CG

Trend-

Fashion

TE

Base

setting

conscious

Product +

+Innovative

STRA

+Service

Consum-

able

product

Product

Servitization

Razor Blade

Trendsetter

Constraint: Transform from selling a product-Constraint: Create a value proposition composed Constraint: Transform a technology (innovation) based value proposition to a service-based one of a base product and a consumable product that into a fashionable trend.

that generates revenues from a subscription

generates recurring revenues.

model.

Swatch conquered the world by turning a

Nespresso transformed the sales of espresso plastic watch that could be made cheaply due Hilti shifted from selling machine tools to build-from a transactional business to one with recur-to a reduced number of pieces and innovative ers to leasing fleet management services to ring revenues based on consumable pods for its production technology into a global fashion managers at construction companies.

espresso machine.

trend.

PROCESS

91

.2 2

+Platform

Reduced

cost

structure

DESIGN /

New cost-

Conscious

Low-cost

Customer

VP

VP A

Customer A

OM / VPD /

Platform

YZER.CG

Cost

TE

Upsell VP

VP B

Customer B

STRA

Low-Cost

Platform

Tips

ǃɲ Assign different constraints to differ-

Constraint: Reduce the core value proposition to Constraint: Build a platform model that connects ent working groups if you have the

its basic features, target an unserved or under-several actors with a specific value proposition for opportunity to do so. It allows you to

served customer segment with a low price and sell each.

explore alternatives in parallel.

everything else as an additional value proposition.

ǃɲ Use constraints that represent the

Airbnb made private homes around the world challenges in your arena, such as

Southwest became the largest low-cost airline accessible to travelers by connecting them with free value propositions, decreasing

by stripping down the value proposition to its people who seek to rent out their apartments margins, and so on.

bare minimum, travel from point A to point B, short term.

and offering low prices. They opened up flying to a new segment.

Download Constraint Cards

Invite Big Ideas to

PROCESS

the Table with Books

and Magazines

92

OBJECTIVE

OUTCOME

Broaden horizon and

Ideas that build on

.2 2

generate fresh ideas

relevant topics and

integrate latest trends

E-retailers

Climate change

DESIGN /

Use best-selling books and magazines

grow in

awareness aff ects

Rise of the

to generate fresh ideas for new and

power

consumer behavior

“sharing

innovative value propositions and busi-

economy”

2

ness models. It’s a quick and eff ective

Browse and extract.

OM / VPD /

way to immerse yourself in various

Mass-collab.

Participants browse

relevant and popular topics and build

changes

their book and capture

YZER.CG

on current trends.

how value

the best ideas on sticky

TE

is created

notes. (45 min)

Bringing books into a workshop is like inviting the STRA

world’s best thinkers to brainstorm. This way you can aff ord a lot more of them at the same time.

1

Select books.

Prepare a series of books

and magazines repre-

senting a trend, import-

ant topic, or big idea

Meet and

on a large table. Ask

exceed the

workshop participants to

basic needs

pick up a book each.

of every

How the digital

Surge of the

human being

generation ticks

maker movement

on the planet

diff erently

Tips

ǃɲ Select books about society, tech-

nology, and environment that push

PROCESS

participants outside of their comfort

zone.

ǃɲ Avoid complicated business theories

or methods.

ǃɲ Mix in YouTube videos of keynote

93

talks by the authors.

.2

ǃɲ Use napkin sketches to share your

2

value proposition ideas.

DESIGN /

3

Share and discuss.

OM / VPD /

Participants share their

highlights in groups of

YZER.C

four or fi ve people and

G

TE

capture their insights on

5

a board. (20 min)

Pitch.

STRA

Each group shares their

alternative value prop-

ositions with the other

groups.

4

Brainstorm

possibilities.

Each group generates

three new value proposi-

tion ideas based on their

discussions. (30 min)

Download “Big Idea Book List”

Push vs. Pull

The push versus pull debate is a common one. Push indicates that you’re starting the design of your value proposition from a technology or innovation you possess, whereas pull means you’re beginning with a manifest customer job, Key Partnerships

Key Activities

Value Propo sit

94

pain, or gain. These are two common starting points, many of which we outlined previously → p. 88. Consider both as

.2 2

viable options depending on your preferences and context.

DESIGN /

Technology Push

Start from an invention, innovation, or (technological) resource for which you develop a value proposition that addresses a customer job, pain, and gain.

OM / VPD /

In simple terms, this is a solution in search of a problem.

Explore value proposition prototypes that are based on your invention, YZER.C

Key Resources

G

innovation, or technological resource with potentially interested customer TE

segments. Design a dedicated value map for each segment until you fi nd problem-solution fi t. Read more about the build, measure, learn cycle on STRA

→

p. 186.

technological

resources

Technology

1. Solution

(invention, innovation, technology)

Cost Structure

learn

build

FIND A

PROBLEM

3. Customer

jobs, pains, gains

2. Value

insights

proposition

prototype

measure

Market

1. Problem

(jobs, pains, gains)

po sitions

Customer

Customer

Relationships

Segments

learn

build

95

.2

FIND A

2

SOLUTION

3. Adjust

2. Value

technology

proposition

DESIGN /

(and resource)

prototype

needs

measure

OM / VPD /

Channels

YZER.CG

TE

STRA

Market Pull

Start from a manifest customer job, pain, or gain for which you design a Revenue Streams

value proposition. In simple terms, this is a problem in search of a solution.

Learn what technologies and other resources are required for each value proposition prototype designed to address manifest customer jobs, pains, and gains. Redesign your value map and adjust resources until you fi nd a viable solution to address customer jobs, pains, and gains. More about the build, measure, learn cycle on →

p. 186.

Push: Technology

?

?

2

3

EXERCISE

in Search of Jobs,

Ideate.

Segment.

Come up with an idea for a

Select a customer segment that could be

Pains, and Gains

value proposition using the

interested in this value proposition and

compressed air energy storage.

would be ready to pay for it.

96

OBJECTIVE

OUTCOME

The Business Model Canvas

Practice the

Improved skills

.2 2

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

technology-driven

Relationships

Segments

approach with no risk

DESIGN /

This push exercise starts

with the solution

OM / VPD /

Key Resources

Channels

YZER.CG

TE

compressed

air energy

STRA

1

storage

Design.

Design a value proposition based on

Cost Structure

the technology outlined in the press

Revenue Streams

excerpt from the Swiss Federal

Institute of Technology in Lausanne

(EPFL) by targeting a customer seg-

ment that might be interested in

adopting this technology.

“S olar and aeolian sources are great candi-EPFL has worked for over ten years on an orig-A spin-off has been created to develop this dates for the electricity generation of the inal storage system: compressed air. The use principle and create ‘turnkey’ electrical energy future… However, solar and wind sources’

of a hydraulic piston delivers the best system storage and retrieval units. In 2014, a 25 kW pilot peak availability takes place at times that do performance… The obtained high pressure

will be installed at a photovoltaic park in Jura.…

not usually correspond to peak demand hours.

air can be safely stored in bottles without losses In the future, there will be 250 kW installations at Therefore, a way must be devised to store and until it is necessary to generate new electricity first and 2,500 kW ones afterwards.”

later reuse the energy generated.

by expanding the gas in the cylinder. One of the advantages of our system is that it does not require rare materials.

Tips

ǃɲ Add design constraints to technol-

ogy push exercises. Your organi-

EXERCISE

zation might not want to address

certain customer segments (e.g.,

B2B, business-to-consumer [B2C],

specific regions, etc.). Or you might

prefer certain strategic directions,

97

for example, licensing rather than

.2

building solutions.

2

ǃɲ Follow up on your customer

assumptions by researching

customers → p. 104 and produc-

DESIGN /

ing evidence → p. 172 once you’ve

6

selected a potentially interested

segment.

OM / VPD /

Assess.

Assess the fit between

YZER.C

the customer profile

G

?

TE

and the designed

value proposition.

Continued on → p. 152

?

STRA

Zoom in

?

?

The Value Proposition Canvas

4

?

Profile.

?

Sketch out the

customer’s profile.

5

Make assumptions

about jobs to be done,

Sketch.

pains, and gains.

Refine the value prop-

osition by sketching

out how it will kill

customer pains and

create gains.

Pull: Identify

High-Value Jobs

98

Great value proposition creators master

.2 2

the art of focusing on the jobs, pains,

and gains that matter. How will you

know which of these jobs, pains, and

DESIGN /

gains to focus on? Identify high-value

jobs by asking if they are important,

tangible, unsatisfi ed, and lucrative.

+

+

OM / VPD /

YZER.CG

TE

High-value jobs are

STRA

characterized by pains

and gains that are…

Important

Tangible

When the customer’s success or failure to get When the pains or gains related to a job can be the job done leads to essential gains or extreme felt or experienced immediately or often, not just pains, respectively.

days or weeks later.

ǃɲ Does failing the job lead to extreme pains?

ǃɲ Can you feel the pain?

ǃɲ Does failing the job lead to missing out on ǃɲ Can you see the gain?

essential gains?

99

.2 2

DESIGN /

+

=

OM / VPD /

YZER.CG

TE

STRA

Unsatisfi ed

Lucrative

High-value jobs

When current value propositions don’t help relieve When many people have the job with related

Focus on the highest-value jobs

pains or create desired gains in a satisfying way pains and gains or a small number of customers and related pains and gains.

or simply don’t exist.

are willing to pay a premium.

ǃɲ Are there unresolved pains?

ǃɲ Are there many with this job, pain, or gain?

ǃɲ Are there unrealized gains?

ǃɲ Are there few willing to pay a lot?

Based on initial work by consultancy, Innosight.

Customer Profile

Pull: Job

Synthesized customer profile of a CIO

EXERCISE

Selection

fully

ability to

integrated

OBJECTIVE

OUTCOME

provide busi-

systems

Identify high-value

Ranking of customer

seat at

ness-critical

the top

100

customer jobs that

jobs from your

information

ability to

management

you could focus on

perspective

invest in new

table

.2

projects on

systems

2

time and

assure

employees

This pull exercise starts with

on budget

compliance

following IT

the customer.

happy users

support

policy

DESIGN /

innovation

unified

Imagine your customers are chief

contribution purchasing

manage staff satisfy users

integrated

information officers (CIOs) and you

platforms

to revenue

(mobile,

growth

have to understand which jobs matter

OM / VPD /

cloud, etc.)

create

manage

most to them. Do this exercise to

value for

legacy

prioritize their jobs or apply it to one

corporation

systems

YZER.CG

security

of your own customer profiles.

getting fired

design IT

TE

breach

strategy

manage

STRA

mobile

security

Tips

infrastruc-

updating

gadgets of

budget cuts

manage

ture

software

ǃɲ This exercise helps you prioritize jobs from the employees

budget

downtime

customer’s perspective. It doesn’t mean you

complex IT

have to mandatorily address the most important antiquated

budget

compliance

infrastruc-

ones in your value proposition; those might be legacy

overruns of

breach

ture

systems

+5 percent

outside your scope. However, make sure your

value proposition does address jobs that are overflowing

staying

highly relevant to customers.

requests of

up to date

ǃɲ Great value proposition creators often focus IT projects

with trends

on only few jobs, pains, and gains, but do that extremely well.

ǃɲ Complement this exercise with getting customer insights from the field → p. 106 and experiments that produce evidence → p. 216.

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer

EXERCISE

ǃɲ Does failing the job

ǃɲ Can you feel the pain?

ǃɲ Are there unresolved

ǃɲ Are there many with

Focus on the highest

101

lead to extreme pains?

ǃɲ Can you see the gain?

pains?

this job, pain, or gain?

value jobs and related

.2

ǃɲ Does failing the job

ǃɲ Are there unrealized

ǃɲ Are there few willing

pains and gains.

2

lead to missing out on

gains?

to pay a lot?

essential gains?

Jobs

Important

Tangible

Unsatisfi ed

Lucrative

High-value jobs

DESIGN /

create

value for

���

�

���

��

= 9

corporation

OM / VPD /

design IT

��

�

��

��

= 7

strategy

YZER.CG

TE

STRA

Scoring scale: � (low) to ���� (high) Based on initial work by consultancy, Innosight.

Six Ways to Innovate

from the Customer Profi le

You’ve mapped your customer profi le. What to do from here?

Here are six ways to trigger your next value proposition move.

102

Can you…

.2 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Address more jobs?

Switch to a more

Go beyond functional jobs?

important job?

Address a more complete set of jobs, including Help customers do a job that is diff erent from Look beyond functional jobs and create new

related and ancillary jobs.

what most value propositions currently focus on.

value by fulfi lling important social and emotional jobs.

With the iPhone, Apple not only reinvented the Hilti, the machine tool manufacturer, understood mobile phone but enabled us to store and play that construction managers needed to keep Mini Cooper created a car that became as music and browse the web on one device.

schedules to avoid penalties, not only drill holes.

much a means of transport as a statement of Their fl eet management solution addressed the identity.

former in addition to the latter.

Download trigger questions

103

.2 2

DESIGN /

OM / VPD /

YZER.CG

TE

Help a lot more customers

Get a job done

Help a customer get a

STRA

get a job done?

incrementally better?

job done radically better?

Help more people do a job that was otherwise too Help customers better do a job by making a

This is the stuff of new market creation, when complex or too expensive.

series of microimprovements to an existing value a new value proposition dramatically outper-proposition.

forms older ways of helping a customer get a High-end web data storage and computing

job done.

power used to be reserved to big companies with German engineering and electronics multi-large IT budgets. Amazon.com made it avail-national Bosch improved on a wide range of The first spreadsheet called VisiCalc not only able to companies of any size and budget with features of its circular saw that really mattered introduced a new market for such tools but Amazon Web Services.

to customers and outperformed competition.

also ushered a whole new realm of possibilities across industries powered by easy, visual calculations.

104

2.3

Understanding

Customers

VATION

OBSER

Six Techniques to

Gain Customer Insights

Understanding the customer’s perspective is crucial to designing great value propositions. Here are six techniques 106

that will get you started. Make sure you use a good mix of these techniques to understand your customers deeply.

.3 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

The Data Detective

The Journalist

The Anthropologist

Build on existing work with (desk) research. Sec-Talk to (potential) customers as an easy way to Observe (potential) customers in the real world ondary research reports and customer data you gain customer insights. It’s a well-established to get good insights into how they really be-might already have provide a great foundation practice. However, customers might tell you one have. Study which jobs they focus on and how for getting started. Look also at data outside thing in an interview but behave diff erently in the they get them done. Note which pains upset

your industry and study analogs, opposites, or real world.

them and which gains they aim to achieve.

adjacencies.

Diffi culty level: ★★

Diffi culty level: ★★★

Diffi culty level: ★

Strength: quick and cheap to get started with fi rst Strength: data provide unbiased view and allow Strength: great foundation for further research learnings and insights

discovering real-world behavior

Weakness: static data from a diff erent context Weakness: customers don’t always know what Weakness: diffi cult to gain customer insights

→

p. 108 for more

they want and actual behavior diff ers from inter-related to new ideas

view answers

→

p. 114 for more

→

p. 110 for more

107

.3 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

The Impersonator

The Cocreator

The Scientist

“Be your customer” and actively use products and Integrate customers into the process of value Get customers to participate (knowingly or

services. Spend a day or more in your customer’s creation to learn with them. Work with customers unknowingly) in an experiment. Learn from the shoes. Draw from your experience as an (unsatis-to explore and develop new ideas.

outcome.

fi ed) customer.

Diffi culty level: ★★★★★

Diffi culty level: ★★★★

Diffi culty level: ★★

Strength: the proximity with customers can help Strength: provides fact-based insights on Strength: fi rsthand experience of jobs, pains, and you gain deep insights

real-world behavior; works particularly well for gains

Weakness: may not be generalized to all custom-new ideas

Weakness: not always representative of your real ers and segments

Weakness: can be hard to apply in existing customer or possible to apply

organizations because of strict (customer) policies and guidelines

→

p. 216 for more

The Data Detective:

Never before have creators had more access to readily available information and data inside and outside their Get Started with

companies before even getting started with designing value.

Use available data sources as a launching pad to getting Existing Information

started with customer insights.

108

.3 2

DESIGN /

OM / VPD /

Google Trends

YZER.CG

Compare three search terms repre-

Government Census Data,

TE

senting three diff erent trends related

World Bank, IMF, and more

to your idea.

Identify the (government) data that

STRA

are relevant to your idea and at your

fi ngertips via the web.

Google Keyword Planner

Third-Party Research Reports

Learn what’s popular with potential

Identify three readily available

customers by fi nding the top fi ve

research reports that can serve you

search terms related to your idea.

as a starting point to prepare your

How often are they searched for?

own customer and value proposition

research.

Social Media Analytics

Existing companies and brands should:

ǃɲ Identify the shakers and movers

related to their brand on social

media?

ǃɲ Spot the 10 most frequently

109

mentioned positive and negative

.3

things said about them on social

2

media.

Customer Relationship

DESIGN /

Management (CRM)

ǃɲ List the top three questions,

complaints, and requests that you

OM / VPD /

are getting from your daily interac-

tions with customers (e.g., support).

YZER.CG

TE

Tracking Customers on Your Website

ǃɲ List the top three ways customers reach

STRA

your site (e.g., search, referrals).

ǃɲ Find the 10 most and least popular

destinations on your website.

Data Mining

Existing company should mine their

data to:

ǃɲ Identify three patterns that could be

useful to their new idea.

Source: Siegel & Davenport, Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die, 2013.

The Journalist:

EXERCISE

Interview Your Customers

OBJECTIVE

OUTCOME

Gain a better customer

First lightly validated customer

2

110

understanding

profi le(s)

Create an

interview outline.

.3 2

Talk to customers to gain insights relevant to your context.

Ask yourself what

Use the Value Proposition Canvas to prepare interviews and you want to learn.

organize the chaotic mass of information that will be coming Derive the interview

DESIGN /

at you during the interview process.

questions from your

customer profi le.

Ask about the most

important jobs, pains,

OM / VPD /

and gains.

YZER.CG

TE

STRA

10

1

Create a

5

customer profi le.

Sketch out the jobs,

Review the interview.

pains, and gains you

Assess if you need to

believe characterize

review the interview

the customer you are

questions based on

targeting. Rank jobs,

what you learned.

pains, and gains in

order of importance.

Tip

Capture your biggest

insights from all the

EXERCISE

interviews.

3

7

Conduct the interview.

Synthesize.

111

Conduct the inter-

Make a separate

.3

view by following the

synthesized customer

2

interview ground rules

profi le for every

outlined on the next

customer segment

page.

that emerges from

DESIGN /

all your interviews.

Write down your most

important insights on

OM / VPD /

sticky notes.

YZER.CG

TE

x

STRA

4

6

Capture.

Search for patterns.

Map out the jobs,

Make sure you also

Can you discover

Why are they similar

pains, and gains you

capture business

similar jobs, pains,

or diff erent? Can

learned about in the

model learnings.

and gains? What

you detect specifi c

interview on an empty

Write down your most

stands out? What is

(recurring) contexts

customer profi le.

important insights.

similar or diff erent

that infl uence jobs,

among interviewees?

pains, and gains?

Ground Rules

for Interviewing

112

.3 2

Rule 1

It is an art to conduct good interviews

Adopt a beginner’s mind.

DESIGN /

that provide relevant insights for value

Listen with a “fresh pair of ears” and avoid inter-proposition design. Make sure you

pretation. Explore unexpected jobs, pains, and focus on unearthing what matters to

gains in particular.

(potential) customers rather than try-

OM / VPD /

ing to pitch them solutions. Follow the

rules on this spread to conduct great

YZER.C

Rule 2

G

interviews.

Listen more than you talk.

TE

Your goal is to listen and learn, not to inform, Get “Ground Rules for Interviewing” poster impress, or convince your customer of anything.

STRA

Avoid wasting time talking about your own beliefs, because it’s at the expense of learning about your customer.

Rule 3

Get facts, not opinions.

Don’t ask, “Would you…?”

Ask, “When is the last time you have…?”

Rule 4

Ask “why” to get real motivations.

Ask, “Why do you need to do…?”

Ask, “Why is ___ important to you?”

Ask, “Why is ___ such a pain?”

113

.3

Rule 5

2

The goal of customer insight interviews

Tips

is not selling (even if a sale is involved); ǃɲ Interviews are an excellent starting point to DESIGN /

it’s about learning.

learn from customers, but typically they don’t Don’t ask, “Would you buy our solution?” Ask provide enough or suffi ciently reliable insights

“what are your decision criteria when you make a for making critical decisions. Complement your OM / VPD /

purchase of…?”

interviews with other research, just like a good journalist does further research to fi nd the real YZER.C

Rule 6

story behind what people tell. Add real-world G

TE

observations of customers and experiments

Don’t mention solutions (i.e., your prototype that produce hard data to your research mix.

STRA

value proposition) too early.

ǃɲ Conduct interviews in teams of two people.

Don’t explain, “Our solution does…”

Decide in advance who will lead the interview Ask, “What are the most important things you are and who will take notes. Use a recording device struggling with?”

(photo, video, or other) if possible, but be aware that interviewees might not answer the same

Rule 7

way with a recording device on the table.

Follow up.

Get permission to keep your interviewee’s contact information to come back for more questions and answers or testing prototypes.

Rule 8

Always open doors at the end.

Ask, “Who else should I talk to?”

Fitzpatrick, The Mom Test, 2013.

The Anthropologist:

Dive deep into your (potential) customers’ worlds to gain insights about their jobs, pains, and gains. What customers Dive into Your

do on a daily basis in their real settings often diff ers from what they believe they do or what they will tell you in an Customer’s World

interview, survey, or focus group.

114

.3 2

DESIGN /

OM / VPD /

B2C: Stay with the family.

B2C: Observe shopping behavior.

Stay at one of your potential customers’ home for Go to a store where your (potential) customers YZER.CG

several days and live with the family. Participate in shop and observe people for 10 hours. Watch.

TE

daily routines. Learn about what drives that person.

Can you detect any patterns?

STRA

B2B: Work alongside/consult.

Spend time working with or alongside a (poten-B2C: Shadow your customer for a day.

tial) customer (e.g., in a consulting engagement).

Be your (potential) customer’s shadow and follow him Observe. What keeps the person up at night?

B2B/B2C?

or her for a day. Write down all the jobs, pains, and How could you immerse yourself in your (potential) gains you observe. Time stamp them. Synthesize.

customer’s life? Be creative! Go beyond the usual Learn.

boundaries.

A Day in

Time

Activity (what I see)

Notes (what I think)

the Life

7 pm

brush kid's teeth before bed

parents annoyed by water splashing everywhere EXERCISE

Worksheet

OBJECTIVE

115

Understand your customer’s world

.3

in more detail

2

OUTCOME

Map of your customer's day

DESIGN /

Capture the most important

jobs, pains, and gains of the

customer you shadowed.

OM / VPD /

YZER.C

Tips

G

TE

ǃɲ Observe and take notes. Hold

back with interpretation based

STRA

on your own experience. Stay

nonjudgmental! Work like an

anthropologist and watch with

“fresh” eyes and an open

mind-set.

ǃɲ Pay attention to both what you

see and what you don't see.

ǃɲ Capture not only what you can

observe but also what is not

talked about such as feelings or

emotions.

ǃɲ Develop customer empathy as

a critical mind-set to perform

this type of contextual inquiry

effectively.

Download “A Day in the Life” worksheet

Identify Patterns in

PROCESS

Customer Research

OBJECTIVE

OUTCOME

Crystallize your customer

Synthesized Customer Profi le(s)

116

Analyze your data and try to detect patterns once you

.3 2

have a good amount of customer research gathered.

Search for customers with similar jobs, pains, or gains or customers that care about the same jobs, pains, or gains DESIGN /

and make separate customer profi les.

OM / VPD /

YZER.CG

TE

STRA

4

Design.

3

Get started with proto-

typing value propositions

Synthesize.

after fi nishing your fi rst

Synthesize the profi les

attempt at customer

2

from each segment

segmentation. Design

Group and segment.

into a single master

one or more value prop-

1

Group similar customer

profi le. Identify the most

osition prototypes with

Display.

profi les in to one or more

common jobs, pains, and

confi dence, based on the

Display all the customer

separate segments if you

gains and use separate

newly identifi ed patterns

profi les from your

can identify patterns in

labels to describe them

in the master profi le.

research on a large wall.

the jobs, pains, and gains.

in the master profi le.

Synthesis Example: Master profile of a business professional / book reader

PROCESS

To establish a master profile of book readers, we looked at the jobs, pains, and gains of the different customer profiles from our interviews. We synthesized the most frequent ones into the master profile by using representative labels.

117

.3 2

Tips

grow

ǃɲ Pay special attention to outlier

DESIGN /

business

profiles. They might be irrelevant,

but they could represent a special

create new

learning opportunity. Sometimes the

OM / VPD /

business line

best discoveries lie at the edges.

ǃɲ Ask yourself if an outlier might be

YZER.C

a bellwether and a sign of things to

G

improve

renovate

TE

or build

our business

come that you should pay attention

a business

to. Or maybe an outlier is different

STRA

open source

by positive deviance. It may simply

increase

online icon

our product

be a better solution to jobs, pains,

library

lack of time

portfolio

and gains than peers offer.

grow by

Outlier not retained

5 percent

in master profile

annually

lack of time

limited

takes a lot

because

no time

amount

of time

of job

of time

to learn

Mentioned several times

Find Your

5

HELP!

Has or can acquire a budget.

Earlyvangelist

The customer has committed or

can quickly acquire a budget to

Pay attention to earlyvangelists when

purchase a solution.

researching potential customers and

118

looking for patterns. The term was

coined by Steve Blank* to describe

.3 2

customers who are willing and able to

4

take a risk on a new product or service. Has put together solution Use earlyvangelists to build a foothold

out of piece parts.

DESIGN /

market and shape your value proposi-

The job is so important that the

tions via experimentation and learning. customer has cobbled together an interim solution.

OM / VPD /

HELP!

YZER.CG

3

TE

Is actively looking for a solution.

The customer is searching for a solu-

STRA

tion and has a timetable for fi nding it.

2

Is aware of having a problem.

The customer understands that

there is a problem or job.

1

Has a problem or need.

In other words, there is a job

to be done.

119

.3 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Steve Blank, Bob Dorf, The Start-up Owner's Manual, 2012.

120

2.4

Making

Choices

TO

TESTING

ASSESSMENT

7 QUESTIONS

DEL

BUSINESS MO

FAILED

10 Questions to Assess

EXERCISE

Your Value Proposition

Use the 10 questions of great value propositions we presented previously to constantly assess the design of your OBJECTIVE

OUTCOME

value propositions. Draw on them to integrate your cus-Unearth potential to improve your

Value proposition assessment

tomer insights. Integrate them when you decide which 122

value proposition

prototypes to explore further and test with customers.

.4 2

Do this exercise online

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

1

2

3

4

5

Is it embedded in a

Does it focus on the

Does it focus on unsat-

Does it concentrate on

Does it address func-

great business model?

most important jobs,

isfi ed jobs, unresolved

only a few pain reliev-

tional, emotional, and

most extreme pains,

pains, and unrealized

ers and gain creators

social jobs all together?

and most essential

gains?

but does those

gains?

extremely well?

EXERCISE

123

.4 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

6

7

8

9

10

Does it align with how

Does it focus on jobs,

Does it diff erentiate

Does it outperform

Is it diffi cult to copy?

customers measure

pains, or gains that a

from competition in a

competition substan-

success?

large number of cus-

meaningful way?

tially on at least one

tomers have or for

dimension?

which a small number

are willing to pay a lot

of money?

Simulate the Voice

PROCESS

of the Customer

OBJECTIVE

OUTCOME

Stress-test your value proposition

More robust value proposition

124

“in the meeting room”

before validating it “in the market”

.4 2 Use role-playing to bring the voice of the customer and other stakeholder perspectives “into the room” long before you test your value propositions in the real world.

DESIGN /

The success of your value proposition typically depends on a number of key Two workshop partic-stakeholders. Customers are the obvious one, but there are many others ipants engage in a

(e.g., stakeholders inside your company). Pick the most important ones, and role-playing game

OM / VPD /

organize role-plays to stress test your value proposition from the perspective in which one person

of these stakeholders.

plays a company

YZER.CG

sales rep and the

TE

other, a stakeholder,

for example, the

STRA

Tips

customer. A third

ǃɲ Make sure you choose the person who plays person takes notes.

the stakeholder wisely. Who best represents

the voice of the customer? Is it sales, customer support, fi eld engineering, or somebody else who is close to the buyer?

ǃɲ Role-plays don’t replace testing your value propositions in the real world with customers and stakeholders, but they help evolve your

ideas by taking a stakeholder’s perspective

into consideration.

ǃɲ Role-plays can be an eff ective way to bring in the voice of the customer after you intensively analyzed customer behavior.

The salesperson

PROCESS

The note taker

125

Quickly evaluate your ideas

.4

with role-playing by simulating

2

the voices of key players.

Customers

Strategic partners

DESIGN /

Take the customers’ point of view and

Your value proposition may rely

focus on customer jobs, pains, and

on the collaboration with strategic

gains and competing value proposi-

partners. Are you off ering them

OM / VPD /

tions. In a B2B context think of end

value?

users, infl uencers, economic buyers,

YZER.C

decision makers, and saboteurs.

Government offi cials

G

TE

What role does the government

Chief executive officer (CEO),

play? Is it an enabler or a barrier?

STRA

senior leaders, and board

members

Investors/shareholders

Take the company leadership’s point

Will they support or resist your

of view (e.g., CEO, chief fi nancial

ideas?

offi cer [CFO], chief operations offi cer

[COO]). Give feedback from the

Local community

perspective of the company’s vision,

Are they aff ected by your ideas?

direction, and strategy.

The planet!

Other internal stakeholders

What eff ect does your value proposi-

Who else's buy-in in the company do

tion have on the environment?

you need for your idea to succeed?

Does production play a role? Do you

need to convince sales or marketing?

The (critical) customer

Understand

the Context

Value propositions and business mod-

els are always designed in a context.

126

Zoom out from your models to map the

environment in which you are design-

.4 2

ing and making choices about the

prototypes to pursue. The environment

is made up of competition, technology

DESIGN /

change, legal constraints, changing

customer desires, and other elements.

Learn more with the illustration on this

spread or read more in Business Model

OM / VPD /

Generation.

YZER.CG

TE

STRA

Zoom out

Participatory TV

Imagine you are a player in the movie

Industry Forces

Key Trends

industry. So far, you have been making

Key actors in your space, such as

Key trends shaping your space, such

movies and TV series with leading

competitors, value chain actors,

as technology innovations, regulatory

actors for cinema and home viewers

technology providers, and more

constraints, social trends, and more

globally. But you’d like to explore new

Macroeconomic Forces

Market Forces

avenues.

Macro trends, such as global market

Key customer issues in your space,

There is one idea that your inno-

conditions, access to resources,

such as growing segments; customer

vation teams want to explore more

commodities prices, and more

switching costs; changing jobs, pains,

closely: participatory TV—enabling

and gains; and more

viewers to crowdsource the plot of a

Zoom in

TV series.

Osterwalder & Pigneur, Business Model Generation, 2010.

Illustration:

Participatory TV

Sketch out your environment and

Social media is a

ask which elements look like…

powerful marketing

ǃɲ an opportunity that strengthens the case

channel for passionate

for your value proposition (in green) viewers.

Integration of TV

ǃɲ a threat or a constraint that undermines

and web will enable

User-generated

127

or limits it (in red)

+ Democra-

high-engagement

content is less prone

tization of

.4

experiences.

to piracy.

2

distribution

-

+

+

Web tools make it

Size doesn’t matter

Connected

Piracy

TV + www

easier for anyone to

anymore—anybody

DESIGN /

-

participate.

can get access to

millions of users.

Piracy is on the rise.

Democra-

+

It is diffi cult to

-

tization of

OM / VPD /

production

get viewers to

Platform

-

leave established

fi delity

YZER.C

User-led content

platforms such as

G

TE

can be a disruptor

Netfl ix or Apple.

to professionally

STRA

produced content.

Gaming

Web

industry

generation

-

+

Subscription

Actors in the gaming

pricing

The generation of

+

industry might be

users who grew up

better equipped to

Pricing models that

with the Internet

succeed with a partici-

produce recurring

participates online on

patory value

Cost of talent

revenues (subscription)

a daily basis.

proposition.

is dropping.

fi t well with a commu-

nity of cocreators.

+ Cost of

star talent

Value Proposition

Value Proposition (VP) Design

Design vs. Competitors

Let’s focus on one element of your design and decision helps create helps under-products

making environment: your competitors. Assess how your Value

stand what

+ services

Proposition

matters to

128

value proposition performs against those of your competi-people want

Canvas

customers

tion by comparing them on a Strategy Canvas, a graphical

.4

shared

2

tool from the Blue Ocean Strategy book. This is a simple but language to

powerful way to visualize and compare how the “benefi ts”

book

communicate

of your value proposition perform.

+ collaborate

DESIGN /

exclusive

On this spread we compare the performance of Value online

Proposition Design to the performance of executive educa-companion

integrates

tion and massive open online courses (so-called MOOCs).

OM / VPD /

with other

We do so by drawing a Strategy Canvas with a number online exer-business

cises, tools,

of competitive factors on the x-axis and then plot how the methods

YZER.C

templates,

minimizes

G

diff erent competitors perform on each one of these factors.

community

risk of (big)

practical,

TE

We selected the competitive factors from our value map and failure

visual, +

enjoyable

complemented them with elements from our competitors’

STRA

format

value maps.

Select the most important features from your VP to use on the Strategy Canvas as factors of competition.

Exec Ed

MOOCs

networking

large choice

easy nav/

exec ed

live practice

online

search

classroom

curriculum

course

video =

certifi cates

material

edutainment

reputation/

brand

free

Kim & Mauborgne, Blue Ocean Strategy, 2005.

Strategy Canvas

Value proposition of this book vs. executive education vs. MOOCs as compared with each other

129

.4 2

DESIGN /

OM / VPD /

VP Design compares

well to MOOCs and

YZER.C

executive education.

G

TE

STRA

Factors of competition

helps create

helps under-

creates

integrates

practical,

minimizes

products

stand what

shared

with other

visual, +

reputation/

risk of (big)

free

+ services

matters to

language to

business

enjoyable

brand

failure

people want

customers

communicate

methods

format

Compare Your

EXERCISE

Value Proposition

3

with Competitors

2

Score your value proposition.

Select factors of competition.

Draw a vertical axis ( y-axis) to repre-130

OBJECTIVE

OUTCOME

Draw a horizontal axis ( x-axis). Pick sent the performance of a value prop-Understand how you

Visual comparison

the pain relievers and gain creators

osition. Add a scale from low to high

.4 2

are performing com-

with competitors

you want to compare with competi-

or from 0 to 10. Plot how your value

pared to others

tion. Place them on the axis. These

proposition performs on each factor of

are the factors of competition of your

competition on the x-axis (i.e., the pain DESIGN /

Use the Strategy Canvas from the

Strategy Canvas.

relievers and gain creators you chose).

Blue Ocean Strategy book to plot the performance of your value proposition

Tip

against those of your competitors.

You can also add pains and gains

OM / VPD /

Then compare the curves to assess

if you feel like they better describe

how you are diff erentiating.

important factors of competition.

YZER.CG

TE

Instructions

Draw a Strategy Canvas step by step and

STRA

compare your value proposition with those of your competitors.

1. Prepare or pick a value map for this exercise.

2. Grab a big sheet of paper or use a whiteboard.

3. Follow the steps.

1

Select a value

proposition.

Select the value

proposition (prototype)

you want to compare.

EXERCISE

131

.4 2

DESIGN /

6

OM / VPD /

Analyze your sweet spot.

Analyze the curves and uncover

YZER.C

opportunities. Ask yourself if and

G

TE

5

how you are diff erentiating from

competitors with your value

STRA

4

Score competing value

proposition.

propositions.

Add competing value propositions.

Plot how competing value propositions

Tip

Add competing value propositions to

perform, just as you did for your own.

Make sure the factors of competi-

the Strategy Canvas. Choose those that

tion that you compare align with

are most representative of the compe-

Tip

the top jobs, pains, and gains in

tition out there. Add pain relievers and

Use this tool to compare the perfor-

the customer profi le. Normally that

gain creators from their value proposi-

mance of alternative value propositions

should be the case, because pain

tion to the factors of competition on the

you might be considering.

relievers and gain creators are

x-axis if necessary.

designed to match relevant jobs,

pains, and gains.

Tip

Consider competing value propositions

beyond traditional industry boundaries.

Don’t just compare value propositions

based on products and services that

are similar to yours.

Avoid Cognitive Murder

to Get Better Feedback

Present your value proposition to others to gather feedback, get buy-in, and complement the more “analytical assessment” that we looked at up to this 132

point and the experiments we will study in the testing chapter.

Use low-fi delity

Make sure you get the best from presenting your ideas by explaining them prototypes to

.4 2

with disarming simplicity and coherence. It would be a waste of time and make your ideas

resources to put all your energy into designing remarkable value propositions tangible.

only to fail to present them in a convincing way when it matters.

DESIGN /

Presenting your ideas and canvases in a clear and tangible way is critical throughout the design process. Present early and rough prototypes before refi ning to get buy-in from diff erent stakeholders. Only work on more refi ned presentations later in the design process.

OM / VPD /

One of the most important aspects of presenting value propositions is to convey messages with customer jobs, pains, and gains in mind. Never just Always refer back

YZER.CG

pitch features; instead, think about how your value proposition helps get to customer jobs,

TE

important jobs done, kills extreme pains, and creates essential gains.

pains, and gains in

your presentation.

STRA

Best Practices for Presenters

√ DOS

× DON’TS

Simple

Complex

Tangible

Abstract

Presenting only what matters Presenting all you know Customer-centric

Feature-centric

1 piece of info after the other

All information at once

The right media support

No visual support

Storyline

Random fl ow of information

133

Canvases to be

1. Start with an empty canvas.

implemented

.4

Make sure listeners were

2

given at least a short

introduction to the canvas.

High-fi delity prototypes

DESIGN /

2. Begin your presentation

Testing data

wherever it makes most

sense. You can start with

OM / VPD /

products or with jobs.

Customer interviews

and videos

YZER.C

3. Put up one sticky note after

G

TE

the other progressively to

Tested Canvases

explain your value proposition

STRA

so your audience doesn’t

experience cognitive murder.

Untested Canvases

Synchronize what you say

and what you put up. Tell a

Low-fi delity prototypes

story of value creation by

(e.g., product box)

connecting products and

services with customer jobs,

pains, and gains.

Napkin sketches

What to present and when

Present diff erent types of prototypes

depending on how far you are into the

design and testing process.

Master the Art of Critique Practice the art of feedback to help ideas evolve rather than stall. This goes for feedback receivers who present ideas, as well as for feedback providers who give input on ideas.

In a great

Learn from the design professions, where people are trained to present feedback

134

ideas early and feedback providers are trained to provide eff ective design culture…

critiques. This contrasts with feedback providers in business who are often

.4 2

leaders in steering boards or advisory committees. They are trained to decide People feel

rather than to give feedback. If they cannot get to decisions fast, they often comfortable

get nervous or become unsatisfi ed.

presenting (bold)

DESIGN /

Teach feedback providers how to help ideas evolve (rather than to decide new ideas early,

on them). Get them to understand that value proposition prototypes are still knowing that they

rough and evolving during the design and testing phase. Prototypes may will evolve sub-OM / VPD /

radically change, in particular based on market facts that matter more than stantially, maybe

the opinion of feedback providers.

into something

Teach feedback receivers that feedback providers are not as important as very diff erent.

YZER.CG

customers, however powerful they might be. Listening to feedback providers TE

more than to customers and market facts only postpones failure.

STRA

Get “Master the Art of Critique” poster

Present early.

Distinguish between Three Types of Feedback

+

-

OPINION

“If we added ___I believe we’d have a better chance to make it work.”

Logical reasoning can help

It can lead to pursuing pet

improve ideas.

ideas of people with more

power.

EXPERIENCE

“When we did ___ in our last project, we learned that…”

Past experiences provide

Failing to realize that

valuable learning that can

diff erent contexts lead to

help prevent costly mistakes.

diff erent results.

(MARKET) FACTS

“We interviewed people about this and learned that ___ percent This provides input that

Measuring the wrong data

struggled with…”

reduces uncertainty and

or simply bad data can lead

(market) risk.

to missing out on a big

opportunity.

135

.4

Leaders and decision

2

makers are trained

to give feedback on

DESIGN /

early ideas to help

them evolve. They

know their opinion

can be trumped by

OM / VPD /

market facts and

they’re comfortable

YZER.CG

with that.

TE

×

√

√

STRA

Don’t judge.

Listen.

Evolve ideas.

Don’t

Shoot people

Present only

Have long,

Allow for prolif-

Create a

Create nega-

Foster culture in

Just ask

down for

refi ned ideas to

unstructured,

eration of pure

context that

tive vibes that

which feedback

“why?”

× presenting new leadership and free-fl owing, opinion.

enables politics

destroy positive

destroys big

(bold) ideas.

decision makers.

time-consuming

and personal

creative energy.

ideas because

discussions.

agendas to

they’re hard to

supersede value

implement.

creation.

Do

Create a safe

Foster a culture

Run facilitated,

Provide feed-

Encourage

Bring in fun and

Draw a distinc-

Ask, “Why

environment in

of early feed-

structured feed-

back based on

a customer-

productive feed-

tion between

not?” “What

√ which people back on rapidly back processes. experience or centered back processes.

hard to do and

if?” and “What

feel comfortable evolving ideas.

(market) facts.

feedback culture

worth doing.

else?”

to present (bold)

that neutralizes

ideas.

politics.

Collect Effi cient Feedback PROCESS

with de Bono’s Thinking Hats

Collect feedback on ideas, value propositions, and business OBJECTIVE

OUTCOME

models using Edward de Bono’s thinking hats. This method Collect feedback eff ectively and

Understanding of what’s good or

136

is very eff ective—especially in large groups—and helps you avoid lengthy discussions

bad about ideas and how they can

avoid losing time in endless discussions.

be improved

.4 2

Workshop participants put on a metaphorical colored hat that symbolizes a certain type of thinking. This technique allows you to quickly collect diff erent DESIGN /

types of feedback and avoid having an idea shot down for purely political reasons. Use four of de Bono’s six thinking hats to gather feedback.

OM / VPD /

YZER.CG

TE

STRA

1

2

3a

3b

Pitch

White hat

Black hat

3–15 min depending on stage of idea

Information and data; neutral and objective Diffi culties, weaknesses, dangers; spotting the risks The design team presents their idea and value 2–5 min depending on stage of idea

1 min to write down

3 min to collect feedback

proposition and/or Business Model Canvas.

“Audience” members ask clarifying questions to Participants write down

The facilitator rapidly

fully understand the idea.

why it’s a bad idea on

collects one feedback

a sticky note.

after the other on a flip

chart, while partici-

pants read it out loud.

Tips

ǃɲ This exercise requires strong facilitation skills.

Make sure people don’t voice opinions when it’s PROCESS

time for the white hat to ask clarifying questions.

ǃɲ Make sure that regardless of whether people hate or love an idea, everybody puts on all

hats, white, black, yellow, and green.

ǃɲ Use the black hat before the yellow hat to 137

neutralize extremely negative people. Once

.4

they voiced their feedback, they might even

2

think positively.

ǃɲ De Bono’s Thinking Hats also works well in small groups or individually to help people come up DESIGN /

with all the reasons why an idea might fail or succeed.

OM / VPD /

YZER.CG

TE

STRA

4a

4b

5

6

Yellow hat

Green hat

Evolve

Positives, plus points; why an idea is useful Ideas, alternative, possibilities;

The presenting team evolves their idea equipped with 1 min to write down

3 min to collect feedback

solutions to black hat problems

the white, black, yellow, and green hat feedback.

Participants write down

The facilitator rapidly

5–15 min of open discussion

why it’s a good idea on

collects one feedback

The floor is opened to discussion. Participants a sticky note.

after the other on a flip

bring in suggestions regarding how to evolve the chart, while partici-ideas that were presented.

pants read it out loud.

Edward de Bono, Six Thinking Hats,1985.

Vote Visually

PROCESS

with Dotmocracy

Use Dotmocracy to quickly visualize the preferences of a group, in particular in large workshop settings. This is a OBJECTIVE

OUTCOME

simple and speedy technique to prioritize among diff erent Visualize the preferences of a group

Quick selection of ideas

value propositions and business model options. It helps to 138

and avoid lengthy discussions

prevent lengthy discussions.

.4 2

3

Criteria.

DESIGN /

The voting criteria are

defined. For example,

2

participants may be

Stickers.

instructed to place a

OM / VPD /

Each workshop partic-

sticker on their favorite

ipant gets the same

ideas.

YZER.CG

number of stickers (e.g.,

TE

1

10), and each sticker

Idea gallery.

counts as one vote.

STRA

Ideas or canvases are

exposed on a wall as a

gallery of options.

5

Count.

Stickers are counted,

4

and preferred ideas

Vote.

are highlighted.

Participants can put

all their stickers on one

idea or distribute them

across several ideas.

PROCESS

139

Value Propositions

Multicriteria

.4 2

Use a table when you want to use several criteria IDEAS

GROWTH

RISK

to select among alternative value propositions DESIGN /

Free

and business models.

Partnership

OM / VPD /

with Supplier

YZER.CG

TE

Dotmocracy is used to select ideas based on Emerging

internal criteria, such as growth potential, risk, and Markets Push

STRA

diff erentiation potential. Apply this technique during the design process to choose among Sustainability

several alternatives before you test them in the Focused

real world.

Defi ne Criteria and

Competition and Environment

PROCESS

Select Prototypes

How the idea allows the company to position

itself related to the competition

Provides

Fits with tech

Allows

OBJECTIVE

OUTCOME

competitive

and other

diff erentia-

Select among a range of alternatives

Ranking of prototypes

advantage

trends

tion

140

Decide which criteria are most important to you and your

.4 2

organization and select value propositions and business Relation to Current Business Model

models accordingly during the design process. You need to How the idea builds or doesn't build on the

prioritize among (hopefully attractive) alternatives, even if current business model

DESIGN /

your customer is the fi nal judge of your ideas later on in the process.

Fits current

Fit with

Builds on

Plugs

business

Use the following themes and criteria as brand

strengths

weaknesses

model

an input for your own selection criteria.

OM / VPD /

Disrupts

Fit with Strategy

current cash

YZER.CG

cows

How the idea fi ts with the overall direction TE

of the company

A

B

Financials and Growth

STRA

C

B

D

Fits with

A

Aligns with

What potential each idea has related to

Good timing

desired risk

strategy

D

level

growth and fi nancials

C

Can replace

outdated

Revenue

Market

Market size

Margins

business

potential

growth

models

1

Fit with Customer Insights

Implementation Criteria

How the idea relates to the fi rst customer

How diffi cult it is to implement the idea from Brainstorm criteria.

insights gained during fi rst market research design to market

Come up with as many

criteria as you can to

No good

Do we have

Access

Important

Visible and

Time to

solution

Cost to build

right team

to target

assess the attractive-

job

tangible pain

market

exists

and skills

customers

ness of your prototypes.

Strong

Risk of

Technology Implementa-

customer

management

risk

tion risk

evidence

resistance

2

A

B

PROCESS

Select criteria.

C

B

D

A

Select the criteria that

are most important for

D

C

your team and

organization.

141

.4 2

Criteria

Prototype A: 36

Prototype B: 32

Prototype C: 12

Prototype D: 42

A

DESIGN /

B

C

D

Allows

D

diff erentia-

tion

OM / VPD /

YZER.CG

Builds on

TE

strengths

STRA

4

Market

Evolve prototype

growth

and explore with

market.

Evolve your prototype

(e.g., based on the

3

scores it got), and test it

A

in the market to learn if

B

Score prototypes

C

D

it really has potential.

B

(0 [low] – 10 [high]).

A

Score each idea on

D

C

the criteria you chose.

142

2.5

Finding the Right

Business Model

TO

TESTING

ASSESSMENT

7 QUESTIONS

DEL

BUSINESS MO

TOTYPING

PRO

FAILED

Create Value for

Your Customer

and Your Business

144

.5 2

DESIGN /

OM / VPD /

To create value for your

To sustainably create

YZER.CG

business, you need to

value for your customer,

TE

STRA

create value for your

you need to create value

customer.

for your business.

A business that generates fewer revenues than it incurs costs will inevitably disappear, even with the most successful value proposition. This section shows how getting both the business model and the value proposition right is a process of back and forth until you nail it.

Are you creating value for your business?

The Business Model Canvas makes explicit how you are creating and capturing value for your business.

?

?

145

?

.5 2

?

?

DESIGN /

Zoom out to the

?

?

Zoom in to the

bigger picture to

detailed picture to

OM / VPD /

analyze if you can

investigate if the

profitably create,

customer value

YZER.C

deliver, and capture

-Zoom

+Zoom

proposition in your

G

TE

value around this

business model

particular customer

really creates value

STRA

value proposition.

for your customer.

Are you creating value for your customer?

The Value Proposition Canvas makes explicit how you are creating value for your customers.

Azuri (Eight19):

1

Initial idea

Turning a Solar Technology

An opportunity.

Developing low-cost solar

into a Viable Business

technology and providing

low-income people with

146

Azuri Business Model: version 0

access to electricity.

.5 2

1.6 billion people in the world still

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

live without electricity. Could innova-

tive value propositions and business

DESIGN /

models around new technology offer

answers?

help people

Simon Bransfield-Garth founded Eight19 based Cambridge

light their home

rural African

OM / VPD /

University

cheaply using

consumer

on a printed plastic technology originating from solar power

Cambridge University. The technology is designed Key Resources

Channels

YZER.CG

to deliver low-cost solar cells. In 2012 Eight19

printed plas-

TE

tic technology

launched Azuri to commercialize the technology designed to

and bring electricity to off-grid customers in rural STRA

deliver low-cost

emerging markets.

solar cells

Finding the right value propositions and

business models in such a context is not easy. We Cost Structure

Revenue Streams

illustrate how it is a continuous back and forth between both on the following pages.

Case adopted in accordance with Azuri.

147

.5 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Zoom in

0

7

$

Azuri Value Proposition: version 0

Rural African consumer

2

E

FRE

lighting &

charging

charging a

Observe

cell phone

The Cost Barrier.

lighting the

house

“A rural farmer on

cheap

3

solar-based

$3 per day struggles

electricity

to aff ord a $70 solar

Design

buying

danger of

power system.”

What If?

installation

lease the

safe & easy

oil-based

Give the solar installa-

installation

installation

lighting*

tions away for free to

upfront

eliminate the hurdle of

investment

upfront investment.

* An alternative for lighting is burning oil, which is dangerous and expensive.

4

Iteration 2

Idea for

Business Model.

148

Lease the solar instal-

Azuri Business Model: version 1

lations and collect

.5 2

regular subscription fees;

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

it works just fine with

conventional panels; get

distribution

+ installation

DESIGN /

resources and partner-

Cambridge

University

ships for financing the

development

cheap solar

installations.

+ manufac-

installation

turing

rural African

OM / VPD /

manufactur-

consumer

ing partner

rent

Zoom out

Key Resources

Channels

license to

YZER.C

solar aid

G

use patented

(NGO)

TE

technology

STRA

local vendors

solar energy

installations

Cost Structure

Revenue Streams

installation

manufactur-

regular

cost

ing cost

payments

149

.5 2

DESIGN /

09 –6 35–926208

OM / VPD /

09

09 6

YZER.CG

TE

STRA

Zoom in

Azuri Value Proposition: version 1

Rural African consumer

5

lighting &

charging

charging a

Observe

cell phone

The no-banking

lighting the

house

barrier.

cheap

6

solar-based

How can regular

electricity

payments be

Design

buying

danger of

recovered without

Low-tech solution.

installation

lease the

safe & easy

oil-based

any effi cient

Combine mobile phone

installation

installation

lighting

banking system?

and solar technology

easy

upfront

with scratch cards to

payment

investment

scratch card

(without

access electricity over

bank)

a period of time.

7

Iteration 3

Idea for the Azuri

Business Model.

150

Azuri provides solar-as-

Azuri Business Model: version 2

a-service, with Indigo, a

.5 2

pay-as-you-go lighting

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

and charging system

for which customers

distribution

+ installation

DESIGN /

purchase weekly scratch

Cambridge

University

cards: adapt the revenue

development

cheap solar

model accordingly.

+ manufac-

installation

turing

rural African

OM / VPD /

manufactur-

consumer

Zoom out

ing partner

Indigo kit

Key Resources

Channels

license to

YZER.C

solar aid

G

use patented

(NGO)

TE

technology

STRA

local vendors

solar energy

installations

Cost Structure

Revenue Streams

1x indigo kit

repetitive

installation

manufactur-

deposit

scratch cards

cost

ing cost

($10)

($1)

Affordable scratch

cards make it possible

to slowly cover the

installation fees.

So…

151

How does the Indigo value proposition

.5

look for a customer?

2

DESIGN /

OM / VPD /

YZER.CG

TE

1 2 3

4 5 6

09 –6 35–926208

STRA

7 8 9

* 0 #

$10

$1

free

upgrade Time

Buy the Indigo kit

Buy scratch cards, use SMS

Own your box after 80 scratch

Escalate to a larger system

(solar panel, lamps, charger).

from a mobile phone, enter

cards, or…

and access more energy;

the resulting passcode into

continue to buy scratch cards.

the Indigo unit, and use the installation for a period of

time (typically a week).

From Value

A1

EXERCISE

Proposition to

Front Stage.

Prototype a revenue model, select distribution Business Model…

channels, and defi ne the relationships that could be adopted with customers.

?

152

OBJECTIVE

OUTCOME

The Business Model Canvas

Practice the connec-

Improved skills

.5 2

tion between value

Key Partnerships

Key Activities

Value Pr

V

opositions

alue Propositions

Customer

Customer

Customer

Relationships

Segments

Segments

proposition and

business model with

DESIGN /

no risk

Your idea

Your Idea

OM / VPD /

from page 96

from page 96

Key Resources

Channels

YZER.CG

TE

←

From p. 96

STRA

Cost Structure

Revenue Streams

Part A

Design the Full Business Model.

On page 96 you imagined a value

?

proposition to commercialize an inno-

A2

A3

vative compressed air energy storage

Backstage.

Assessment.

technology. Now map out the remain-

Add the Key Resources, Key Activities, and

Assess your prototype and detect possible weaking business model elements and

Partners required for the model to work and use nesses of the business model →

p. 156.

sketch out the rough numbers (part A).

that to estimate the cost structure.

…and Back Again

B3

Refine or clear

EXERCISE

Part B

your profile?

Could you refine your

Revisiting the Value Proposition

customer profile, or do

Assess the weaknesses of your first full

you need to describe

business model prototype (from part A).

an entirely new one

153

Ask yourself how you could improve or

because you switched

.5

change your initial value proposition,

customer segments?

2

maybe by shifting to an entirely differ-

B4

ent segment by considering the follow-

Change or clear

ing five questions:

your benefits?

DESIGN /

Do you need to

B5

change or clear the

Got fit?

benefits your value

Do you have fit

OM / VPD /

proposition created

between your new

because the customer

customer profile and

YZER.C

profile changed?

the newly designed

← Repeat

G

TE

value proposition?

Step A

→ p. 40 on fit

if required.

STRA

Zoom in

The Value Proposition Canvas

B1

New VP?

Could there be

another radically

B2

different value prop-

osition for the same

New segment?

technology?

Will you keep the

same customer

segment, or will you

Tip

shift to an entirely

Follow up on your new customer assump-

different, maybe

tions by researching customers → p. 106

larger, market

and producing evidence → p. 216.

segment?

Stress Testing

Medtech Prototype 1

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

with Numbers:

Relationships

Segments

R&D

manufactur-

A MedTech

personal

ing

assistance

110K

154

Illustration

sales &

marketing

medical

primary

OEMs

diagnostic

care

doctors

Key Resources

device

Channels

.5 2

A great value proposition without a

financially sound business model is not

third-party

intellectual

going to get you very far. In the worst

sales force

property

DESIGN /

case you will fail because your busi-

ness model incurs more costs than it

$1M

Cost Structure

Revenue Streams

produces revenues. But even business

sales &

$5.5M

marketing

models that work can produce sub-

$1.2M

OM / VPD /

device

1x

stantially different results.

equipment

production

transactional

sales

$2.8M

YZER.CG

Play with different business models and financial TE

assumptions to find the best one. We illustrate this vs.

with the medical technology illustration on this Medtech Prototype 2

STRA

spread. We sketched out two models both starting Key Partnerships

Key Activities

Value Propositions

Customer

Customer Winner!

from the same technology that enables building a Relationships

Segments

R&D

cheap diagnostic device.

manufactur-

Prototype 1 generates $5.5 million in revenues personal

ing

and a profit of $0.5 million. Prototype 2 starts from assistance

110K

the same technology but produces more than $30

sales &

marketing

medical

primary

million in revenues and a profit of $23 million with OEMs

diagnostic

care

a different value proposition and business model.

doctors

Key Resources

device

Channels

Only the market can judge if either model

could work, but you certainly want to explore and third-party

intellectual

testing strips

sales force

test the best options.

property

www

$1M

$24.8M

Cost Structure

Revenue Streams

sales &

$5.5M

marketing

recurring

$1.2M

sales test

device

1x

equipment

strips

$2.3M

transactional

production

production

sales

$2.8M

of strips

$0.5M

Value Prop Model 1

Model 1: Sales of Medical Diagnostic Device Profit

patients

ǃɲ 1× transactional sales of device to primary care A quick sketch of the

don't wait

doctors in the United States for $1,000/device numbers provides us

for results

ǃɲ 5 percent market share

with a sanity check

155

ǃɲ Sales via third-party sales force -50 percent that this model is not

medical

.5

commission

very profitable, so we

diagnostic

2

device

ǃɲ Variable production costs of $225/device

should go back and

ǃɲ Fixed marketing expenses of $1 million

explore changes to

the business model.

immediate

Primary Care Doctor

DESIGN /

in-house

Costs

Revenues

testing

Device Production, 1.2M Device Sales, 5.5M

happy

Sale & Marketing, 1M

patients

OM / VPD /

Sales Commission, 2.8M

no need for

follow-up

Profit 0.5M

with patients

YZER.CG

test patient's

TE

health risk

send to

STRA

Model 2: Recurring Revenues from Consumable laboratory

wait for

Testing Strips

Profit

Value Prop Model 2

results

cleaning

ǃɲ Each diagnosis requires a consumable

The same technology

patients

diagnostic

calling in for

testing strip

with a different busi-

devices

patients

results

ǃɲ Recurring revenues from selling an average ness model now yields

don't wait

of 5 strips/month/device for $75 each

a much larger poten-

for results

ǃɲ Variable production costs of testing strips tial profit. Although

medical

of $7/strip

these numbers aren't

diagnostic

validated, it's clearly

device

Costs

Revenues

the more interesting

immediate

Device Production, 1.2M Device Sales, 5.5M

prototype to take to

testing strips

in-house increased

Sale & Marketing, 1M

Testing Strip Sales, 24.8M

the testing stage.

testing

hygiene via

Sales Commission, 2.8M

consumable

Testing Strips Prod., 2.3M

strips

Profit, 23M

$23M

Seven Questions to

EXERCISE

Assess Your Business

Model Design

156

OBJECTIVE

OUTCOME

1. Switching Costs.

2. Recurring Revenues.

Unearth potential to improve your

Business Model Assessment

.5

How easy or diffi cult is it for

Is every sale a new eff ort

2

business model

customers to switch to another or will it result in quasi-company?

guaranteed follow-up

Great value propositions should be embedded in great busi-revenues and purchases?

DESIGN /

ness models. Some are better than others by design and will produce better fi nancial results, will be more diffi cult to copy, and will outperform competitors.

My customers are locked

100 percent of my sales lead

in for several years.

to automatically recurring

OM / VPD /

Score your business model design by answering these seven revenues.

questions:

10

10

YZER.CG

scalability.

before assembling PCs.

companies.

an interesting example of

machines.

ers, and earned revenue

expenditures.

for free for credit card

card companies are also

moats.

that fi tted only into their

try, sold directly to consum-

coms incurred heavy capital

and shoppers create value

with few employees. Credit

App Store provide powerful

more diffi cult for customers.

ing single-portioned pods

until Dell disrupted the indus- and messages, while tele-users. Similarly, merchants

hundreds of millions of users models like Apple with the ware, which made switching

recurring revenues by sell-

risk of inventory depreciation a free infrastructure for calls free by more than 1 billion

or WhatsApp that serve

imitators. Similarly, platform

library into the iTunes soft-

selling coff ee into one with

ahead of selling them at the

try by using the Internet as

from content produced for

are platforms like Facebook

with. Ikea has found few

to copy their entire music

transactional industry of

used to be produced well

disrupted the telecom indus-

book’s business model comes are extremely scalable, as are often hard to compete

Apple’s iPod got people

Nespresso turned the

Personal computers (PCs)

Skype and WhatsApp

Most of the value in Face-

Licensing and franchising

Powerful business models

revenues.

my competitors.

business model.

resources and eff ort.

to competition.

back from leaving me.

are transactional.

costs of COGs before earning least 30 percent higher than value created in my model requires substantial

moats, and I’m vulnerable

Nothing holds my customers 100 percent of my sales I incur 100 percent of my

My cost structure is at

I incur costs for all the

Growing my business

My business model has no

revenues.

goods & services sold (COGs). my competitors.

for free by external parties.

that are hard to overcome.

in for several years.

to automatically recurring

nues before incurring costs of least 30 percent lower than business model is created

virtually no limits to growth. provides substantial moats My customers are locked

100 percent of my sales lead

I earn 100 percent of my reve- My cost structure is at All the value created in my

My business model has

My business model

purchases?

those of your competitors?

for free?

support, hiring)?

your competition?

company?

teed follow-up revenues and

tially diff erent and better than parties to create value for you (e.g., infrastructure, customer model protecting you from

customers to switch to another will it result in quasi-guaran-before you are incurring costs? Is your cost structure substan- model get customers or third without facing roadblocks

How much is your business

How easy or diffi cult is it for

Is every sale a new eff ort or

Are you earning revenues

Cost Structure

How much does your business How easily can you grow Competition

1. Switching Costs

2. Recurring Revenues

3. Earn Before Spending

4. Game-changing

5. Others Who do the Work 6. Scalability

7. Protection from

TE

STRA

0

0

Nothing holds my customers 100 percent of my sales back from leaving me.

are transactional.

Apple’s iPod got people

Nespresso turned the

to copy their entire music

transactional industry of

library into the iTunes soft-

selling coff ee into one with

ware, which made switching

recurring revenues by sell-

more diffi cult for customers.

ing single-portioned pods

that fi tted only into their

machines.

Download “Seven Questions to Assess Your Business Model”

EXERCISE

3. Earnings vs. Spending. 4. Game-changing 5. Others Who Do the Work. 6. Scalability.

7. Protection from

157

Are you earning revenues

Cost Structure.

How much does your business

How easily can you grow

Competition.

.5 2

before you are incurring costs? Is your cost structure substan- model get customers or third without facing roadblocks

How much is your business

tially diff erent and better than parties to create value for you (e.g., infrastructure, customer model protecting you from those of your competitors?

for free?

support, hiring)?

your competition?

DESIGN /

I earn 100 percent of my reve- My cost structure is at All the value created in my

My business model has

My business model

nues before incurring costs of least 30 percent lower than business model is created virtually no limits to

provides substantial moats

OM / VPD /

goods & services sold (COGs). my competitors.

for free by external parties.

growth.

that are hard to overcome.

10

10

10

10

10

YZER.CG

scalability.

before assembling PCs.

companies.

an interesting example of

machines.

ers, and earned revenue

expenditures.

for free for credit card

card companies are also

moats.

that fi tted only into their

try, sold directly to consum-

coms incurred heavy capital

and shoppers create value

with few employees. Credit

App Store provide powerful

more diffi cult for customers.

ing single-portioned pods

until Dell disrupted the indus- and messages, while tele-users. Similarly, merchants

hundreds of millions of users

models like Apple with the

ware, which made switching

recurring revenues by sell-

risk of inventory depreciation a free infrastructure for calls free by more than 1 billion

or WhatsApp that serve

imitators. Similarly, platform

library into the iTunes soft-

selling coff ee into one with

ahead of selling them at the

try by using the Internet as

from content produced for

are platforms like Facebook

with. Ikea has found few

to copy their entire music

transactional industry of

used to be produced well

disrupted the telecom indus-

book’s business model comes are extremely scalable, as are often hard to compete

Apple’s iPod got people

Nespresso turned the

Personal computers (PCs)

Skype and WhatsApp

Most of the value in Face-

Licensing and franchising

Powerful business models

revenues.

my competitors.

business model.

resources and eff ort.

to competition.

back from leaving me.

are transactional.

costs of COGs before earning least 30 percent higher than value created in my model requires substantial

moats, and I’m vulnerable

Nothing holds my customers 100 percent of my sales I incur 100 percent of my

My cost structure is at

I incur costs for all the

Growing my business

My business model has no

revenues.

goods & services sold (COGs). my competitors.

for free by external parties.

that are hard to overcome.

in for several years.

to automatically recurring

nues before incurring costs of least 30 percent lower than business model is created

virtually no limits to growth. provides substantial moats My customers are locked

100 percent of my sales lead

I earn 100 percent of my reve- My cost structure is at All the value created in my

My business model has

My business model

purchases?

those of your competitors?

for free?

support, hiring)?

your competition?

company?

teed follow-up revenues and

tially diff erent and better than parties to create value for you (e.g., infrastructure, customer model protecting you from

customers to switch to another will it result in quasi-guaran-before you are incurring costs? Is your cost structure substan- model get customers or third without facing roadblocks

How much is your business

How easy or diffi cult is it for

Is every sale a new eff ort or

Are you earning revenues

Cost Structure

How much does your business How easily can you grow Competition

1. Switching Costs

2. Recurring Revenues

3. Earn Before Spending

4. Game-changing

5. Others Who do the Work 6. Scalability

7. Protection from

TE

STRA

0

0

0

0

0

I incur 100 percent of my

My cost structure is at

I incur costs for all the

Growing my business

My business model has no

costs of COGs before earning least 30 percent higher than value created in my model requires substantial moats, and I’m vulnerable revenues.

my competitors.

business model.

resources and eff ort.

to competition.

Personal computers (PCs)

Skype and WhatsApp

Most of the value in

Licensing and franchising

Powerful business models

used to be produced well

disrupted the telecom indus- Facebook’s business model are extremely scalable, as

are often hard to compete

ahead of selling them at the

try by using the Internet as

comes from content produced

are platforms like Facebook with. Ikea has found few risk of inventory depreciation a free infrastructure for calls for free by more than 1 billion or WhatsApp that serve

imitators. Similarly, platform

until Dell disrupted the indus- and messages, while tele-users. Similarly, merchants

hundreds of millions of users models like Apple with the try, sold directly to consum-coms incurred heavy capital and shoppers create value with few employees. Credit

App Store provide powerful

ers, and earned revenue

expenditures.

for free for credit card

card companies are also

moats.

before assembling PCs.

companies.

an interesting example of

scalability.

158

2.6

Designing in

Established

Organizations

FROM

TESTING

S

STARTING POINT

TO

VATION

OBSER

TESTING

ASSESSMENT

7 QUESTIONS

S

TOTYPING

PRO

EL

OD

BUSINESS M

FAILED

Adopt the Right

Attitude to Invent

or Improve

160

invent

.6 2

Existing organizations need to improve

Objective

Design new value propositions regardless of the potential constraints given existing value propositions and create

by existing value propositions and business models (although leadership DESIGN /

new ones proactively. Make sure you

may defi ne other constraints).

understand on which end of the spectrum

Helps With

ǃɲ Proactive bet on the future

you are at the beginning of a particular

ǃɲ Take on a crisis

project, because each requires a diff erent

ǃɲ Emergence of a game-changing technology, regulation, etc.

OM / VPD /

attitude and process. Great companies

ǃɲ Response to a disruptive value proposition of a competitor will have a balanced portfolio of proj-YZER.CG

ects covering the entire spectrum from

Financial Goals

At least 50 percent annual revenue growth (caveat: company-specifi c) requires a substantial expansion of Amazon.com's business model.

customer segment. Builds on existing key resources and activities but of Amazon.com.

Design of a new IT infrastructure value proposition targeted at a new Introduce a membership with special benefi ts targeted at frequent users Examples

Amazon Web Services

Amazon Prime

Main Activities

Search, test, and evaluate

Refi ne, plan, and execute

Design Approach

Radical/disruptive change to value proposition (and business model) Incremental change and tweaks to existing value proposition Mindset

Open to exploring new possibilities

Focused on making one or several aspects better Attitude to Failure

Part of learning and iteration process

Not an option

Business Model

Requires radical adaptions or changes

Little change

Customer Knowledge

Low, potentially nonexistent

High

Risk and Uncertainty

High

Low

Financial Goals

At least 50 percent annual revenue growth (caveat: company-specifi c) 0 to15 percent annual revenue increase or more (caveat: company-specifi c) ǃɲ Address customer complaints.

ǃɲ Response to a disruptive value proposition of a competitor ǃɲ Keep growth going.

ǃɲ Emergence of a game-changing technology, regulation, etc.

ǃɲ Improve profi t potential or cost structure.

ǃɲ Take on a crisis

ǃɲ Ensure or maintain fi t.

Helps With

ǃɲ Proactive bet on the future

ǃɲ Renew outdated products and services.

may defi ne other constraints).

by existing value propositions and business models (although leadership or aff ecting the underlying business model(s).

Objective

Design new value propositions regardless of the potential constraints given Improve your existing value proposition(s) without radically changing TE

improve to invent.

Risk and Uncertainty

High

Customer Knowledge

Low, potentially nonexistent

STRA

Business Model

Requires radical adaptions or changes

Attitude to Failure

Part of learning and iteration process

Mind-set

Open to exploring new possibilities

Design Approach

Radical/disruptive change to value proposition (and business model) Main Activities

Search, test, and evaluate

Examples

Amazon Web Services

Design of a new IT infrastructure value proposition targeted at a new customer segment. Builds on existing key resources and activities but requires a substantial expansion of Amazon.com's business model.

improve

161

In between: Extend

.6 2

Improve your existing value proposition(s) without radically changing A common situation in the Improve-or aff ecting the underlying business model(s).

Invent spectrum is the need to fi nd

new growth engines without investing

DESIGN /

ǃɲ Renew outdated products and services.

in substantial changes to the existing

ǃɲ Ensure or maintain fi t.

business model. This is often required

ǃɲ Improve profi t potential or cost structure.

to monetize investments in existing

OM / VPD /

ǃɲ Keep growth going.

models and platforms.

ǃɲ Address customer complaints.

YZER.C

0 to15 percent annual revenue increase or more (caveat: company-specifi c) The objective is to search for new value prop-G

requires a substantial expansion of Amazon.com's business model.

customer segment. Builds on existing key resources and activities but of Amazon.com.

Design of a new IT infrastructure value proposition targeted at a new Introduce a membership with special benefi ts targeted at frequent users Examples

Amazon Web Services

Amazon Prime

Main Activities

Search, test, and evaluate

Refi ne, plan, and execute

Design Approach

Radical/disruptive change to value proposition (and business model) Incremental change and tweaks to existing value proposition Mindset

Open to exploring new possibilities

Focused on making one or several aspects better Attitude to Failure

Part of learning and iteration process

Not an option

Business Model

Requires radical adaptions or changes

Little change

Customer Knowledge

Low, potentially nonexistent

High

Risk and Uncertainty

High

Low

Financial Goals

At least 50 percent annual revenue growth (caveat: company-specifi c) 0 to15 percent annual revenue increase or more (caveat: company-specifi c) ǃɲ Address customer complaints.

ǃɲ Response to a disruptive value proposition of a competitor ǃɲ Keep growth going.

ǃɲ Emergence of a game-changing technology, regulation, etc.

ǃɲ Improve profi t potential or cost structure.

ǃɲ Take on a crisis

ǃɲ Ensure or maintain fi t.

Helps With

ǃɲ Proactive bet on the future

ǃɲ Renew outdated products and services.

may defi ne other constraints).

by existing value propositions and business models (although leadership or aff ecting the underlying business model(s).

Objective

Design new value propositions regardless of the potential constraints given Improve your existing value proposition(s) without radically changing TE

Low

ositions that substantially extend the existing High

underlying business model, without modifying too STRA

Little change

many aspects of it.

Not an option

For example, with the introduction of the

Focused on making one or several aspects better Kindle, Amazon created a new channel to extend Incremental change and tweaks to existing value proposition its digital off ering to Amazon.com customers.

Refi ne, plan, and execute

Although this presents a great new value proposi-Amazon Prime

tion to its customers, it remains to a large extent Introduce a membership with special benefi ts targeted at frequent users within the parameters of its successfully estab-of Amazon.com.

lished and well-mastered e-commerce business model.

Tip

Great companies manage a portfolio of value

propositions and business models that cover the entire invent-improve spectrum and make syner-gies and competitive confl icts explicit. They are proactive and invent while they are still successful, rather than wait for a crisis.

The Business Book

of the Future

Imagine if you were a business book publisher. How could you improve your present off ering and invent the business 162

book of the future, which might not even be a book anymore?

We sketched out three ideas along the invent-improve invent

.6 2

spectrum.

The YouTube of business education

The 1-800-Business-Book hotline

DESIGN /

An online platform matching videos from business A hotline number extending physical business experts with customers who are looking for answers books and off ering on-demand answers. This

to their problems. This would require a substantial would build on the existing business model but extension or reinvention of the business model of require an extension from a sales to a service OM / VPD /

publishing books.

model.

YZER.CG

TE

progress at

own pace

customized

access 24/7

STRA

answers to

problems

online

consulting

answers

hotline

sharable

content

physical

online

book

minimizes

videos

risk of wast-

low pay-per-

ing time

use

This concept

An additional

attract

requires an

community

experts

service capabil-

consulting

entirely diff erent

ity adds a layer

business model

to the business

and makes the

Web

IT

model but doesn’t

call center

original one

transform it.

obsolete.

infrastruc-

community

percent on

hourly

matchmaking

service

ture

management

charge

improve

163

.6 2

The practical business book

The more you move toward the invent

Improve business books by making them more

end of the spectrum, the more your

DESIGN /

visual and applicable without altering the core new value proposition will diff er from

business model behind it substantially.

your existing ones. Inventing new

value propositions provides an oppor-

OM / VPD /

tunity to more closely address jobs

that really matter to customers (in

YZER.C

this case, getting answers to business

more visuals

G

links to Web

TE

questions).

Our three-tier value proposition

STRA

consists of a physical book, sharable

how-to guide

practical content online, and advanced

learning through our online course. It is

physical

book

our attempt to push the boundaries of

easy-to-

business learning and doing.

understand

The value proposition of this book

language

combined with online exercises and

fewer pages

material on Strategyzer.com is our

Improvements

attempt to more closely address the

add to the value

jobs we believe matter to our readers.

proposition and

require only minor

tweaks to the

business model.

Web

design

Reinvent by Shifting

Old

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

from Products…

Construction equipment manufacturer

Hilti reinvented its value proposition

Key Resources

Channels

164

and business model by shifting from

products to services. Its move from

.6 2

selling branded machine tools to

guaranteeing timely access to them

required a substantial overhaul not

Cost Structure

Revenue Str

Rev

eams

DESIGN /

just of their value proposition but also

g

of their business model. Let’s learn

Manufacturing

Brand

how Hilti did it.

OM / VPD /

Many organizations aspire to regain

a competitive advantage by trans-

YZER.CG

forming from a product manufacturer

Builders

TE

into a service provider. This requires

a substantial reinvention.

STRA

safety trig-

safe

gers against

employees

An Expired Model

mishandling

Hilti’s old model focused mainly on selling high-ergonomic,

work

quality machine tools directly to builders. They holds in hand

enjoyment

were known for breaking less often, lasting longer, get

and overall being less costly by minimizing time construction

quality tools

done

loss. Hilti tools also have a reputation for being robustness

particularly safe and enjoyable to work with.

means less

Unfortunately, this old model was one of

long life

maintenance

time lost in

decreasing margins and subject to competition makes overall

maintenance

cost cheaper

from lower-cost competitors.

expensive

over lifetime

Read more about Hilti in Johnson, Seizing the Whitespace, 2010.

New

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

…to Services

Hilti focused on a new job to be done

after discovering that its tools were

Key Resources

Channels

related to a more important customer

165

Boss

Bo

job: that of delivering projects on time

.6

to avoid fi nancial penalties. They

2

learned that broken, malfunctioning,

Reve

or stolen tools could lead to major

Cost Structure

Revenue Streams

DESIGN /

g

delays and penalties. From there, Hilti

Manufacturing

Service

moved toward a new value proposition,

Brand

off ering services around machine tools.

OM / VPD /

A Fresh Start

Hilti used its new service-based value proposition YZER.C

Managers

to create more value for construction companies G

TE

by ensuring that they had the right tools at the 100 percent right tool,

right place at the right time. This would help immediate

convenient

STRA

uptime

right place,

tool

tool

safe

construction companies achieve a much more

right time

replacement procurement

employees

predictable cost management and keep operations profi tability

profi table.

latest

work

under

get

technology

enjoyment

control

construction

Impact on the Business Model

subscription

done

based fl eet

Moving from products to services sounds like an management

meet

easy and obvious value proposition shift, but it no cost for

planning

theft

requires substantially reengineering the business repair and

broken tools

schedule

replacement

model. Hilti had to add substantial new service predictable

time lost in

upfront

resources and activities in addition to manufactur-costs

maintenance

investment

ing. But it was worth it. With their new value proposition, Hilti achieves higher margins, recurring delays

fi nancial

revenues, and better diff erentiation.

penalties

New service created:

“New” customer, more important

monthly subscriptions to

job identifi ed: delivering on time!

fl eet management utility

The Perfect

Workshop Setting

Use thick markers so ideas

Use wall-sized posters

Workshops are an important part of

are visible from afar.

to sketch out big ideas.

value proposition design in established

166

organizations. Great workshops can

make a big diff erence in the design

Use sticky notes to move

.6 2

process and lead to better results. The

ideas around—ideally

questions below will help you create

in several colors for

the perfect setting.

color-coding.

DESIGN /

OM / VPD /

YZER.CG

TE

Who should join?

STRA

Invite people with diff erent backgrounds, especially when you know there will be a substantial eff ect on the business model. Their buy-in is crucial.

Get customer-facing staff to participate to leverage their knowledge. Customers or partners may also be a good addition to help evaluate value propositions.

What should the format be?

How can space be used as an instrument?

What tools and materials are needed?

As a rule of thumb, more viewpoints are generally Great workshop spaces are an often-overlooked Prepare a self-service area with canvas posters, better than fewer at the early stages of value instrument to create outstanding workshops with sticky notes, paper, blue tack, markers, and other proposition design. With 10 participants or more, exceptional outcomes. Choose a space that is tools so participants can help themselves with you can explore several alternatives in parallel suffi ciently large and off ers large walls or working what they need.

by working in groups of fi ve. Smaller teams need areas. Set up the space to support creation, to explore alternatives sequentially. At the later collaboration, and productivity. For breakthrough Check readily available workshop material stages of developing and refi ning value proposi-results, choose an unusual and inspiring venue.

tions, fewer participants are usually better.

Work-in-Progress Gallery/Inspiration Wall Projector and Screen

Set up an area where you can expose canvases This is used to show slides or

and other work in progress. Add an “inspiration customer videos. It should be

wall” with content that participants can draw easily viewable by all.

from, such as reference models, examples, and models of competitors.

167

Small Group Areas

Room Control

.6

This is where work

This space should

2

gets done. Four or

be set aside for the

fi ve people per group

facilitator and team

is best. Do not use

to access computer,

DESIGN /

chairs or tables unless

sound system, Wi-Fi,

required for specifi c

and maybe a printer.

work. Keep working

OM / VPD /

groups in the same

room rather than a

YZER.C

break-out room to

G

TE

retain high energy

levels throughout the

STRA

workshop.

Stand

Sit

Walls

Venue Size, Look, and Feel

Large vertical surfaces are

As a rule of thumb, calculate

Plenary Space

indispensable, whether

50m2 per 10 participants.

Everyone can meet here for

movable or part of the build-

Favor inspiring venues over

plenary presentations and

ing. Make sure you can stick

boring hotel meeting rooms.

discussions. It can be set up

large posters, sticky notes,

with or without tables.

and fl ip chart paper on them.

Compose

Your Workshop

A great workshop produces tangible

and actionable outcomes. Use the

168

tools and processes from this book

Day 1

Day 2

to start designing a draft workshop

9 AM

9 AM

.6 2

outline that leads to great results.

Design Principles for a Great Workshop

DESIGN /

ǃɲ Create a workshop agenda with a clear

10 AM

10 AM

thread that shows participants how the new

or improved value proposition(s) or business model(s) will emerge.

OM / VPD /

11 AM

11 AM

ǃɲ Take participants on a journey of many steps by focusing on one simple task (module) at

YZER.CG

a time.

TE

ǃɲ Avoid “blah blah blah” and favor structured 12 PM

12 PM

interactions with tools like the canvases or STRA

processes like the thinking hats.

ǃɲ Alternate between work in small groups (4–6

1 PM

1 PM

people) and plenary sessions for presentations and integration.

ǃɲ Strictly manage time for each module, in

particular for prototyping. Use a timer visible 2 PM

2 PM

to all participants.

ǃɲ Design the agenda as a series of iterations for the same value proposition (or business model).

3 PM

3 PM

Design, critique, iterate, and pivot.

ǃɲ Avoid slow activities after lunch.

4 PM

4 PM

5 PM

5 PM

Use the modules below as

Before Your Workshop

After Your Workshop

Get Online For:

a menu of options to draft

Do your homework and gather

Get going with testing your

ǃɲ sample agendas

a workshop agenda.

customer insights → p. 106.

value propositions and busi-

ǃɲ templates and instructions

ness models in the real world

ǃɲ all-in-one material package

→ p. 172.

Prototype Possibilities

Making Choices

Preparing Tests

169

Rank Jobs, Pains, and Gains — → p. 20

Extracting Hypotheses — → p. 200

Trigger Questions — → p. 15, 17, 31, 33

.6 2

Check Your Fit — → p. 94

CS Mapping — → p. 22

‘Job’ Selection — → p. 100

Prioritizing Hypotheses — → p. 202

10 Questions — → p. 122

DESIGN /

Voice of Customer — → p. 124

VP Mapping — → p. 36

Assess against Environment — → p. 126

Test Design — → p. 204

OM / VPD /

Napkin Sketches — → p. 80

YZER.C

Differentiate from Competition — → p. 128

Choose a Mix of Experiments — → p. 216

G

TE

De Bono's Hats — → p. 136

Ad libs — → p. 82

Dotmocracy — → p. 138

STRA

Selecting Prototype — → p. 140

Test Road Map — → p. 242–245

Flesh out Ideas with VPC — → p. 84

Constraints — → p. 90

Back and Forth with Business Model

Back and Forth Iteration — → p. 152

New Ideas with Books — → p. 92

Breaks

Lunch

Numbers Projections — → p. 154

Push / Pull Exercise — → p. 94

Coffee and snacks

7 BM Questions — → p. 156

Six Ways to Innovate — → p. 102

170

.6 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

Lessons Learned

Prototyping Possibilities

Understanding Customers

Finding the Right

Business Model

Rapidly prototype alternative value

Imagine, observe, and understand

propositions and business models.

your customers. Put yourself in their

Search for the right value proposition

Don’t fall in love with your first ideas.

shoes. Learn what they are trying to

embedded in the right business model,

Keep your early models rough enough

get done in their work and in their lives.

because every product, service, and

to throw away without regret so that

Understand what prevents them from

technology can have many different

they can evolve and improve.

getting this done well. Unearth which

models. Even the best value proposi-

outcomes they are looking for.

tions can fail without a sound business

model. The right business model can

be the difference between success

and failure.

171

.6 2

DESIGN /

OM / VPD /

YZER.CG

TE

STRA

te

st

3

Reduce the risk and uncertainty of your ideas for new and improved value propositions by deciding What to Test p. 188. Then, get started with Testing Step-by-Step p. 196

and drawing from the Experiment Library

p. 214 before Bringing It All Together p. 238 and measuring your progress.

HYPOTHESIS

CESS

SUC

Start Experimenting

to Reduce Risk

When you start exploring new ideas, you are usually in a space of maximum uncertainty. You don’t know if your ideas 178

will work. Refi ning them in a business plan won’t make them more likely to succeed. You are better off testing your ideas

.0 3

with cheap experiments to learn and systematically reduce uncertainty. Then increase spending on experiments, proto-TEST /

types, and pilots with growing certainty. Test all aspects of your Value Proposition and Business Model Canvases, all the way from customers to partners (e.g., channel partners).

OM / VPD /

YZER.CG

TE

Assumptions

Numbers

Evidence-based

Granular documents and spreadsheets

Detail

Dependent on level of evidence from experiments Masked via detailed plan

Uncertainty

Acknowledged and reduced via experiments

Avoided

Failure

Embraced as means to learn and improve

Not addressed adequately

Risk

Minimized via learnings

Historical facts from past success

Decision-basis

Facts and insights from experiments

Execution of a plan

Focus

Experimentation and learning

Inside the building

Where

Outside the building

Planning

Process

Customer development and lean start-up

Business plan

Tools

Business Model and Value Proposition Canvas

We know

Attitude

Our customers and partners know

STRA

Spending

$

$

Progress

$

$

$

Uncertainty

$

$

Search

Execute

Business Plans vs.

Experimentation Processes

The fi rst step in any venture used to be writing ideas to learn what works and what doesn’t is readiness and often die along the way. You need a business plan. We now know better. Business a far better approach than writing a plan. One to experiment, learn, and adapt to manage this plans are great execution documents in a known might even argue that plans maximize risk. Their change and progressively reduce risk and uncer-179

environment with suffi cient certainty. Unfortu-refi ned and polished nature gives the illusion that tainty. This process of experimentation, which we

.0

nately, new ventures often take place under high with great execution little can go wrong. Yet ideas will explore on the following pages, is known as 3

uncertainty. Therefore, systematically testing dramatically change from inception to market customer development and lean start-up.

TEST /

OM / VPD /

YZER.CG

TE

Assumptions

Numbers

Evidence-based

Granular documents and spreadsheets

Detail

Dependent on level of evidence from experiments Masked via detailed plan

Uncertainty

Acknowledged and reduced via experiments

Avoided

Failure

Embraced as means to learn and improve

Not addressed adequately

Risk

Minimized via learnings

Historical facts from past success

Decision-basis

Facts and insights from experiments

Execution of a plan

Focus

Experimentation and learning

Inside the building

Where

Outside the building

Planning

Process

Customer development and lean start-up

Business plan

Tools

Business Model and Value Proposition Canvas

We know

Attitude

Our customers and partners know

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Business Planning

Experimentation

Applied to New Ventures

We know

Attitude

Our customers and partners know

Business plan

Tools

Business Model and Value Proposition Canvas

Planning

Process

Customer development and lean start-up

Inside the building

Where

Outside the building

Execution of a plan

Focus

Experimentation and learning

Historical facts from past success

Decision basis

Facts and insights from experiments

Not addressed adequately

Risk

Minimized via learnings

Avoided

Failure

Embraced as means to learn and improve

Masked via detailed plan

Uncertainty

Acknowledged and reduced via experiments

Granular documents and spreadsheets

Detail

Dependent on level of evidence from experiments Assumptions

Numbers

Evidence-based

10 Testing Principles

Apply these 10 principles when you start testing your value proposition ideas with a series of experiments. A good experimentation process produces evidence of what works and what doesn’t. It also will enable you to adapt and 180

change your value propositions and business models and systematically reduce risk and uncertainty.

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Get “10 Testing Principles” poster

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OM / VPD /

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1

2

3

4

5

Realize that evidence

Learn faster and

Test early; refi ne later.

Experiments ≠ reality.

Balance learnings

trumps opinion.

reduce risk by

Gather insights with early

Remember that experiments

and vision.

Whatever you, your boss,

embracing failure.

and cheap experiments

are a lens through which you

Integrate test outcomes

your investors, or anybody

Testing ideas comes with

before thinking through or

try to understand reality.

without turning your back

else thinks is trumped by

failure. Yet failing cheaply

describing your ideas in

They are a great indicator,

on your vision.

(market) evidence.

and quickly leads to more

detail.

but they diff er from reality.

learning, which reduces risk.

181

.0 3

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6

7

8

9

10

Identify idea killers.

Understand

Make it measurable.

Accept that not all

Test irreversible

Begin with testing the most

customers fi rst.

Good tests lead to measur-

facts are equal.

decisions twice as much.

important assumptions:

Test customer jobs, pains,

able learning that gives you

Interviewees might tell you

Make sure that decisions that

those that could blow up

and gains before testing

actionable insights.

one thing and do another.

have an irreversible impact

your idea.

what you could off er them.

Consider the reliability of

are particularly well informed.

your evidence.

Introducing

the Customer

Development

182

Process

.0 3

Customer development is a four-step

process invented by Steve Blank,

TEST /

serial entrepreneur turned author and

educator. The basic premise is that

there are no facts in the building, so

you need to test your ideas with cus-

OM / VPD /

tomers and stakeholders (e.g., channel

partners or other key partners) before

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you implement them. In this book we

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use the customer development process

to test the assumptions underlying

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Value Proposition and Business Model

Pivot

Canvases.

Customer Discovery

Customer Validation

Get out of the building to learn about

Run experiments to test if customers

your customers’ jobs, pains, and gains.

value how your products and services

Investigate what you could off er them

intend to alleviate pains and create

to kill pains and create gains.

gains.

Search

Search vs. Execute

183

The goal of the search phase is to

.0

experiment and learn which value

3

propositions might sell and which

business models could work. Your

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canvases will radically change and

constantly evolve during this phase

while you test every critical hypoth-

OM / VPD /

esis. Only when you have validated

your ideas do you get into the execu-

YZER.C

tion mode and scale. At the early

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stages of the process, your canvases

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change rapidly; they will stabilize

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with increasing knowledge from your

experiments.

Customer Creation

Company Building

Tip

Start building end user demand. Drive

Transition from a temporary orga-

Capture every hypothesis, every-

customers to your sales channels and

nization designed to search and

thing you tested, and everything you

begin scaling the business.

experiment to a structure focused on

learned. Use the Value Proposition

executing a validated model.

and Business Model Canvases to

Execute

track your progress from initial idea

and starting point toward a viable

value proposition and business model.

Keeping track of your progress and

evidence produced along the way

allows you to refer back to it if

necessary.

Blank & Dorf ,The Startup Owner's Manual, 2012.

Integrating Lean

Start-up Principles

Eric Ries launched the Lean Startup movement based on Steve Blank’s customer development process. The idea is 184

to eliminate slack and uncertainty from product development by continuously building, testing, and learning in an

.0 3

iterative process. Here we apply the three steps in combination with the canvases and customer development to TEST /

test ideas, assumptions, and so-called minimum viable product (MVPs).

Zoom in

OM / VPD /

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TE

STRA

Pivot

Search

Execute

Customer Discovery

Customer Validation

Customer Creation

Company Building

1. Design/build.

Design or build an artifact specifi cally

conceived to test your hypotheses,

gain insights, and learn. This could be a

conceptual prototype, an experiment,

or simply a basic prototype (MVP) of the

products and services you intend to off er.

185

.0

0. Generate a hypothesis.

3

Start with the Value Proposition and

Business Model Canvases to defi ne

TEST /

the critical hypotheses underlying

your ideas in order to design the right

experiments.

OM / VPD /

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TE

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3. Learn.

2. Measure.

Analyze the performance of the arti-

Measure the performance of the

fact, compare to your initial hypothe-

artifact you designed or built.

ses, and derive insights. Ask what you

thought would happen. Describe what

actually happened. Then outline what

you will change and how you will do so.

Ries, The Lean Startup, 2011.

Apply Build, Measure, Learn Apply the Lean Startup circle to more than just products and services.

Use the same three steps of designing/building, testing/measuring, and learning with all the artifacts you create in Value Proposition Design. Apply design/build, test/measure, learn to your…

186

.0 3

Conceptual

Design rapid conceptual prototypes

to shape your ideas, fi gure out

TEST /

Prototypes

what could work, and identify which

hypotheses need to be true to

succeed. Use these prototypes as

a tangible way to clearly map,

OM / VPD /

track, iterate, and share your ideas

and hypotheses.

YZER.CG

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Hypotheses

Design and build experiments to

test the hypotheses that need to be

true for your idea to succeed. Start

with the most critical hypotheses

that could kill your idea.

Products

Build so-called MVPs to test your

value propositions. These are pro-

and services

totypes with a minimum feature set

specifi cally designed to learn rather

than to sell.

Design/Build

Measure

Learn

187

.03

Business Model and/

Performance of

If and why you need to

I present Shrek models,

/

or Value Proposition

conceptual prototype:

adapt your conceptual

that’s a Yiddish expression

Canvases to shape

fit between customer

prototypes

for making people nervous.

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your ideas throughout profile and value map, Assumed financial

Frank Gehry, Architect

the process

ballpark figures, design

performance of your

assessment with 7 busi-

business model

OM / VPD /

ness model questions

Assumed fit

Which hypotheses

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you need to test

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Interviews, obser-

What actually happens

If and why you need

There are no facts in the

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vations, and exper-

in your experiments

to change any of the

building… So get the hell out

iments to test initial

compared with what

building blocks of

and talk to customers.

value proposition

you thought would

your Business Model

Steve Blank, Entrepreneur & Educator

and business model

happen (i.e., your

or Value Proposition

assumptions derived

hypotheses)

Canvas

from conceptual

prototyping

MVPs with the bene-

If your products and

If and why you need

fits and features you

service actually relieve

to change the prod-

want to test

pains and create gains

ucts and services in

Fail early to succeed sooner.

for customers

your value proposition

David Kelley, Designer

Which pain relievers

and gain creators

work and which ones

don’t

188

3.

What to Test

Testing

the Circle

Prove which jobs, pains, and gains

matter to customer most by conducting

Provide evidence showing what

190

experiments that produce evidence

beyond your initial customer research.

customers care about (the circle)

.13

Only after this has been done should

/

you get started with your value propo-

before focusing on how to help

TEST

sition. This will prevent you from wast-

ing time with products and services

them (the square).

customers don’t care about.

Start with jobs, pains, and gains

Possessing evidence about customer jobs, pains, OM / VPD /

In the design section we looked at a series of and gains before you focus on your value propo-techniques to better understand customers. In sition is very powerful. If you start by testing your YZER.CG

this chapter we go a step further. The objective value proposition, you never know if customers TE

of “testing the circle” is to confirm with evidence are rejecting your value proposition or if you are that our profile sketches, our initial research, our simply addressing irrelevant jobs, pains, or gains.

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observations, and our insights from interviews This is less likely to happen if you have evidence were correct. We aim to know with more certainty about which jobs, pains, and gains matter to which jobs, pains, and gains customers really care customers.

about.

Of course, this means you need to find creative ways to test customer preferences without

already drawing on the use of minimum viable products (MVPs). We show how to do so with the tools in the testing library → p. 214.

ǃɲ Which gains matter to your customers?

ǃɲ Which ones are most essential?

Do you

have evidence

191

.13

showing…

/

TEST

OM / VPD /

ǃɲ Which jobs matter to your customers?

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ǃɲ Which ones matter most?

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ǃɲ Which pains matter to your customers?

ǃɲ Which ones are most extreme?

Testing the

ǃɲ Which one of your gain creators

customers really need or desire?

Square

ǃɲ Which ones they crave most?

Test if and how much your customers

care about how you intend to help

192

them. Design experiments that pro-

duce evidence showing that your prod-

.13

ucts and services kill pains and create

/

gains that matter to customers.

TEST

OM / VPD /

Do you

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have evidence

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showing…

ǃɲ Which one of your products and

services customers really want?

ǃɲ Which ones they want most?

ǃɲ Which one of your pain relievers

helps your customers with their

headaches?

ǃɲ Which ones they long for most?

Provide evidence showing that your customers care about how

193

.13

your products and services kill

/

pains and create gains.

TEST

The Art of Testing Value Propositions

Make sure your experiments allow you to

OM / VPD /

It is an art to test how much your customers care understand which aspects of your products and about your value proposition because the goal services customers appreciate, so that you can YZER.C

is to do so as cheaply and quickly as possible avoid offering anything unnecessary. In other G

without implementing the value proposition in its words, remove any features or efforts that don’t TE

entirety.

contribute directly to the learning you seek.

STRA

You need to test your customers’ taste for your Always make sure you aim to find the simplest, products and services one pain reliever and gain quickest, and cheapest way to test a pain reliever creator at a time by designing experiments that or gain creator before you start prototyping prod-are measurable, provide insights, and allow you to ucts and services.

learn and improve → p. 214.

Testing the

Rectangle

Test the most critical assumptions

underlying the business model your

Provide evidence showing that the

194

value proposition is embedded in.

Remember, even great value proposi-

way you intend to create, deliver,

.13

tions can fail without a sound business

/

model. Provide evidence showing that

and capture value is likely to work.

TEST

your business model is likely to work,

will generate more revenue than costs,

Don’t neglect testing your business model from revenue from those same customers won’t and will create value not only for your

You can fail even with a successful value proposi-survive over the long term. Similarly, a company customers but for your business.

tion if your business model generates less revenue will obviously go out of business if resources and OM / VPD /

than it incurs costs. Many creators are so focused activities required to create value are more costly on designing and testing products and services than the value they capture. In some markets you YZER.CG

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(profit = revenues - costs) resulting from the build-be interested in working with you.

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Design experiments that address the most

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A value proposition that customers want is

important things that have to be true for your worth little if you don’t have the channels to reach business model to work. Testing such critical customers in a way they want to be reached.

assumptions will prevent you from failing with a Likewise, a business model that spends more

great value proposition that customers actually money on acquiring customers than it will earn want.

Do you have

ǃɲ That you will be able to

ǃɲ How you will succeed in

evidence

195

perform the activities

acquiring and retaining

.1

required to create value?

customers?

3

showing…

/

TEST

ǃɲ That you will have access

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

to the partners required

for your model to work?

OM / VPD /

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Key Resources

Channels

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ǃɲ That you will have access

ǃɲ Through which channels

to the resources required

will you be able to reach

to create value?

customers?

Cost Structure

Revenue Streams

ǃɲ That you can generate

ǃɲ How you will generate

more revenue than costs

revenues from customers?

incurred?

196

3.2

Testing

Step-by-Step

HYPOTHESIS

Overview of the

Testing Process

198

.23/

TEST

+

OM / VPD /

Test Card

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Extract Hypotheses

Prioritize Hypotheses

Design Tests

→ p. 200

→ p. 202

→ p. 204

Design

Testing

199

.23/

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Prioritize Tests

Run Tests

Capture Learnings

Make Progress

→ p. 205

→ p. 205

→ p. 206

→ p. 242–245

Get “Testing Process Overview” poster

Extract Your Hypotheses: What Needs to Be True

for Your Idea to Work?

readers

200

Use the Value Proposition and Business

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must be true for your idea to work.

interested in

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Prioritize Your Hypotheses: What Could Kill Your Business

Not all hypotheses are equally critical. Some can kill your business, whereas others matter only once you get the most 202

important hypotheses right. Start prioritizing what’s critical to survival.

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Identify the business killers. These are the hypotheses that are critical to the survival of your idea. Test them fi rst!

Rank all your hypotheses in order of how critical they are for your idea to survive and thrive: There is no basis for our idea if people

+

aren’t making or don’t fear making

Critical to survival

bad business decisions (in particular

regarding products and services) or if

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203

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Experiments

Download the Test Card and do the exercise online with the

Test Card

204

Test Card

Name the test, set a

due date, and list the

AdWords campaign

May 1, 2014

person responsible.

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Structure all of your experiments with

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Natasha Hanshaw

2 weeks

this simple Test Card. Start by testing

TEST

step 1: hypothesis

the most critical hypotheses.

We believe that

businesspeople are looking for methods

Indicate how critical

1

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how the advertising campaign performs

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most critical hypotheses highest, but

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prioritize cheap and quick tests to be

eses with several experiments. Start with

done early in the process, when uncer-

cheap and quick tests. Then follow up

tainty is at its maximum. Increase your

with more elaborate and reliable tests if

spending on experiments that produce

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with growing certainty.

-

Repeat.

Where can I get the most

learning the fastest?

Capture Your

Insights with

Download the Learning Card

the Learning

206

Card

Learning Card

Name the insight, the

date of learning, and

Demand for VP method

May 1, 2014

the person responsible.

.23

Structure all of your insights with

/

Natasha Hanshaw

this simple Learning Card.

TEST

step 1: hypothesis

We believed that businesspeople are looking for methods Describe the hypothesis

that you tested.

to help them design better value propositions.

OM / VPD /

YZER.CG

Outline the outcomes

step 2: observation

TE

of your experiment(s)

We observed

a strong demand during workshops and a

in terms of data and

STRA

results. A Learning

2.5 percent CTR in our Google AdWords campaign.

Data Reliability:

Card may aggregate

the observations from

several Test Cards.

step 3: learnings and insights

Note how reliable the

data measured are.

From that we learned that

there is a sufficiently

Explain what conclu-

sions and insights you

strong interest for the topic.

derived from the test

Action Required:

results.

Highlight how

step 4: decisions and actions

Describe what actions

dramatic the actions

Therefore, we will

launch a LinkedIn campaign to explore

you will take based on

required are based on

your insights.

what you learned.

interest by segment (e.g., product managers).

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer

Invalidated

Get back to the drawing

For example, when you have inval-

board: pivot.

idated customer interest for your

Find new alternative segments, value

value proposition around a novel

propositions, or business models to

technology, search for new poten-

make your ideas work when your

tial customers, value propositions,

tests invalidate your first attempts.

and business models.

207

Learn more

.2

Seek confirmation.

For example, if interviews with

3/

Design and conduct further tests

potential customers show a strong

when quick and early experiments

interest for a service that requires

TEST

based on a small amount of data

heavy investments to launch, follow

indicate the need for drastic actions.

up with research and experiments

that produce more reliable data

OM / VPD /

validating customer interest.

YZER.C

Deepen your understanding.

For example, if the quantitative

G

Design and conduct further tests to

data of an experiment show that

TE

understand why a trend is taking

potential customers are not inter-

STRA

place once you discovered that it is

ested, follow up with qualitative

taking place.

interviews to understand why they

are uninterested.

Validated

Expand to next building block.

For example, when you have vali-

Move on to test your next important

dated customer interest for a prod-

hypothesis when you are satisfied

uct, follow up with experiments that

with your insights and the data

validate the willingness of channel

reliability.

partners to stock and promote your

product.

Execute.

For example, when you have learned

When you are satisfied with the qual-

and validated exactly what it takes

You experimented

ity of your insights and the reliability

to get channel partners interested

and learned.

of the data, you may directly start

in reselling your value proposition,

Now what?

executing based on your findings.

start scaling up sales efforts

by hiring salespeople or designing

dedicated marketing material.

How Quickly Are

+

You Learning?

Quick learning

The only thing standing between you

Learning Instruments

and fi nding out what customers and

Napkin sketches

208

partners really want is the consistency

ULTRA FAST

Quickly shape your ideas to share, challenge, or and speed with which you and your

iterate them and to generate hypotheses to test.

.2 3

team can propel yourself through the

BM & VP Canvases

design/build, measure, learn cycle.

TEST /

This is called cycle time.

Interviewing

Quickly gain fi rst market insights. Keep the eff ort FAST

customers, partners,

in-house so learnings remain fresh and relevant The speed at which you learn is crucial, especially and stakeholders

and so you can move fast and act upon insights.

during the early phases of value proposition OM / VPD /

design. When you start out, uncertainty is at its Library of

Use the whole range of experiments from the maximum. You don’t know if customers care

experiments

experiment library → p. 214. Start with quick YZER.CG

about the jobs, pains, and gains you intend to ones when uncertainty is high. Continue with TE

address, let alone if they’re interested in your more reliable, slower ones, when you have value proposition.

evidence about the right direction.

STRA

Therefore, it is critical that your early experiments be extremely fast and produce a maximum Business plans are more refi ned documents and of learning so you can adapt rapidly. This is why SLOW

Business plan

usually more static. Write one only when you writing a business plan or conducting a large third-have clear evidence and are approaching the party market study is the wrong thing to start with, execution phase.

although it can make sense later in the process.

VERY SLOW

Outsourced

Market studies are often costly and slow.

market studies

They are not an optimal search tool because they don’t allow you to adapt to circumstances rapidly. They make most sense in the context of incremental changes to a value proposition.

VERY SLOW

Pilot study

A pilot study is often the default way to test an idea inside a corporation. However, they should be preceded by quicker and cheaper learning tools, because most pilots are based Slow learning

on relatively refi ned value propositions that involve substantial time and cost.

-

The faster

ty

you iterate,

209

ertain

1

2

3

4

5

6

the more

ncU

.2

you learn

3

and the

TEST /

Risk

faster you

OM / VPD /

Time

succeed.

YZER.CG

Six rapid iteration cycles based on quick experiments produce more learning than three TE

long iteration cycles based on slower experiments. The faster approach will produce knowl-STRA

edge more quickly and thus reduce risk and uncertainty more substantially than the latter.

ty

1

2

3

Don’t waste your time!

ertain

nc

Imagine spending a week, a month,

U

or more on refi ning and perfecting

your idea. Imagine spending all that

time thinking hard about what you’d

need to do to produce great growth

numbers only to fi nd out that your

Risk

customers and partners don’t really

care. That’s wasted time!

Time

Five Data

False-

Traps to Avoid

Negative

Avoid failure by thinking critically

Trap

about your data. Experiments produce

210

valuable evidence that can be used

You’re not

Risk: Not seeing things that are there.

pregnant.

to reduce risk and uncertainty, but

Occurs: When your experiment fails to

.2 3

they can’t predict future success with

REALITY

detect, for example, a customer job it

100 percent accuracy. Also, you might

True

was designed to unearth.

TEST /

simply draw the wrong conclusions

Tips

from your data. Avoid the following fi ve

Make sure your test is adequate.

traps to ensure you successfully test

Dropbox, a fi le hosting service, initially

your ideas.

Accurate

tested customer interest with Google

OM / VPD /

Measurements

MEASURED/PERCEIVED

AdWords. They invalidated their

hypotheses, because the ads didn’t

YZER.CG

TE

False-

perform. But the reason people didn’t

search was because it was a new

True

False

STRA

Positive

market, not because there was a lack

of interest.

Trap

You’re pregnant!

Accurate

Measurements

Risk: Seeing things that are not there.

Occurs: When your testing data

mislead you to conclude, for example,

that your customer has a pain when in

False

fact it is not true.

Tips

ǃɲ Test the circle before you test the

square. Understand what’s relevant

to customers to avoid being misled

by positive signals for irrelevant

value propositions.

ǃɲ Design diff erent experiments for the

same hypothesis before making

important decisions.

The “Exhausted

Maximum” Trap

211

.2 3

Risk: Overlooking limitations (e.g., of a market).

Occurs: When you think an opportunity is larger TEST /

The “Local

than it is in reality. For example, when you think you are testing with a sample of a large population Maximum”

but the sample is actually the entire population.

OM / VPD /

Tip

B

Trap

Design tests that prove the potential beyond the YZER.C

immediately addressed test subjects.

G

TE

STRA

a

The Wrong

Data Trap

Risk: Searching in the wrong place.

Occurs: When you abandon an opportunity because you are looking at the wrong data. For example, you might drop an idea because the

customers you are testing with are not interested Risk: Missing out on the real potential.

Tip

and you don’t realize that there are people who Occurs: When you conduct experiments that opti-Focus on learning rather than optimizing. Don’t are interested.

mize around a local maximum while ignoring the hesitate to go back to designing better alter-Tip

larger opportunity. For example, positive testing natives if the testing data are positive but the Go back to designing other alternatives before feedback might result in you sticking with a much numbers feel like they should be better (e.g., you give up.

less profi table model when a more profi table one larger market, more revenues, better profi t).

exists.

Test Card

Test Name

Deadline

212

Assigned to

Duration

.23

step 1: hypothesis

/

We believe that

TEST

Critical:

OM / VPD /

step 2: test

To verify that, we will

YZER.CG

TE

Test Cost:

Data Reliability:

STRA

step 3: metric

And measure

Time Required:

step 4: criteria

We are right if

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer Download the Test Card

Learning Card

Insight Name

Date of Learning

Person Responsible

213

step 1: hypothesis

.23/

We believed that

TEST

OM / VPD /

step 2: observation

We observed

YZER.CG

TE

Data Reliability:

STRA

step 3: learnings and insights

From that we learned that

Action Required:

step 4: decisions and actions

Therefore, we will

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer Download the Learning Card

214

3.3

Experiment

Library

CESS

SUC

Choose a Mix

of Experiments

Every experiment has strengths and weaknesses. Some are quick and cheap but produce less reliable evidence. Some 216

produce more reliable evidence but require more time and money to execute.

.3 3

Select a series of tests by drawing from our Consider cost, data reliability, and time required when you experiment library or by using your imagination TEST /

design your mix of experiments. As a rule of thumb, start to invent new experiments. Keep two things in cheap when uncertainty is high and increase your spending mind when you compose your mix:

on experiments with increasing certainty.

What customers say and do are two

OM / VPD /

DEF·I·NI·TION

diff erent things.

Experiment

Use experiments that provide verbal evidence YZER.CG

A procedure to validate or

from customers as a starting point. Get customers TE

invalidate a value proposition

to perform actions and engage them (e.g., interact

or business model hypothesis

with a prototype) to produce stronger evidence STRA

that produces evidence.

based on what they do, not what they say.

Customers behave diff erently when you

are there or when you are not.

During direct personal contact with customers, you can learn why they do or say something and get their input on how to improve your value proposition. However, your presence might lead them to behave diff erently than if you weren’t there.

In an indirect observation of customers (on

the web, for example) you are closer to a real-life situation that isn’t biased by your interaction with customers. You can collect numerical data and track how many customers performed an action you induced.

Tip

Use these techniques to verify whether

customers really mean what they say.

Produce evidence that the jobs, pains,

and gains they mention are real and

that they are seriously interested in

your products and services.

217

.3

DIRECT CONTACT with customers

INDIRECT OBSERVATION of customers

3

Learn why and how to improve

Learn how many and how much

TEST /

Lab studies

Sale actions

Tip

ǃɲ Learning prototype/MVP →

p. 222

ǃɲ Mock sales →

p. 236

ors

Use these techniques to understand

vi

ǃɲ Life-size prototypes →

p. 226

ǃɲ Presales →

p. 237

OM / VPD /

how customers interact with your

ǃɲ Wizard of Oz →

p. 223

ǃɲ Crowdfunding →

p. 237

OMERS DO

prototypes. Investments are usually

YZER.C

higher but produce concrete and

Anthropologist →

p. 114

Tracking actions

G

actionable feedback.

T CUST

For fi eld studies

ǃɲ Ad and link tracking →

p. 220

TE

ǃɲ Landing page →

p. 228

WHA

STRA

Observe their beha

ǃɲ Split testing →

p. 230

Participatory design

Detective →

p. 108

and evaluation

For data analysis

Y

ǃɲ Illustrations, storyboards,

Tip

es

and scenarios →

p. 224

d

Use these techniques at the early

ǃɲ Speedboat →

p. 233

stages of the design process, because

OMERS SA

ǃɲ Product box →

p. 234

investment is low and they produce

ǃɲ Buy a feature →

p. 235

quick insights.

T CUST

Journalist →

p. 110

WHA

Observe their attitu

For interviews

Inspired by the work in user experience by Christian Rohner (NN).

Produce

Evidence with

a Call to Action

218

Use experiments to test if customers

are interested, what preferences they

.3 3

have, and if they are willing to pay for

what you have to off er. Get them to

TEST /

perform a call to action (CTA) as much

as possible in order to engage them

and produce evidence of what works

and what doesn’t.

OM / VPD /

The more a customer (test subject) has to invest YZER.CG

to perform a CTA, the stronger the evidence that TE

he or she is really interested. Clicking a button, answering a survey, providing a personal e-mail, STRA

or making a prepurchase are diff erent levels of investments. Select your experiments accordingly.

CTAs with a low level of investment are

appropriate at the beginning of value proposition design. Those requiring a high level of investment make more sense later in the process.

DEF·I·NI·TION

Call to Action (CTA)

Prompts a subject to perform

an action; used in an exper-

iment in order to test one or

more hypotheses.

Use experiments to test…

219

interest and relevance

.3

Prove that potential customers and partners are 3

genuinely interested and don’t just tell you so.

Show that your ideas are relevant enough to them TEST /

to get them to perform actions that go beyond lip service (e.g., e-mail sign-ups, meetings with decision makers and budget holders, letters of intent, and more).

OM / VPD /

YZER.CG

TE

priorities and preferences

STRA

Show which jobs, pains, and gains your potential customers and partners value most and which ones they value least. Provide evidence that indicates which features of your value proposition they prefer. Prove what really matters to them and what doesn’t.

willingness to pay

Provide evidence that potential customers are interested enough in the features of your value proposition to pay. Deliver facts that show they will put their money where their mouth is.

Ad Tracking

Use ad tracking to explore your potential customers’ jobs, pains, gains, and interest—or lack of it—for a new value proposition. Ad tracking is an established technique used Google

by advertisers to measure the effectiveness of ad spending.

220

You can use the same technique to explore customer interest even before a value proposition exists.

.33/

TEST

Test customer interest

with Google AdWords

We use Google AdWords to illustrate this

technique because it’s particularly well suited OM / VPD /

for testing based on its use of search terms for advertising (other services such as LinkedIn YZER.CG

and Facebook also work well).

TE

1. Select search terms.

STRA

Select search terms that best represent

what you want to test (e.g., the existence of a customer job, pain, or gain or the interest for a value proposition).

2. Design your ad/test.

Design your test ad with a headline, link

to a landing page, and blurb. Make sure it

represents what you want to test.

3. Launch your campaign.

Define a budget for your ad/testing campaign Where to apply?

and launch it. Pay only for clicks on your ad, which represent interest.

Test interest early in the process

4. Measure clicks.

to learn about the existence of

Learn how many people click on your ad.

customer jobs, pains, gains, and

No clicks may indicate a lack of interest.

interest for a particular value

proposition.

Unique Link

Where to apply?

Tracking

This works anywhere but

is particularly interesting

Set up unique link tracking to verify

in industries where building

potential customers’ or partners’

MVPs is diffi cult, such as in

interest beyond what they might tell

industrial goods and medical

221

you in a meeting, interview, or call.

devices.

.3

It’s an extremely simple way to

3

measure genuine interest.

TEST /

0

0

OM / VPD /

YZER.CG

TE

STRA

0

0

0

1

2

“Fabricate” a unique link.

Pitch and track.

Make a unique and trackable link to more detailed Explain your idea to a potential customer or part-information about your ideas (e.g., a download, ner. During or after the meeting (via e-mail), give landing page) with a service such as goo.gl.

the person the unique link and mention it points to 3

more detailed information.

Learn about genuine interest.

Track if the customer used the link or not. If the link wasn’t used, it may indicate lack of interest or more important jobs, pains, and gains than those that your idea addresses.

MVP Catalog

MVP stands for minimum viable product, a concept What’s an MVP in this book?

popularized by the lean start-up movement to effi ciently test the interest in a product before building it entirely.

A representation or prototype of a value

Tip

Rather than coining a new term we stick to this established proposition designed specifi cally to test

Start cheaply, even

222

one and adapt it to testing value propositions.

the validity of one or more hypotheses/

in large companies

assumptions.

with big budgets. For

.3 3

Make it “real” with

example, use your

The goal is to do so as quickly, cheaply,

smartphone to make

TEST /

and effi ciently as possible. MVPs are

a representation of

and test reactions to

mainly used to explore potential customer

a video before you

and partner interest.

OM / VPD /

a value proposition.

bring in a video crew

to “professionalize”

videos and expand

Use the following techniques to make your

testing.

YZER.CG

value propositions feel real and tangible before TE

implementing anything when you test them with potential customers and partners.

STRA

Data Sheet

Brochure

Storyboard

Specs of your imagined

Mocked-up brochure

Illustration of a customer

value proposition

of your imagined value

scenario showcasing your

Requirements:

proposition

imagined value proposition

Word processor

Requirements:

Requirements:

Word processor

Sketch artist

and design skills

Landing Page

Learn with

My Product

Website outlining your

imagined value proposition

Functional MVPs

(mostly with a CTA).

Use prototypes designed specifi cally to learn from 223

Requirements:

experiments with potential customers and partners.

.3

Web designer

3

TEST /

Learning Prototype

OM / VPD /

Functioning prototype of

your value proposition with

YZER.C

the most basic feature set

G

required for learning

TE

Product Box

Requirements:

STRA

Prototype packaging

Product development

of your imagined value

proposition

Requirements:

Packaging designer and

prototype implementation

Wizard of Oz

Video

Set up a front that looks

Video showcasing your

like a real working value

imagined value proposition

proposition and manually

or explaining how it works

carry out the tasks of a

Requirements:

normally automated prod-

Video crew

uct or service

Requirements:

Getting your hands dirty

Illustrations,

Storyboards,

and Scenarios

224

Share illustrations, storyboards, and

scenarios related to your value prop-

.3 3

osition ideas with your potential cus-

tomers to learn what really matters

TEST /

to them. These types of Illustrations

are quick and cheap to produce and

make even the most complex value

1

propositions tangible.

Prototype alternative value propositions.

OM / VPD /

Come up with several alternative prototypes for Tips

the same customer segment. Go for diversity (i.e., YZER.CG

ǃɲ In a business-to-business (B2B) context think of 8-12 radically diff erent value propositions) and TE

value propositions for each important customer variations (i.e., slightly diff erent alternatives).

segment, such as users, budget owners, deci-

STRA

sion makers, and so on.

ǃɲ For existing organizations, make sure to

2

include customer-facing staff in the process, Defi ne scenarios.

notably to get buy-in and gain access to

Sketch out scenarios and storyboards that

customers to present the illustrations.

describe how a customer will experience each ǃɲ Complement the illustrations with mock data value proposition in a real-world setting.

sheets, brochures, or videos to make your

ideas even more tangible.

ǃɲ Run A/B tests with slightly diff erent scenarios 3

to capture which variations get most traction.

Create compelling visuals.

ǃɲ Four or fi ve meetings per customer segment Use an illustrator to consolidate your sketches are typically suffi cient to generate meaningful into compelling visuals that make the customer feedback.

experience clear and tangible. Use single illus-

ǃɲ Leverage the customer relationship and

trations for each value proposition or entire story repeat the process later on with more sophis-boards.

ticated prototypes.

Process adapted from Christian Doll, bicdo.de.

225

.3

Questions to

3

ask customers:

TEST /

Which value propositions really create

OM / VPD /

value for you?

Which ones should we keep and move

YZER.CG

forward with, and which ones should we

TE

abandon?

STRA

4

Dig deeper for each value proposition;

Test with customers.

pay attention to jobs, pains, and gains;

Meet customers and present the diff erent illus-and inquire:

trations, scenarios, and storyboards to start a conversation, provoke reactions, and learn what

· What is missing?

matters to them. Get customers to rank value propositions from most valuable to least helpful.

· What should be left aside?

· What should be added?

5

Debrief and adapt.

· What should be reduced?

Use the insights from your meetings with customers. Decide which value propositions you will

· Always ask why to capture

continue exploring, which ones you will abandon, qualitative feedback.

and which ones you will adapt.

Life-Size Experiments

Get your customers to interact with life-size prototypes and real-world replicas of service experiences. Stick to the principles of rapid, quick, and low-cost prototyping to gather customer insights despite the more sophisticated 226

set-up. Add a CTA to validate interest.

.3 3

TEST /

OM / VPD /

YZER.CG

TE

Concept Cars and Life-Size Prototypes

These are cars made to showcase new designs

STRA

and technologies. Their purpose is get reactions from customers rather than to go into mass

production directly.

Lit Motors used lean start-up principles to

prototype and test a fully electric, gyroscopi-cally stabilized two-wheel drive with customers. Because this type of vehicle represents a completely new concept, it was essential for Lit Motors to understand customer perception and acceptance from the very beginning.

In addition, Lit Motors added a CTA to

validate customer interest beyond initial

interactions with the prototype. Customers can prereserve a vehicle with a deposit ranging

from $250 to $10,000. Deposits go into a holding account until vehicles are ready, with higher deposits moving customers to the front of the waiting list.

Prototype Spaces

These are spaces to cocreate products and

service experiences with customers and/or

227

observe their behavior to gain new insights.

.3

Invite potential customers to create their own 3

perfect experience. Include industry experts to help build and test new concepts and ideas.

TEST /

Hotel chain Marriott built a prototyping

space in its headquarters’ basement called the Underground. Guests and experts are invited

OM / VPD /

to create the hotel experience of the future by cocreating hotel rooms and other spaces.

YZER.C

Guests are invited to add furniture, electricity G

outlets, electronic gadgets, and more, to hotel TE

room replicas that can easily be reconfi gured.

STRA

Tips

ǃɲ Make sure you validate life-size prototypes and service experiences with a CTA. Customers will always be tempted to create the

perfect experience in a prototype setting,

whereas they might not be willing to pay for it in real life.

ǃɲ Use quicker and cheaper validation methods before you draw on life-size prototypes and

real-world replicas of service experiences.

ǃɲ Don’t let the costs for this type of prototyping get out of hand. Stick to the principles of rapid, quick, and low-cost prototyping as much as possible, while off ering a close-to-life experience to test subjects.

Landing Page

The typical landing page MVP is a single web page or simple website that describes a value proposition or some aspects of it. The website visitor is invited to perform a CTA Traffi c

that allows the tester to validate one or more hypotheses.

Generate traffi c to your landing page

228

The main learning instrument of a landing page MVP is the MVP with ads, social media, or your

conversion rate from the number of people visiting the site existing channels. Make sure you

.3 3

to visitors performing the CTA (e.g., e-mail sign-up, simu-address the target customers you

lated purchase).

want to learn about, not just anybody.

TEST /

“The goal of a landing

Use your value map to craft the

Headline

headline and text that describes

Craft a headline that speaks to your

OM / VPD /

page MVP is to validate

your value proposition on the

potential customers and introduces

landing page.

the value proposition.

YZER.CG

one or more hypotheses,

Value Proposition

TE

STRA

not to collect e-mails

Use the previously described tech-

Test Card

niques to make your value proposi-

or sell, which is a nice

Test Name

Deadline

tion clear and tangible to potential

Assigned to

Duration

customers.

by-product of the

We believe that

Critical:

Call to Action

experiment.”

Get website visitors to perform an

To verify that, we will

action that you can learn from (e.g.,

Test Cost:

Data Reliability:

e-mail sign-up, surveys, fake purchase,

When?

prepurchase). Limit your CTAs to

And measure

Test early to learn if the jobs, pains, and gains optimize learning.

Time Required:

you intend to address and/or your value proposition are suffi ciently important to your customer We are right if

Outreach

for them to perform an action.

Reach out to people who performed

your CTA and investigate why they

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer Variations

were motivated enough to perform the

Combine with split testing to investigate pref-Design your landing page, traffi c

action. Learn about their jobs, pains,

erences or alternatives that work better than generation, and CTA based on your

and gains. Of course, this requires

others. Measure click activity with so-called heat learning goals.

collecting contact information during

maps to learn where visitors click on your page.

the CTA.

229

.3 3

Total audience addressed

My Product

TEST /

What percentage

of people were inter-

ested enough to visit

OM / VPD /

your page?

YZER.CG

Visitors to website

TE

STRA

What percentage

of people were inter-

Tips

ested to perform the

ǃɲ Consider building a landing page MVP that action?

gives the illusion that a value proposition

Visitors who

exists even if doesn’t yet. Your insights from performed action

a CTA closer to reality (e.g., simulated sales) will provide more realistic evidence than, for example, the e-mail sign-up to a planned value proposition or a prepurchase of it.

What percentage

ǃɲ Be transparent with your test subjects after a of people were willing

concluded experiment if you, for instance, “fake”

Visitors who

to invest time to talk

the existence of a value proposition. Consider are willing to

to you?

off ering them a reward for participating in the talk to you

experiment.

ǃɲ A landing page MVP can be set up as a stand-alone web page or within an existing website.

Split Testing

Split testing, also known as A/B test-

ing, is a technique to compare the

performance of two or more options.

In this book we apply the technique

230

to compare the performance of alter-

native value propositions with custom-

Send the same

.3 3

ers or to learn more about jobs, pains,

amount of people to

and gains.

the diff erent options

TEST /

you want to test.

OM / VPD /

Control

Compare how each

Challenge

YZER.CG

option performs

TE

regarding your CTA.

STRA

8%

20%

Conducting Split Tests

What to Test?

Call to Action

The most common form of split test is to test Here are some elements that you can easily test How many of the test subjects perform the CTA?

two or more variations of a web page or a

with A/B testing

ǃɲ Purchase

purpose-built landing page (e.g., the variations ǃɲ Alternative features

ǃɲ E-mail sign-up

may have design tweaks or outline slightly

ǃɲ Pricing

ǃɲ Click on button

or entirely diff erent value propositions). This ǃɲ Discounts

ǃɲ Survey

technique was popularized by companies

ǃɲ Copy text

ǃɲ Completion of any other task

such as Google and LinkedIn, as well as the

ǃɲ Packaging

2008 Obama campaign. Split tests can also be ǃɲ Website variations

conducted in the physical world. The main learn-

ǃɲ . . .

ing instrument is to compare if conversion rates regarding a specifi c call to action diff er between competing alternatives.

Split testing the

title of this book

For this book we performed several split tests.

For example, we redirected traffi c from

businessmodelgeneration.com to test three diff erent book titles. We tested the titles with more than 231

120,000 people over a period of 5 weeks.

.3

There were several CTAs. The fi rst one was

3

to simply click on a button labeled “learn more.”

Then people could sign up with their e-mail for the TEST /

launch of the book. In the last CTA, we asked them to fi ll out a survey to learn more about their jobs, pains, and gains. As a small reward we showed OM / VPD /

people a video explaining the Value Proposition Canvas.

YZER.CG

Tips

TE

ǃɲ Test a single variation in the challenging option STRA

if you want to clearly identify what leads to a better performance.

ǃɲ Use so-called multivariate testing to test several combined elements to fi gure out which combination creates the highest impact.

ǃɲ Use Google AdWords or other options to attract test subjects.

ǃɲ Make sure you reach a statistical signifi cance of You’re holding more than a book,

You’re holding more than a book, it’s a

You’re holding more than a book, its one

it’s the first step to design, test and deliver toolkit for how to create compelling value

part of everything you need to make what

what really matters for your customers.

propositions. So go ahead, start a...

your customers want. You’re holding the…

greater than 95 percent

ǃɲ Use tools such as Google Website Optimizer, Value

Customer

Value

Proposition

Stampede

Proposition

Optimizely, or others to easily perform split Design

By Alex Osterwalder, Yves Pigneur,

Greg Bernarda, & Alan Smith

Designed by Trish Papadakos

Toolkit

tests.

By Alex Osterwalder, Yves Pigneur,

By Alex Osterwalder, Yves Pigneur,

Greg Bernarda, & Alan Smith

Greg Bernarda, & Alan Smith

Designed by Trish Papadakos

Designed by Trish Papadakos

From the team behind

From the team behind

From the team behind

Business Model Generation,

Business Model Generation,

Business Model Generation,

the global bestseller of over

the global bestseller of over

the global bestseller of over

1 million copies in 30+ languages

1 million copies in 30+ languages

1 million copies in 30+ languages

Conversion rates:

8.51 percent

6.62 percent

8.21 percent

Innovation Games®

Innovation Games is a methodology popularized by Luke Hohmann to help you design better value propositions by using collaborative play with your (potential) customers.

The games can be played online or in person. We present 232

three of them.

.3 3

All three Innovation Games we present can be used in various ways. We outline three specifi c TEST /

tasks they can help us with when it comes to the Value Proposition Canvas and related

hypotheses.

OM / VPD /

YZER.CG

TE

STRA

Buy a Feature

Product Box

Speed Boat

Task: Prioritize which

Task: Understand your

Task: Identify the most

features customers

customers’ jobs, pains,

extreme pains holding

want most.

and gains and the value

customers back from

propositions they’d like.

completing their jobs to

be done.

Hohmann, Innovation Games, 2006.

Speed Boat

1

Set-up.

This is a simple but powerful game to help you verify your Prepare a large poster with a speed-understanding of customer pains. Get your customers to boat fl oating at sea.

explicitly state the problems, obstacles, and risks that are holding them back from successfully performing their jobs to be done by using the analogy of a speed boat held back 2

233

by anchors.

Identify pains.

.3

Invite customers to identify the

3

problems, obstacles, and risks that

are preventing them from success-

TEST /

fully performing their jobs. Each issue

should go on a large sticky note. Ask

them to place each sticky as anchors

OM / VPD /

to the boat—the lower the anchor,

the more extreme the pain.

YZER.CG

TE

3

STRA

Analysis.

Compare the outcomes of this exercise

with your previous understanding of

what is holding customers back from

performing their jobs to be done.

Tips

ǃɲ This exercise can be used during the

design phase to identify customer

pains or during testing to verify your

existing understanding.

ǃɲ Use a sailing boat with anchors and

sails if you want to work on pains

and gains simultaneously. The sails

allow you to ask, “What makes the

boat faster,” in addition to using the

anchors to symbolize what holds

people back.

Product Box

In this game, you ask customers to design a product box that represents the value proposition they’d want to buy from you. You’ll learn what matters to customers and which features they get excited about.

234

2

.3 3

1

Pitch.

Design.

Ask your customers to imagine they’re

TEST /

Invite customers to a workshop.

selling your product at a tradeshow.

Give them a cardboard box and ask

Pretend you’re a skeptical prospect

them to literally design a product

and get your customer to pitch the

box that they would buy. The box

box to you.

OM / VPD /

should feature the key marketing

messages, main features, and key

YZER.CG

benefi ts that they would expect

TE

from your value proposition.

STRA

3

Capture.

Observe and note which messages,

features, and benefi ts customers

mention on the box and which partic-

ular aspects they highlight during the

pitch. Identify their jobs, pains, and

gains.

Buy a Feature

This is a sophisticated game to get customers to prioritize among a list of predefi ned (but not yet existing) value proposition features. Customers get a limited budget of play money to buy their preferred features, which you price based on real-world factors.

235

.3 3

TEST /

$35

$35

$35

OM / VPD /

Features

Price

Total Required

Bought?

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$35

20

0

10

-5

No

G

TE

$50

5

0

0

-45

No

STRA

$70

10

35

25

0

Yes

1

2

3

4

Select and price features.

Defi ne the budget.

Have the participants buy.

Analyze outcomes.

Select the features for which you

Participants buy features as a group,

Invite participants to allocate their

Analyze which features get most

want to test customer preferences.

but each participant gets a personal

budget among the features they

traction and are bought and which

Price each one based on develop-

budget that he or she can allocate

want. Instruct them to collaborate

ones are not.

ment cost, market price, or other

individually. Make sure the personal

with others to get more features.

factors that are important to you.

budget forces participants to pool

resources, and the overall budget

forces them to make hard choices

among the features they want.

Mock Sales

A great way to test sincere customer interest is to set up a mock sale before your value proposition even exists. The goal is make your customers believe they are completing a real purchase. This is easily done in an online context 236

but can also be done in a physical one.

.3 3 Online

Physical World

TEST /

Test diff erent levels of customer commitment with Mock sales are not limited to online. Here’s what these three experiments:

retailers do to test customer interest and pricing Learn about customer interest by measuring how in the real world:

OM / VPD /

many people click on a simple “buy now” button.

YZER.CG

BUY NOW

»

TE

STRA

Learn how pricing infl uences customer interest.

Combine with A/B testing (see p. 230) to learn more about demand elasticity and the optimal price point.

»

Get hard data by simulating a transaction with the customer’s credit card information. This is the strongest evidence of customer demand (see tips to manage customer perception, p. 237).

Introduce products

Sell a product in one

that don’t exist yet in a

retail location only for

limited number of (mail

a limited amount of time

Enter credit card number

$

order) catalogs.

(diff erent from a pilot,

which typically covers

»

an entire market).

Presales

The main objective of this type of presales is to explore customer interest; it is not to sell. Customers make a purchase commitment and are aware of the fact that your value propo-Tips

sition does not yet fully exist. In case of a lack of interest, the Don’t fear that mock sales might

sale is canceled and the customer reimbursed.

237

alienate customers and negatively

.3

aff ect your brand. Manage customer

3

perception well, and mock sales can

be turned into an advantage. Build on

TEST /

these best practices:

ǃɲ Explain that you were performing a

test after the customer completes

OM / VPD /

the mock purchase.

ǃɲ Be transparent about which infor-

YZER.C

mation you keep or erase.

G

ǃɲ Always erase credit card informa-

TE

tion in a fake purchase.

STRA

ǃɲ Off er a reward for participating in

the test (e.g. goodies, discounts).

You will turn test subjects into advo-

X

cates for your brand rather than alien-

»

ate them if you manage customer

perception well.

Online

Attention

Physical World

Remember that successful presales

Platforms such as Kickstarter made preselling are only an indicator. Ouya, an

popular. They allow you to advertise a project, Pledges, letters of intent, and signatures, even if Android-based video game console,

and if customers like it, they can pledge money.

not legally binding, are a powerful technique to raised millions on Kickstarter but

Projects receive funds only if they reach their test potential customers’ willingness to buy. This is later failed to attract a large base

predefi ned funding goals. If you are up for building also easier to apply in a B2B context.

of customers or design a scalable

the required infrastructure you can also set up business model.

your own presales process.

238

3.4

Bringing It

All Together

TO

VATION

OBSER

TESTING

ASSESSMENT

7 QUESTIONS

FROM

TESTING

S

TOTYPING

STARTING POINT

PRO

DEL

BUSINESS MO

FAILED

CESS

SUC

HYPOTHESIS

The Testing Process

Use all the tools you learned about to describe what you need to test and how you will do so in order to turn your idea into reality.

240

.4 3

TEST /

What to Test

With the Value Proposition and Business Model Canvases, you map out how you believe your idea could become a success. This foundation allows you to easily make the hypotheses explicit that need to be true for your idea to work. Start by OM / VPD /

testing the most important ones with a series of experiments.

YZER.CG

TE

STRA

How to Test

With the testing card, you describe how exactly you will verify your most important hypotheses and what you will measure. After one or more completed experiments, you use the learning card to capture your insights and indicate whether you need to learn more, iterate, pivot, or move on to test the next important hypothesis.

Whatš Next

Keep your eyes on the prize, and make sure you are progressing. Track whether you are advanc-ing from your initial idea toward a profi table and scalable business via problem-solution fi t, product-market fi t, and business model fi t.

1

2

(re)Shape

Extract

your ideas.

your

hypotheses.

(6)

241

Build

.4

5A

5B

3

INVALIDATED

UNCERTAIN

iterate or pivot

test more

TEST /

Learning Card

Test Card

5

4

3

OM / VPD /

Capture

Enter the

Design

YZER.C

learnings

learning loop.

your

G

and next

tests.

TE

actions.

STRA

5C

VALIDATED

progress toward

Learn

Measure

next element

6

Measure

Pivot

progress.

Customer

Customer

Customer

Company

Discovery

Validation

Creation

Building

Measure Your

Progress

The testing process allows you to con-

tinuously reduce uncertainty and gets

242

you closer to turning your idea into a

real business. Measure your progress

.4 3

toward this goal by tracking the activi-

ties you’ve done and the results you’ve

TEST /

achieved. We designed this spread

Idea Designed

Customer Assumptions Validated

that allows you to understand if you’re

Problem-Solution Fit

progressing based on Steve Blank’s

Investment Readiness Thermometer.

OM / VPD /

Download Progress Indicators

YZER.CG

TE

STRA

Business Model and

Assessed with

Value Proposition

Competitors

Prototyped

Blank, Investment Readiness Thermometer, 2013, http://steveblank.com/2013/11/25/its-time-to-play-moneyball-Customer

the-investment-readiness-level/.

Discovery

243

.4 3

Value Proposition Validated

TEST /

Product-Market Fit

Business Model

Business

OM / VPD /

Validated

Model

Business Model Fit

Monitoring

YZER.CG

TE

STRA

Willingness to

Preference

Pay Validated

Interest

Validated

Validated

Customer

Customer

Company

Validation

Creation

Building

The Progress Board

Use the progress board to manage and monitor your tests and assess how much progress you are making toward success.

244

Get Progress Board poster

.4 3

TEST /

What did

Use the Value Proposition and Business Model Canvases to track which elements you have

I test

tested, validated, or invalidated.

OM / VPD /

already?

YZER.CG

TE

STRA

What am

Track the tests you are planning, building, measurI testing,

ing, and digesting to learn and make your insights and follow-up actions explicit.

and what

did I learn?

How much

Keep score of how much progress you are making.

progress did

I make?

1

2

(re)Shape

Extract your

your ideas.

hypotheses.

(6)

245

back to the drawing

Test Card

3

.4

board: iterate or pivot

3

your design

Design your tests.

TEST /

Learning

Learning

Card

Card

4

5A

INVALIDATED

Tests

backlog

build

measure

learn

done

5

OM / VPD /

Test Card

Test Name

Deadline

Test Card

Test Card

Test Card

Test Card

Test Card

Assigned to

Duration

We believe that

Learning

Learning

Learning

Critical:

Insights

5B

Card

Card

Card

To verify that, we will

Test Cost:

Data Reliability:

YZER.C

And measure

and Actions

Time Required:

LEARN MORE

G

We are right if

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer TE

Test Card

Test Name

Deadline

Test Card

Test Card

Test Card

Assigned to

Duration

We believe that

Critical:

To verify that, we will

Learning

Learning

STRA

Test Cost:

Data Reliability:

Card

Card

And measure

5C

Time Required:

We are right if

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer VALIDATED

Test Card

Test Name

Deadline

Test Card

Assigned to

Duration

We believe that

Critical:

To verify that, we will

Test Cost:

Data Reliability:

advance to next step:

And measure

Time Required:

We are right if

move on in your quest to

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer turn your idea into reality

6

Measure progress.

Owlet: Constant

Progress with

Systematic

246

Design and

Owlet Business Model: version 0

.43/ Testing

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

TEST

Wireless monitoring of babies’ blood

oxygen, heart rate, and sleep data. *

nurses

pulse

OM / VPD /

oximetry

monitor

YZER.C

Key Resources

Channels

G

TE

hospitals

hospitals

STRA

sales force

Cost Structure

Revenue Streams

1

Initial idea

An opportunity

Monitoring pulse oximetry

could be easier without the

cord between the device

and the monitor display.

Watch Owlet presentation online

* Case adopted in accordance with Owlet. Owlet was the winner of the 2013 International Business Model Competition.

Test Card

Nurses

247

.4

Test 1A: Nurse Interviews

3

ankle-worn

HYPOTHESIS: Wireless pulse oximetry is more

tracking

shortest

convenient

time

TEST /

METRIC: Percentage of positive feedback

TEST: Interview nurses

pulse

oximetry

monitoring

DATA: Of 58 nurses interviewed, 93 percent prefer monitor

patients

OM / VPD /

the wireless monitoring.

Validated: 1 week, $0

cord between

device and

YZER.C

wireless

G

monitor

TE

display

STRA

Test Card

Hospital administrators

Test 1B: Hospital Administrator

Interviews

HYPOTHESIS: Wireless pulse oximetry is more

convenient.

buying

METRIC: Percentage of positive feedback

pulse

materials

TEST: Interview hospital administrators

oximetry

DATA: 0 percent ready to pay more for wireless monitor

“ease of use is not a pain, if not cost-eff ective.”

managing

Pivot:

Unvalidated: 1 week, $0

budgets

change the

wireless

cost

customer

segment

248

Owlet Business Model: version 2

.4 3

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

TEST /

parents

OM / VPD /

baby alarm

YZER.C

Key Resources

Channels

G

TE

STRA

baby stores

Cost Structure

Revenue Streams

<$200 price

2

Iteration

Peace of mind for parents

DATA: Sudden infant death syndrome (SIDS) A wireless monitor that collects the baby’s heart is the leading cause of infant deaths.

Pivot:

rate, oxygen level, and sleep pattern and sends Change the customer

them via Bluetooth to the parents’ smartphone a fi rst pivot after one week

segment from nurses

with alerts; distributed by baby stores.

and hospitals to worried

parents.

Test Card

Test 2: Parent interviews

HYPOTHESIS: Parents are ready to adopt

and buy a wireless baby alarm.

METRIC: Percentage of adopting parents

TEST: Interview mothers

Parents

249

DATA: Of 105 mothers interviewed, 96 percent

.4

adopt the wireless monitoring.

3

wireless

peace of

“Awesome. I want to buy now!”

smart bootie

monitoring

mind

Validated

TEST /

mobile app

convenience

Test Card

pulse

oximetry

taking care

OM / VPD /

Test 3: MVP Landing page

monitor

of babies

HYPOTHESIS: A smart bootie is convenient and sudden

YZER.C

easy to use for monitoring.

G

infant death

METRIC: Number of positive comments

baby alarm

TE

syndrome

TEST: An MVP, with a video on a website

(SIDS)

STRA

DATA: 17,000 views, 5,500 shares of Facebook, 500 positive comments by parents, distributors, and research organizations

Validated, 2 weeks, $220

Test Card

Test 4: A/B Price test

HYPOTHESIS: Rental versus sale at $200+

sale price

METRIC: Percentage for a sale price

TEST: A/B testing, 3 rounds, on the website

DATA: 1,170 people tested, $299 the best price seems to be

Validated, 8 weeks, $30

a promising

business

but…

250

Owlet Business Model: version 3

.4 3

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

TEST /

worried

parents

OM / VPD /

baby alarm

YZER.C

Key Resources

Channels

G

TE

less worried

infant health

parents

tracker

baby stores

FDA

STRA

baby stores

clearance

13

130

Cost Structure

Revenue Streams

<$200 price

after 24 weeks, and $1,150

Need to be revalidated…

for the tests, including a

3

technical proof of concept

Iteration

Peace of mind, but for less worried parents Running lean

With a more minimal, less risky product, an infant based on experts, a Food and

health tracker (heart rate, oxygen levels, and Drug Administration (FDA)

sleep patterns), but without alarm, for another clearance for a baby alarm is

customer segment: the less worried parents.

one year, $120,000–$200,000

Test Card

Less worried parents

251

.4

Test 5: Interview/Proposition:

3

wireless

peace of

“Owlet Challenge”

smart bootie

monitoring

mind

HYPOTHESIS: Less worried parents are ready to TEST /

adopt and buy a wireless baby health tracker, mobile app

convenience

without alarm.

pulse

METRIC: Percentage of parents adopting the

oximetry

taking care

OM / VPD /

no-alarm tracker

monitor

of babies

TEST: Interview at retail locations, having to YZER.C

choose between the Owlet tracker and other

a slight

G

similar systems (video, sound, and movement) baby alarm

anxiety for

TE

baby sleep

DATA: Of 81 people interviewed, 20 percent

STRA

adopted the Owlet tracker.

Validated, 3 weeks, $0

Owlet decided to start first with

the baby health tracker and to

come later with the baby alarm,

after FDA clearance.

Professions (excluding non-responses):

data from 1119 responses

252

.4 3

TEST /

OM / VPD /

YZER.CG

TE

STRA

Lessons Learned

Testing Step-by-Step

Experiment Library

Bringing It All Together

Your customers are the judge, jury, and

What your customers say might wildly

Launching ideas without testing is

executioner of your value proposition,

diff er from what they do in reality.

wishful thinking. Testing ideas without

so get outside of the building and test

Go beyond talking to customers and

launching is just a pastime. Launching

your ideas with the customer develop-

conduct a series of experiments. Get

tested ideas can change your life as

ment and lean start-up process. Make

them to perform actions that provide

an entrepreneur. Measure your progress

sure you start with quick and cheap

evidence of their interest, their prefer-

from idea to real business step by step.

experiments to test the assumptions

ences, and their willingness to pay.

underlying your ideas when uncertainty

is at its maximum.

253

.4 3

TEST /

OM / VPD /

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TE

STRA

evo

olve

4

Use the Value Proposition and Business Model Canvas as a shared language

to Create Alignment p. 260 throughout

every part of your organization while it

continuously evolves. Make sure you

constantly Measure and Monitor p. 262 your

value propositions and business models

in order to Improve Relentlessly p. 264

and Reinvent Yourself Constantly p. 266.

Create

Alignment

The Value Proposition Canvas is an

excellent alignment tool. It helps you

260

communicate to diff erent stakeholders

which customer jobs, pains, and gains

VE

you are focusing on and explains how

OL

exactly your products and services

EV

relieve pains and create gains.

Packaging

OM / VPD /

YZER.C

Advertising

G

TE

STRA

Explainer Videos

20 4

Slide Decks

> Hello,

?

Craft aligned

messages.

Sales Scripts

261

VE

OL

EV

Marketing

Align internal

Craft marketing messages based on the jobs, pains, and gains your products and services are helping OM / VPD /

and external

with. Align customer-facing messaging all the way from advertising to package design. Point out stakeholders.

which pain relievers and gain creators to focus on.

YZER.CG

TE

STRA

(Channel) Partners

Employees

Bring (channel) partners on board, and explain Help all employees understand which custom-your value proposition. Help them understand why ers you are targeting and which jobs, pains, customers will love your products and services by and gains you are addressing, and outline how highlighting pain relievers and gain creators.

exactly your products and services will create value for customers. Explain how the value

proposition fi ts into the business model.

Sales

Shareholders

Help sales understand which segments to target Explain to your shareholders how exactly you and what customers’ jobs, pains, and gains are.

intend to create value for your customers. Clarify Highlight which attributes of your value proposi-how the (new or improved) value proposition will tion are most likely to sell by relieving pains and bolster your business model and create a compet-creating gains. Align sales scripts and pitch decks.

itive advantage.

Measure

and Monitor

Use the Value Proposition and Business

Business Model

Value Proposition

Customer

Model Canvases to create and monitor

Performance

Performance

Satisfaction

262

performance indicators once your

(Quantitative Facts)

(Perception)

value proposition is operational in the

VE

market. Track the performance of your

OL

business model, your value proposition,

EV

and your customers’ satisfaction.

BUILD

indicators

OM / VPD /

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TE

Investigate

STRA

Change

MONITOR

Δ indicator/target

Track

MEASURE

(continuously)

ce

an

Perform

Threshold

Indicator

Time

Target

★★★★☆

50%

25%

80% satisfied

263

with balance

VE

OL

EV

Indicator

# workshop guide

rating on

OM / VPD /

downloads by readers

Amazon.com

who signed up online

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# of readers who feel

TE

conversion rate from

theory/practice is

book to online sign-up

good

STRA

Building Block

applicable

ideas

down-

loadable

templates,

and guides

engaging

multimedia

too much

content

theory

Improve

Relentlessly

Value Proposition

Customer

Performance

Satisfaction

264

5C

(Quantitative Facts)

(Perception)

INVALIDATED

Build

VE

no impact on

5A

OL

customer

UNCERTAIN

EV

satisfaction

test more

Learning Card

Test Card

OM / VPD /

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TE

STRA

5B

VALIDATED

improved

Learn

Measure

customer

measure causal eff ect on

satisfaction

customer satisfaction

Use the same tools and processes

from testing and monitoring to

improve your value proposition once

it’s in the market. Continuously test

Customer

ce

“what if” improvement scenarios, and

Satisfaction

an

measure their impact on customer

satisfaction.

Perform

Time

Test Card

Hilti

Construction Companies

Test Name

Deadline

Assigned to

Duration

step 1: hypothesis

We believe that

if we decrease the

response time to

replace broken tools, customers feel like

Critical:

they are getting a better service.

step 2: test

subscription-

265

To verify that, we will

decrease response

based fleet

time for one client

management

by 25% on average.

Test Cost:

Data Reliability:

VE

OL

step 3: metric

decrease

feels like

EV

And measure

customer satisfaction at

replacement

better

the beginning and the end

response

of the experiment.

service

Time Required:

time

step 4: criteria

change

satisfaction

OM / VPD /

We are right if customer satisfaction

increases by x%.

causes

YZER.CG

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer TE

STRA

Test Card

Test Name

Deadline

Assigned to

Duration

Value Proposition Design

Readers

step 1: hypothesis

We believe that

if we increase the number

of “wizard” features,

more people will complete exercises. Critical: step 2: test

To verify that, we will

add a wizard

feature to one

exercise.

online

Test Cost:

Data Reliability:

exercises

step 3: metric

And measure

if more people completed

that exercise than before.

add “wizard”

completion

Time Required:

features for

of exercise

online

increases

step 4: criteria

exercises

We are right if there is an increase of x%

change

satisfaction

causes

Copyright Business Model Foundry AG

The makers of Business Model Generation and Strategyzer

Reinvent

Yourself

Constantly

266

Successful companies create value

Five things to remember when you build transient propositions that sell embedded

advantages:

VE

in business models that work. Out-

OL

standing companies do so continu-

· Take the exploration of new value

EV

ously. They create new value proposi-

propositions and business models

tions and business models while they

just as seriously as the execution of

are successful.

existing ones.

OM / VPD /

Today’s enterprise must be agile and develop

· Invest in continuously experimenting

YZER.C

what Columbia Business School Professor Rita with new value propositions and busi-G

McGrath calls transient advantages in her book ness models rather than making big

TE

The End of Competitive Advantage. She argues bold uncertain bets.

STRA

that companies must develop the ability to

rapidly and continuously address new opportu-

· Reinvent yourself while you are

nities, rather than search for increasingly unsus-successful; don’t wait for a crisis to

tainable long-term competitive advantages.

force you to.

Use the tools and processes of Value

Proposition Design to continuously reinvent

· See new ideas and opportunities as

yourself and create new value propositions

a means to energize and mobilize

embedded in great business models.

employees and customers rather

than a risky endeavor.

· Use customer experiments as a yard-

stick to judge new ideas and oppor-

tunities rather than the opinions of

managers, strategists, or experts.

267

VE

OL

EV

OM / VPD /

YZER.CG

TE

STRA

Continuously

What elements in your environment

Is your business model expiring? Do

Is your value proposition still compel-

ask

are changing? What do market, tech-

you need to add new resources or

ling to your customers? How are your

yourself…

nology, regulatory, macroeconomic,

activities? Do the existing ones offer an

customer's jobs, pains, and gains

or competitive changes mean for

opportunity to expand your business

evolving? Can you build on your exist-

your value propositions and business

model? Could you bolster your existing

ing value proposition or do you need

models? Do those changes offer an

business model or should you build

to revisit it entirely? Is there a new

opportunity to explore new possibil-

completely new ones? Is your business

potential customer or a new segmen-

ities or could they be a threat that

model portfolio fit for the future?

tation emerging? What is happening

might disrupt you?

in your business that creates the basis

for new value propositions to existing

or new customers?

Taobao:

Reinventing

(E-)Commerce

268

Taobao is the Chinese e-commerce

phenomenon, part of the Alibaba

VE

Group. It is credited with ushering in

OL

a new wave of commerce in China

EV

by using the Internet to create an

ecosystem where trusted commercial

exchanges could take place. In

OM / VPD /

10 years it evolved its business models

three times. It proactively embraced

YZER.C

the changes taking place on its plat-

G

form and in the wider Chinese economy

TE

and turned them into an opportunity.

ment of goods

th

r e physica

ansactionl econo

s and my

ship-

and

facil l

itac

ers that qua

d

li

k of t t

r

id noy

us

t

ate comm t.

exi

er st

ci

alin

sel

cons

pagolers

um

yme

ode

ns r

t s

h

t ig

u h

amo t

re w p

pri

it

to l

ruc

neat

se

ng bu

confo

t+

s,

h pa p

rt

w go

s r

om

ric

low

um e

yers an

ners

ds

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qu

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d

ts li

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sp

pr

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eak

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gh pr n

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ri

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ne

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bao

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and log

and

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cr

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Chines

ee

c

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at

s se

co

es

an't

senom

t

infr rus

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t :

ruc-

and

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do bus W

in e

es b

s retail

C

L li

a mate of

Introdu

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h of s

on

a usp

of icio

a r

paym n i

evi

ent n

ew

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Lack of infrastructure to

TE

G

G

Y

Y

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and sellers

proposition for buyers

O

O

M / VPD /

Co

M / VPD /

Cr nt

eatext

ion of a new value

EV

EV

OL

OL

VE

VE

PB

PB

STRA

Check out the full Taobao case online

2003

A new Consumer-to-Consumer (C2C) Platform Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Relationships

Segments

Alipay

Developing

(payment

commerce

system)

Online

infrastruc-

customer

Chinese

ture

speaking

269

service

Web retail

consumers

Banks

with choice +

VE

trust + price/

OL

quality

EV

Key Resources

Channels

Two-way

Expert

Retail sales

Chinese

review

Logistics

platform

speaking

system

sellers

OM / VPD /

Taobao.com

YZER.CG

Cost Structure

Revenue Streams

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ment of goods

the physical economy

transactions and ship-

ers tha

f

quali

and lack of t ty

rust.

t did not exist in

acilitate commercial

sellers

consumers

payments

goods

high

ture trus

pric t+ pr

es

ice

new goods /

, low quality

among buyers and sell

with partners to

to consumers

-

Tao

Hi b

pr a

acq

Lack o o

speau

f .c

T o

kin

ocess

ire

r m

g

Ta

gh prices

Low quality

ust

STRA

R

SP e

wio tail sa

ell used

or

les

obao’s acti

th choice+

access

the Ch

on

and

Ch

in

system cr

and logist

Fininese

ese ec

Can

d '

at

n

on

ics infr omy:

eates trust

astruc-

d

STRA

Web

do business retail

Cl

L imate of suspicion in

Introduction of a review

aunch of a payment

TE

Lack of infrastructure to

TE

G

G

Y

Y

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and sellers

proposition for buyers

O

O

M / VPD /

Co

M / VPD /

Cr ntext

eation of a new value

EV

EV

OL

OL

VE

VE

PB

PB

STRA

2

Creation of a new value prop-

Creation of a trusted

osition for buyers and sellers

platform

Launch of a payment and

Introduction of a review

logistics infrastructure

system creates trust among

Find and

acquire

with partners to facilitate

buyers and sellers that did

goods

Sell used and

commercial transactions and

not exist in the physical

new goods

shipment of goods

economy

Can't

1

High prices

process

Low quality

Obstacles to commerce

payments

in the Chinese economy

Consumers discouraged by

Poor access

Lack of infrastructure to do

high prices, low quality, and

to consumers

Lack of trust

business

lack of trust.

2006

Taobao — Small Business-to-Consumer (B2C) Helping

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Alipay

businesses

Relationships

Segments

(payment

Online

succeed

Chinese

system)

customer

Developing

speaking

service

commerce

consumers

infrastruc-

270

ture

Web retail

Training and

Banks

with choice +

Empower-

Micro + Small

VE

trust + price/

ment

Businesses

OL

quality

EV

Key Resources

Channels

Expert

Two-way

Logistics

Grow

review

Chinese

Business

speaking

OM / VPD /

system

App Devs

Taobao.com

sellers

+ Fashion

Models

YZER.CG

Cost Structure

Revenue Streams

TE

Premium for

advanced

Ads

STRA

shop

features

2

1

Pivot toward micro-

Birth of micro-

entrepreneurs

entrepreneurs

Taobao shifts focus and

The Taobao platform

builds on this trend by cater-

becomes so popular that

Sell

ing to micro-entrepreneurs

millions of sellers see an

products

opportunity to become

Inclusion of third-party

micro-entrepreneurs

service providers to

Make a living

strengthen the value

proposition

Creation of the ‘Taobao

Fulfi ll a

University’ to help entrepre-

passion

neurs navigate the platform

and learn about business

2008

2013

Taobao — Big Business-to-Consumer (B2C) Taobao — ?

Helping

Key Partnerships

Key Activities

Value Propositions

Customer

Customer

Alipay

businesses

Relationships

Segments

(payment

Online

succeed

Chinese

system)

One-stop

customer

speaking

Developing

presence

service

consumers

commerce

infrastruc-

271

ture

Web retail

Training and

Banks

with choice +

Empower-

Micro + Small

VE

trust + price/

ment

Businesses

OL

quality

EV

Key Resources

Millions of

Channels

Chinese

Expert

Tmall.com

?

consumers

Logistics

Grow

Big brands

2-way

Business

review

App Devs

OM / VPD /

Taobao.com

system

+ Fashion

Models

YZER.CG

Cost Structure

Revenue Streams

Premium for

Membership

advanced

fees

TE

Creation of new

shop

2-5% Sales

features

Ads

Revenue Streams

STRA

commission

Taobao went from a

simple e-commerce

2

platform to complex

ecosystem in 10 years.

Launch of a new business

It achieved this by

The “new” asset becomes the

Reach

improving and reinvent-

Chinese mass

basis of a new value proposition

ing its value propositions

Returning

consumers

consumers

and business models

…for a new customer (big brands)…

on the way. With new

Develop

developments in mobile,

brand loyalty

1

…helping them reach Chinese

gaming, messaging, and

cost of

A new asset is revealed

consumers much faster than

more, however, the

customer

Taobao realizes that its

through the opening of physical

acquisition

company can’t rest on

Grow sales

business model possesses an

stores.

its laurels. Taobao is

time to

incredible asset: hundreds of

establish

constantly challenged to

millions of Chinese consumers.

physical

continue its evolution.

presence

272

Lessons Learned

VE

OL

Create Alignment

Measure, Monitor, Improve

Reinvent While Successful

EV

The Value Proposition and Business

Track the performance of your value

Don’t wait with reinventing your value

Model Canvases are excellent align-

propositions over time to make sure

propositions and business models.

OM / VPD /

ment tools. Use them as a shared

you continue to create customer

Do so before before market conditions

language to create better collabora-

value while market conditions change.

force you to, because it might be too

YZER.C

tion across the different parts of your

Use the same tools and processes to

late. Create organizational structures

G

organization. Help every stakeholder

improve your value propositions, which

that allow you to improve existing

TE

understand how exactly you intend to

you used to design them.

value propositions and business models

STRA

create value for your customers and

and invent new ones at the same time.

your business.

after

word

Glossary

276

(Business) Hypothesis

Customer Insight

Something that needs to be true for your idea to Minor or major breakthrough in your customer work partially or fully but that hasn't been vali-understanding helping you design better value ORD

dated yet.

propositions and business models.

AFTERW

Business Model

Customer Pains

Rationale of how an organization creates, delivers, Bad outcomes, risks, and obstacles that custom-and captures value.

ers want to avoid, notably because they prevent them from getting a job done (well).

OM / VPD /

Business Model Canvas

Strategic management tool to design, test, build, Customer Profile

YZER.CG

and manage (profitable and scalable) business Business tool that constitutes the right-hand side TE

models.

of the Value Proposition Canvas. Visualizes the jobs, pains, and gains of a customer segment (or STRA

Call to Action (CTA)

stakeholder) you intend to create value for.

Prompts a subject to perform an action; used in an experiment in order to test one or more Environment Map

hypotheses.

Strategic foresight tool to map the context in which you design and manage value propositions Customer Development

and business models.

Four-step process invented by Steve Blank to reduce the risk and uncertainty in entrepreneur-Evidence

ship by continuously testing the hypotheses

Proves or disproves a (business) hypothesis, underlying a business model with customers and customer insight, or belief about a value proposi-stakeholders.

tion, business model, or the environment.

Customer Gains

Experiment/Test

Outcomes and benefits customers must have,

A procedure to validate or invalidate a value expect, desire, or dream to achieve.

proposition or business model hypothesis that produces evidence.

Fit

Minimum Viable Product (MVP)

Value Map

277

When the elements of your value map meet

A model of a value proposition designed specifically Business tool that constitutes the left-hand side relevant jobs, pains, and gains of your customer to validate or invalidate one or more hypotheses.

of the Value Proposition Canvas. Makes explicit ORD

segment and a substantial number of customers how your products and services create value by

“hire” your value proposition to satisfy those jobs, Pain Relievers

alleviating pains and creating gains.

pains, and gains.

Describes how products and services alleviate AFTERW

customer pains by eliminating or reducing bad Value Proposition

Gain Creators

outcomes, risks, and obstacles that prevent

Describes the benefits customers can expect

Describes how products and services create gains customers from getting a job done (well).

from your products and services.

OM / VPD /

and help customers achieve the outcomes and

benefits they require, expect, desire, or dream of Products and Services

Value Proposition Canvas

YZER.C

by getting a job done (well).

The items that your value proposition is based Strategic management tool to design, test,

G

on that your customers can see in your shop

build, and manage products and services. Fully TE

Jobs to Be Done

window—metaphorically speaking.

integrates with the Business Model Canvas.

STRA

What customers need, want, or desire to get done in their work and in their lives.

Progress Board

Value Proposition Design

Strategic management tool to manage and

The process of designing, testing, building, and Lean Start-up

monitor the business model and value proposi-managing value propositions over their entire Approach by Eric Ries based on the Customer

tion design process and track progress toward a lifecycle.

Development process to eliminate waste and

successful value proposition and business model.

uncertainty from product development by continu-Get Glossary pdf

ously building, testing, and learning in an iterative Prototyping (low/high fidelity)

fashion.

The practice of building quick, inexpensive, and rough study models to learn about the desirabil-Learning Card

ity, feasibility, and viability of alternative value Strategic learning tool to capture insights from propositions and business models.

research and experiments.

Test Card

Strategic testing tool to design and structure your research and experiments.

Core Team

278

Yves Pigneur

Trish Papadakos

Supervising Author

Designer

Tegan Mierle

Sarah Kim

Brandon Ainsley

Matt Mancuso

Greg Bernarda

Alex Osterwalder

Alan Smith

Author

Lead Author

Author + Creative Director

Pilot Interactive

Strategyzer Cofounder

Strategyzer Cofounder

Illustration Team

Strategyzer Content Team

Strategyzer Product Team

Benson Garner, Nabila Amarsy

Dave Lougheed, Tom Phillip, Joannou Ng, Chris Hopkins, Matt Bullock, Federico Galindo

Prereaders

We practice what we preach and tested our ideas before releasing them. More than 100 selected people from around the world participated as prereaders to scrutinize our raw creations. More than 60 actively contributed by reviewing ideas, concepts, and spreads. They off ered suggestions, meticulously proofread, and pointed out fl aws and inconsistencies without pity. We iterated the book title 279

several times with prereaders before testing various alternatives in the market.

Gabrielle Benefi eld

Jay Jayaraman

Johan Rapp

Phil Blake

Shyam Jha

Christian Saclier

Jasper Bouwsma

Greg Judelman

Andrea Schrick

Frederic Briguet

James King

Gregoire Serikoff

Karl Burrow

Hans Kok

Aron Solomon

Manuel Jose Carvajal

Ryuta Kono

Peter Sonderegger

Pål Dahl

Jens Korte

Lars Spicker Olesen

Christian Doll

Jan Kyhnau

Matt Terrell

Joseph Dougherty

Michael Lachapelle

James Thomas

Todd Dunn

Ronna Lichtenberg

Paris Thomas

Reinhard Ematinger

Justin Lokitz

Patrick Van Der Pijl

Sven Gakstatter

Ranjan Malik

Emanuela Vartolomei

Jonas Giannini

Deborah Mills-Scofi eld

Mauricio

Claus Gladyszak

Nathan Monk

Reiner Walter

Boris Golob

Mario Morales

Matt Wanat

Dave Gray

Fabio Nunes

Lu Wang

Gaute Hagerup

Jan Ondrus

Marc Weber

Natasha Hanshaw

Aloys Osterwalder

Judith Wimmer

Chris Hill

Matty Paquay

Shin Yamamoto

Luke Hohmann

Olivier Perez Kennedy

Bios

280

Alex Osterwalder

Yves Pigneur

Dr. Alexander Osterwalder is the lead author Dr. Yves Pigneur is coauthor of Business Model of the international bestseller Business Model Generation and a professor of management and Generation, passionate entrepreneur, and information systems at the University of Lausanne.

demanded speaker. He cofounded Strategyzer,

He has held visiting professorships in the United a software company specializing in tools and States, Canada, and Singapore. Yves is a frequent content for strategic management and inno-guest speaker on business models in universities, vation. Dr. Osterwalder invented the Business large corporations, entrepreneurship events, and Model Canvas, the strategic management tool to international conferences.

design, test, build, and manage business models, which is used by companies like Coca Cola, GE, P&G, Mastercard, Ericsson, LEGO, and 3M. He is a frequent keynote speaker in leading organizations and top universities around the world, including Stanford, Berkeley, MIT, IESE, and IMD.

Follow him online @alexosterwalder.

Greg Bernarda

Alan Smith

Trish Papadakos

281

Greg Bernarda is a thinker, creator, and facilitator Alan is obsessed with design, business, and the Trish is a designer, photographer, and entre-who supports individuals, teams, and organiza-ways we do them. A design-trained entrepre-

preneur. She holds a Masters in Design from tions with strategy and innovation. He works neur, he has worked across fi lm, television, print, Central St. Martins in London and Bachelor of with inspired leaders to (re)design a future which mobile, and web. Previously, he cofounded The Design from the York Sheridan Joint Program in employees, customers, and communities can

Movement, an international design agency with Toronto. She teaches design at her alma mater, recognize as their own. His projects have been offi ces in London, Toronto, and Geneva. He helped has worked with award-winning agencies,

with the likes of Colgate, Volkswagen, Harvard create the Value Proposition Canvas with Alex launched several businesses, and is collaborat-Business School, and Capgemini. Greg is a

Osterwalder and Yves Pigneur, and the break-

ing for the third time with the Strategyzer team.

frequent speaker; he cofounded a series

through design for Business Model Generation.

Follow her photography on Instagram

of events on sustainability in Beijing; and is an He cofounded Strategyzer, where he builds

@trishpapadakos.

advisor at Utopies in Paris. Prior to that, he was tools and content with an amazing team; helping at the World Economic Forum for eight years

businesspeople make stuff customers want.

setting up initiatives for members to address Follow him online @thinksmith.

global issues. He holds an MBA (Oxford Saïd) and is a Strategyzer certifi ed business model coach.

Index

282

A

brainstorming

defining criteria with, 140

A/B testing, 230–231

possibilities for, 92–93

ad-libs, for Prototyping, 76, 82–83

See also Starting Points

Ad Tracking (Experiment Library), 220

Bransfield-Garth, Simon, 146

AirBnB, 91

brochures, creating, 222

Alibaba Group, 268–271

Build, Measure, Learn Circle, 94, 95

alignment, creating, 260–261

Business Hypothesis

Anthropologist, 106, 114–115, 217

defined, 201

Apple, 156, 157

extracting, 200–201

App Store (Apple), 157

Lean Startup and, 185, 186–187

assessment

prioritizing, 202–203

Business Model and, 156–157

Business Model, 142–157

of competitors, 128–129, 130–131

assessing, 156–157

of skills for Value Proposition Design, xxii–xxiii Azuri example, 146–151

of Value Proposition, 122–123

compressed air energy storage example, 152–153

Azuri, 146–151

creating value for customers and, 144–145

Fit and, 48–49, 52–53

platform Business Models, 52–53

stress testing, 154–155

B

testing, 194–195

Business Model Canvas

best practices

defined, xv

for mapping customers’ jobs, pains, and gains, 24–25 ( See also Customer illustrated, xvii

Gains; Customer Pains; Jobs to be Done)

Business Model Generation (Osterwalder), xiv, xvi for mapping value creation, 30

business plans, experimentation processes versus, 179

Blank, Steve, 118, 182–183

business-to-business (B2B) transactions, 50–51

Blue Ocean Strategy, 130

Buy a Feature (Experiment Library), 235

books, as Starting Points, 92–93

Buyer of Value (customer role), 12

C

colleagues, Value Proposition Design for, xxiv–xxv 283

Company Building (Customer Development process), 183

Call to Action (CTA), 218–219

competitors, assessing, 128–129, 130–131

Canvas

compressed air energy storage example

Customer Profile and, 3–5, 9, 10–25

Business Model, 152–153

Fit and, 3–5, 40–59

Prototyping, 96–97

identifying stakeholders with, 50–51

context

moviegoing example, 54–55

Jobs to be Done, 13

observing customers, 7

understanding, 126–127

summarized, 60

cost structure, defined, xvi

Value Map and, 3–5, 8, 26–39

Creation (Customer Development process), 183

Value Proposition, defined, 6

criteria, defining, 140–141

See also Business Model Canvas; Customer Profile; Fit; Value Map; Value Customer Development process, 182–183

Proposition; Value Proposition Canvas

Customer Gains

change. See Evolve

best practices for mapping, 24–25

channels, defined, xvi

checking Fit and, 46–47

characteristics, of customers, 14–15

defined, 16–17

Choices, 120–141

psychodemographic profile approach versus, 54–55

competitors and, 128–129, 130–131

ranking, 20–21

context and, 126–127

as Starting Point, 88–89

defining criteria and selecting prototypes, 140–141

Testing the Circle objective, 190–191

feedback and, 132–133, 134–135, 136–137

See also Gain Creators

role-playing and, 107, 124–125

Customer Insight, 104–119

tips for, 124, 131, 137

Anthropologist, 106, 114–115, 217

Value Proposition assessment, 122–123

choosing mix of experiments for, 216–217 ( See also Experiment Library) visualization and, 138–139

Cocreator, 107

Circle, Testing the, 190–191

creating value for, 144–145 ( See also Business Model) Cocreator (for Customer Insight), 107

customer relationship management (CRM), xvi, 109

Cocreator of Value (customer role), 12

Data Detective, 106, 108–109, 217

284

gaining, 106–107

understanding customer perspective for, 22–23

identifying patterns in, 111, 116–119

use of, 60–61

Impersonator, 107, 124–125

See also Jobs to be Done; Starting Points Journalist, 106, 110–113, 217, 225

Scientist, 107

shaping ideas and, 70–71

D

tips for, 113, 115, 117

Customer Pains

Data Detective, 106, 108–109, 217

best practices for mapping, 24–25

data mining, 109

checking Fit and, 46–47

data sheets, creating, 222

defined, 14–15

data traps, avoiding, 210–211

psychodemographic profile approach versus, 54–55

Day in the Life, A (worksheet), 115–116

ranking, 20–21

de Bono, Edward, 136–137

as Starting Point, 88–89

decision makers, 50–51

Testing the Circle objective, 190–191

Dell, 157

See also Pain Relievers

Design, 64–170

Customer Profile, 10–25

characteristics of great Value Propositions, 72–73

best practices for mapping jobs, pains, and gains, 24–25

constraints, 90–91

business-to-business (B2B) transactions, 50–51

design/build (Lean Startup), 185, 186–187

Customer Gains, defined, 16–17

in established organizations, 158–187 ( See also established organizations) Customer Pains, defined, 14–15

finding the right Business Model, 142–157 ( See also business model) customer’s context and, 56–57

making choices for, 120–141 ( See also Choices) customer segments, xvi, 116

overview, 67

defined, 9

Prototyping possibilities, 70–71, 74–85 ( See also Prototyping) different solutions for same customers, 58–59

shaping ideas with, 70–71

identifying high-value jobs, 100–101

Starting Points, 70–71, 86–103 ( See also Starting Points) innovating from, 102–103

summarized, 170

jobs, pains, and gains as new approach, 54–55

understanding customers, 70–71, 104–119 ( See also Customer Insight) Jobs to be Done, defined, 12–13

discovery (Customer Development process), 182

ranking jobs, pains, and gains, 20–21

Dotmocracy, 138–139

sketching, 18–19

Dropbox, 210

E

Call to Action (CTA), 218–219

285

choosing mix of experiments, 216–217

Earlyvangelists, 118

experiment, defined, 216

economic buyers, 50–51

experiment design and, 204–205

Eight19 (Azuri), 146–151

experimenting to reduce risk, 178–179

emotional jobs, of customers, 12

Illustrations, Storyboards, and Scenarios, 222, 224–225

end users, 50–51. See also Customer Insight

Innovation Games, 232

Environment Map, v, xv

Landing Page MVP, 228–229

EPFL, 96–97

Life-Size Experiments, 226–227

established organizations, 158–169

Minimum Viable Product (MVP), 222–223, 228–229

inventing and improving, 160–161, 162–163

Mock Sales, 236–237

reinventing, 164–165

Pre Sales, 237

Value Proposition Design for, xix

Product Box, 234

workshops for, 166–167, 168–169

Speed Boat, 233

Evidence

Split Testing, 230–231

Call to Action (CTA) and, 218–219

tips for, 217, 222, 224, 227, 229, 231, 233, 237

need for, 190–195

Unique Link Tracking, 221

producing, 97, 216

See also Test

See also Test

Evolve, 254–272

creating alignment and, 260–261

F

improvement and, 264–265

measuring and monitoring, 262–263

Facebook, 157

overview, 257

facts, as feedback, 134

reinventing and, 266–267, 268–271

false-negative/false-positive traps, 210

summarized, 272

Federal Institute of Technology (Switzerland), 96–97

“exhausted maximum” trap, 211

feedback, 132–133, 134–135, 136–137

experience, as feedback, 134

financial issues

Experiment Library, 214–237

cost structure, defined, xvi

Ad Tracking, 220

generating revenue, 144–145

Buy a Feature, 235

profit, defined, xvi

286

revenue streams, defined, xvi

H

stress testing, 154–155

testing customers’ willingness to pay, 219

Hilti, 90

( See also Experiment Library)

Hohmann, Luke, 232

See also Business Model

hypothesis. See Business Hypothesis

Fit, 40–59

addressing customers’ jobs, pains, and gains with, 44–45

checking for, 46–47

I

Customer Profile and customer context, 56–57

Customer Profile and Value Map as two sides of, 3–5

Ikea, 157

Customer Profile versus psychodemographic profile approach, 54–55

Illustrations, Storyboards, and Scenarios (Experiment Library), 222, 224–225

different solutions for same customers, 58–59

Impersonator, 107

multiple Fit, 52–53

improvement

stages of, 48–49

for established organizations, 160–161, 162–163

striving for, 42–43

as relentless, 264–265

use of, 60–61

See also Evolve

functional jobs, of customers, 12

Indigo, 150–151

influencers, 50–51

Innovation Games, 232

G

intermediary Fit, 52–53

interviewing, of customers, 106, 110–113, 217, 225

Gain Creators

iPod (Apple), 156

Fit and, 9, 47

Pain Relievers versus, 38

Products and Services as, 33

J

Value Map and, 33–34

gains. See Customer Gains

Jobs to be Done

Google

best practices for mapping, 24–25

AdWords, 220

defined, 12–13

searches, 108

identifying high-value jobs, 98–99, 100–101

government census data, 108

psychodemographic profile approach versus, 54–55

ranking, 20–21

measurement

287

as Starting Point, 88–89

Evolve and, 262–263

Testing the Circle objective, 190–191

Lean Startup feature, 185, 186–187

Journalist, 106, 110–113, 217, 225

See also Test

MedTech, 154–155

Minimum Viable Product (MVP)

K

Lean Start-up with, 184

Prototyping and, 77

key activities, defined, xvi

testing with, 222–223, 228–229

key partnerships, defined, xvi

Mock Sales (Experiment Library), 236–237

key resources, defined, xvi

L

N

napkin sketch, for Prototyping, 76, 80–81

Landing Page MVP (Experiment Library), 228–229

Nespresso, 90, 156

Lean Startup, 184–185, 186–187

new ventures, Value Proposition Design for, xviii Learning Cards, 206–207, 213

learning (Lean Startup), 185, 186–187

Life-Size Experiments (Experiment Library), 226–227

O

listening, 112

Lit Motors, 226

observation, of customers, 106, 114–115, 216–217. See also Experiment

“local maximum” trap, 211

Library

obstacles, of customers, 14–15. See also Customer Pains opinion, as feedback, 134

M

Osterwalder, Alexander, xiv, xvi

outcomes

magazines, as Starting Points, 92–93

Customer Gains as, 16–17

market pull, 95

undesired, by customers, 14–15

Marriott, 227

Owlet, 246–251

288

P

napkin sketch for, 76, 80–81

packaging and, 223, 234

Pain Relievers

principles of, 78–79

Fit and, 9, 47

selecting prototypes, 140–141

Gain Creators versus, 38

shaping ideas with, 70–71

Products and Services as, 31–32

spaces for, 227

Value Map and, 33–34

tips for, 77

“participatory tv,” for understanding context, 126, 127

Value Proposition Canvas for, 77, 84–85

patterns, identifying, 111, 116–119

See also Experiment Library

personal jobs, of customers, 12

psychodemographic profiles, as traditional approach, 54–55

perspective, of customers, 22–23. See also Customer Insight push versus pull debate, 94–95, 96–97, 98–99, 100–101

platform Business Models, 52–53

Pre Sales (Experiment Library), 237

prioritization, 202–203, 219.

R

See also Experiment Library

problems, of customers, 14–15.

ranking, for customer jobs/pains/gains, 20–21

See also Customer Pains

recommenders, 50–51

Problem-Solution Fit, 48–49

Rectangle, Testing the, 194–195

Product Box (Experiment Library), 234

reinventing, to Evolve, 266–267, 268–271

Product-Market Fit, 48–49

required gains, of customers, 16

Products and Services

research, about customers. See Customer Insight meeting customer expectations with, 31–32

revenue streams, defined, xvi

multiple Fit for, 52–53

Ries, Eric, 184–185

Testing the Square objective, 192–193

risks, customers and, 14–15

types of, 29–30

role-playing, 107, 124–125

value of, to customers, 31–32

profit, defined, xvi

Progress Board, 242–243, 244–245

S

Prototyping, 74–85

ad-libs for, 76, 82–83

saboteurs, 50–51

defined, 76

Scientist, 107

segmentation, xvi, 116

Strategy Canvas, 129, 130

289

services. See Products and Services

Strategyzer logo, explained, x

Skype, 157

stress testing, 154–155

social jobs, of customers, 12

supporting jobs, of customers, 12

social media analytics, 109

Swatch, 90

Southwest, 91

synthesis, 116, 117

Speed Boat (Experiment Library), 233

Split Testing (Experiment Library), 230–231

Square, Testing the, 192–193

T

stakeholders

identifying, 50–51

Taobao, 268–271

role-playing and, 107, 124–125

technology push, 94, 96–97

Starting Points, 86–103

Test, 172–252

addressing customer concerns with, 88–89

Customer Development process, 182–183

books and magazines for, 92–93

experimenting to reduce risk, 178–179

design constraints and, 90–91

Experiment Library for, 214–237

innovation with Customer Profile, 102–103

( See also Experiment Library)

push versus pull debate, 94–95, 96–97, 98–99, 100–101

Lean Startup, applying, 186–187

shaping ideas with, 70–71

Lean Startup movement, 184–185

tips for, 93, 97

principles, 180–181

start-ups, Value Proposition Design for, xviii Progress Board, 242–243, 244–245

Step-by-Step Testing, 196–213

step-by-step, 196–213

avoiding data traps, 210–211

( See also Step-by-Step Testing)

extracting hypothesis, 200–201

systematic design and testing example, 246–251

Learning Cards for insight, 206–207, 213

testing process, summarized, 240–241, 252

learning speed and, 208–209

Testing the Circle objective, 190–191

overview, 198–199

Testing the Rectangle objective, 194–195

prioritizing hypothesis, 202–203

Testing the Square objective, 192–193

Test Cards for experiment design, 204–205, 212

tips for, 183

tips for, 210

Test Cards, 204–205, 212

thinking hats (de Bono), 136–137

for Prototyping, 77, 84–85

290

third-party research reports, 108

Value Proposition Design

Transferrer of Value (customer role), 12

book organization and online companion, x

Business Model Canvas, defined, xv ( See also Business Model Canvas)

U

competitors versus, 128–129

Environment Map and, v, xv

unique link tracking (Experiment Library), 221

for established organizations, xix

to overcome problems, vi–vii

selling colleagues on, xxiv–xxv

V

skills needed for, xxii–xxiii

for start-ups, xviii

validation (Customer Development process), 182

successful use of, viii, xi

Value Map, 26–39

tools and process of, xii–xiii ( See also Canvas; Design; Evolve; Test) best practices for mapping value creation, 30

uses of, xx–xxi

Gain Creators and, 33–34

Value Proposition Canvas, defined, xiv, xv ( See also Value Proposition mapping how products and services create value, 36–38

Canvas)

mapping value propositions, 34–35

visualization, 138–139

Pain Relievers, 31–32

Products and Services, 29–30

use of, 60–61

W

Value Proposition

assessing competitors and, 128–129, 130–131

website

assessment, 122–123

tracking customers on, 109

Business Model connection to, 152–153

Value Proposition Design Online Companion, explained, x defined, vi, xvi, 6

websites

See also Value Proposition Canvas; Value Proposition Design landing pages of, 223, 228–229

Value Proposition Canvas

WhatsApp, 157

characteristics of great value propositions, 72–73 ( See also Design) workshops, for established organizations, 166–167, 168–169

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Document Outline

- Cover

- Title Page

- Copyright

- Contents

- You’ll love Value Proposition Design if you’ve been…

- Value Proposition Design will help you successfully…

- Our Value Proposition to You

- The Tools and Process of Value Proposition Design

- An Integrated Suite of Tools

- Refresher: The Business Model Canvas

- Value Proposition Design works for…

- Use Value Proposition Design to…

- Assess Your Value Proposition Design Skills

- Sell Your Colleagues on Value Proposition Design

- Chapter 1. Canvas

- 1.1 Customer Profile

- Customer Jobs

- Customer Pains

- Customer Gains

- Profi le of a “Business Book Reader”

- Ranking Jobs, Pains, and Gains

- Best Practices for Mapping Jobs, Pains, and Gains

- 1.2 Value Map

- Products and Services

- Pain Relievers

- Gain Creators

- Mapping the Value Proposition of Value Proposition Design

- Best Practices for Mapping Value Creation

- 1.3 Fit

- Fit

- Fit?

- Three Kinds of Fit

- Customer Profiles in B2B

- Multiple Fits

- Going to the Movies

- Same Customer, Different Contexts

- Same Customer, Different Solutions

- Chapter 2. Design

- 2.1 Prototyping Possibilities

- What’s Prototyping?

- 10 Prototyping Principles

- Make Ideas Visible with Napkin Sketches

- Flesh out Ideas with Value Proposition Canvases

- 2.2 Starting Points

- Where to Start

- Spark Ideas with Design Constraints

- Invite Big Ideas to the Table with Books and Magazines

- Push vs. Pull

- Pull: Identify High-Value Jobs

- Six Ways to Innovate from the Customer Profi le

- 2.3 Understanding Customers

- Six Techniques to Gain Customer Insights

- The Data Detective: Get Started with Existing Information

- Ground Rules for Interviewing

- The Anthropologist: Dive into Your Customer’s World

- Identify Patterns in Customer Research

- Find Your Earlyvangelist

- 2.4 Making Choices

- Simulate the Voice of the Customer

- Understand the Context

- Value Proposition Design vs. Competitors

- Avoid Cognitive Murder to Get Better Feedback

- Master the Art of Critique

- Collect Efficient Feedback with de Bono’s Thinking Hats

- Vote Visually with Dotmocracy

- Define Criteria and Select Prototypes

- 2.5 Finding the Right Business Model

- Create Value for Your Customer and Your Business

- Azuri (Eight19): Turning a Solar Technology into a Viable Business

- So…

- Stress Testing with Numbers: A MedTech Illustration

- 2.6 Designing in Established Organizations

- Adopt the Right Attitude to Invent or Improve

- The Business Book of the Future

- Reinvent by Shifting from Products…

- …to Services

- The Perfect Workshop Setting

- Compose Your Workshop

- Chapter 3. Test

- 3.1 What to Test

- Testing the Circle

- Testing the Square

- Testing the Rectangle

- 3.2 Testing Step-by-Step

- Overview of the Testing Process

- Extract Your Hypotheses: What Needs to Be True for Your Idea to Work?

- Prioritize Your Hypotheses: What Could Kill Your Business

- Design Your Experiments with the Test Card

- Capture Your Insights with the Learning Card

- How Quickly Are You Learning?

- Five Data Traps to Avoid

- 3.3 Experiment Library

- Choose a Mix of Experiments

- Produce Evidence with a Call to Action

- 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

- 3.4 Bringing It All Together

- The Testing Process

- Measure Your Progress

- The Progress Board

- Owlet: Constant Progress with Systematic Design and Testing

- Chapter 4. Evolve

- Create Alignment

- Measure & Monitor

- Improve Relentlessly

- Reinvent Yourself Constantly

- Taobao: Reinventing (E-)Commerce

- Glossary

- Core Team

- Prereaders

- Bios

- Index

- EULA

Table of Contents

Cover

Title Page

Copyright

Contents

You’ll love Value Proposition Design if you’ve been…

Value Proposition Design will help you successfully…

Our Value Proposition to You

The Tools and Process of Value Proposition Design

An Integrated Suite of Tools

Refresher: The Business Model Canvas

Value Proposition Design works for…

Use Value Proposition Design to…

Assess Your Value Proposition Design Skills

Sell Your Colleagues on Value Proposition Design

Chapter 1. Canvas

1.1 Customer Profile

Customer Jobs

Customer Pains

Customer Gains

Profi le of a “Business Book Reader”

Ranking Jobs, Pains, and Gains

Best Practices for Mapping Jobs, Pains, and Gains

1.2 Value Map

Products and Services

Pain Relievers

Gain Creators

Mapping the Value Proposition of Value Proposition Design

Best Practices for Mapping Value Creation

1.3 Fit

Fit

Fit?

Three Kinds of Fit

Customer Profiles in B2B

Multiple Fits

Going to the Movies

Same Customer, Different Contexts

Same Customer, Different Solutions

Chapter 2. Design

2.1 Prototyping Possibilities

What’s Prototyping?

10 Prototyping Principles

Make Ideas Visible with Napkin Sketches

Flesh out Ideas with Value Proposition Canvases

2.2 Starting Points

Where to Start

Spark Ideas with Design Constraints

Invite Big Ideas to the Table with Books and Magazines

Push vs. Pull

Pull: Identify High-Value Jobs

Six Ways to Innovate from the Customer Profi le

2.3 Understanding Customers

Six Techniques to Gain Customer Insights

The Data Detective: Get Started with Existing Information

Ground Rules for Interviewing

The Anthropologist: Dive into Your Customer’s World

Identify Patterns in Customer Research

Find Your Earlyvangelist

2.4 Making Choices

Simulate the Voice of the Customer

Understand the Context

Value Proposition Design vs. Competitors

Avoid Cognitive Murder to Get Better Feedback

Master the Art of Critique

Collect Efficient Feedback with de Bono’s Thinking Hats

Vote Visually with Dotmocracy

Define Criteria and Select Prototypes

2.5 Finding the Right Business Model

Create Value for Your Customer and Your Business

Azuri (Eight19): Turning a Solar Technology into a Viable Business

So…

Stress Testing with Numbers: A MedTech Illustration

2.6 Designing in Established Organizations

Adopt the Right Attitude to Invent or Improve

The Business Book of the Future

Reinvent by Shifting from Products…

…to Services

The Perfect Workshop Setting

Compose Your Workshop

Chapter 3. Test

3.1 What to Test

Testing the Circle

Testing the Square

Testing the Rectangle

3.2 Testing Step-by-Step

Overview of the Testing Process

Extract Your Hypotheses: What Needs to Be True for Your Idea to Work?

Prioritize Your Hypotheses: What Could Kill Your Business

Design Your Experiments with the Test Card

Capture Your Insights with the Learning Card

How Quickly Are You Learning?

Five Data Traps to Avoid

3.3 Experiment Library

Choose a Mix of Experiments

Produce Evidence with a Call to Action

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

3.4 Bringing It All Together

The Testing Process

Measure Your Progress

The Progress Board

Owlet: Constant Progress with Systematic Design and Testing

Chapter 4. Evolve

Create Alignment

Measure & Monitor

Improve Relentlessly

Reinvent Yourself Constantly

Taobao: Reinventing (E-)Commerce

Glossary

Core Team

Prereaders

Bios

Index

EULA