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Value Proposition Designer Canvas - Background & Aim

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This work is licensed under Creative Commons Attribution Non Commercial 3.0 Opportunity recognition WORKSHOP Value Proposition Designer
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Day 1: The Research Canvas

Opportunity recognition WORKSHOP

Value Proposition Designer

This work is licensed under Creative Commons Attribution Non Commercial 3.0This module introduces the concept of the Value Proposition Designer Canvas and how to apply this concept in diverse settings such as when preparing a new business, evaluating how your know-how or technology can be applied or how a non-profit organisation creates value for its stakeholders.1Value Proposition Designer CanvasPart 1Background & aim

Part 2 Customer sidePart 3 Value proposition side

Part 4 Dealing with competing value propositions

The module deals with four different topics of the value proposition concept. The first part discusses where the concept came from and where its leads towards. Afterwards, the two main key parts of the value propositions designer canvas will be explained, being the customer side and the value proposition side. The last topic focuses on how to deal with competing value propositions.2Value Proposition Designer CanvasPart 1Background & aim

Part 2 Customer sidePart 3 Value proposition side

Part 4 Dealing with competing value propositions

3Origin: Lean start-up movement and business model canvas

Part 1: Background & aim

The value proposition designer canvas finds its origin in the lean start-up movement. This movement adopts the underlying principles of testing, learning and pivoting by experimenting with the most basic product prototypes imaginable - so-called Minimal Viable Products (MVP) during the search for product-market fit. It helps companies and non-profit organisations avoid building or coming up with stuff that customers (or other stakeholders) dont want. This search for product-market fit is the end goal of the value proposition exercise.

Yet, there is no underlying conceptual tool that accompanies this entire process. There is no practical tool that helps people map, think through, discuss, test, and pivot their organisations value proposition in relationship to their customers needs. This is where Alexander Osterwalder, together with Yves Pigneur and Alan Smith, came up with the Value Proposition Designer Canvas. This tool helps people to understand who their customers are and what value you and your organisation, whatever its nature, could offer them. And ultimately evaluate if your value offering and the customers needs and expectations match.

The outcome of the analysis can be plugged in into the broader Business Model Canvas, which is a tool to help people understand and build a business model for their organization. A business model then refers to how an organization creates, delivers, and captures value and not only what this value looks like. More information on this Business Model Canvas can be found in another module.4Value proposition designer canvasGoal 1 Getting to know your customer (even) better

Goal 2 Developing products & services that have a much better fit with the jobs and problems of these customersInstead of pushing a technology, product or service that your customers dont usePart 1: Background & aim

The Value Proposition Designer Canvas has two main goals. The first goal is to better understand and getting to know your (potential) customers. The better you understand your customers and other stakeholders, the better you are able to come up with products, services and activities that meet their expectations, needs and demands.

The second goal of the canvas is to help you developing products and services that have a much better fit with the jobs and problems of these customers. This requires you to have a clear understanding of the value proposition you would offer to customers. The canvas helps you in shaping the value proposition and clearly defining its features, benefits and characteristics.

Ultimately, the Value Proposition Designer Canvas will allow you to better describe the hypotheses underlying Value Propositions and Customers, it will prepare you for customer interviews, and it will guide you in the testing and pivoting.

5http://www.businessmodelgeneration.com

The entire Value Proposition Designer Canvas is composed of two main parts, the value proposition side and the customer side, which each contain three sub-parts. Besides these six sub-parts, a seventh element is critical for understanding and applying the canvas correctly. This seventh part are the small arrows between the two sides, reflecting the need to find a fit or match between the two parts.

6Focus onValue proposition

What value can I bring to my customer(s)?Part 1: Background & aimCustomer segment(s)

Who are my customers and what frustrates them today?

For each of both sides, one key question guides you through the process. For the value proposition side, the key question is what value you can bring to your customers. This relates to the products and services you develop and would like to bring to these customers.For the customer side, the key question to support you is who these customers are and what frustrates them today in their daily activities. Answering this question thoroughly helps you in understanding who they are and what they (could) need. The better you understand your (future) customers, the better you are able to come up with ideas that make their life easier or more enjoyable.7Goal: achieving (product-market) fitAbsence of fit will lead to failure, even for products with great technologies or great products for the wrong customers.

Part 1: Background & aimhttp://www.businessmodelalchemist.com

The goal of the Value Proposition Designer Canvas is to assist you in designing great Value Propositions that match your Customer's needs and jobs-to-be-done and helps them solve their problems. This is what the start-up scene calls product-market fit or problem-solution fit. The Value Proposition Designer Canvas helps you work towards this fit in a more systematic way.

Absence of this fit will most likely lead to products and services that customers wont need or wont buy. The absence of a fit may be due to different reasons, including for example:Customers are satisfied with their current solutions and dont need any new products addressing te same needs.The products and services you developed simply dont match with the needs and expectations of your customers. They may need different functionality, performance, reliability or even look and feel.You think customers experience certain problems and frustrations when getting their jobs done, while this may not be the case.Youre targeting the wrong type of customer. Maybe your products and services are well-designed to provide the best available solution to a certain group of customers, but you may be looking into the wrong group that has others needs and desires.

Ultimately, the canvas helps you to avoid pushing a technology, product or service that your customers dont use. Or it helps you in defining who the right customers are for your products and services.

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Part 1: Background & aimhttp://www.businessmodelalchemist.com

Once you understand both your customers and your value proposition well, and if there is enough fit between the two elements, you start the bigger exercise to develop a full business model. The entire Business Model Canvas with its 9 building blocks focuses on the big picture. The Value Proposition Designer Canvas zooms in on two of those building blocks, the Value Proposition and the Customer Segment, so you can describe them in more detail and analyse the fit between them. Companies need to get both right, the fit and the business model, if they dont want to go out of business. The tools work best in combination. One does not replace the other.

9Value Proposition Designer CanvasPart 1Background & aim

Part 2 Customer sidePart 3 Value proposition side

Part 4 Dealing with competing value propositions

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The golden rule for every business man is: Put yourself in your customers place

Part 2: Customer side

Your most unhappy customers are your greatest source of learningOrison Swett Marden

BillGates

The first part you should start reflecting on when discussing the Value Proposition Designer Canvas, is the customer side. The better you understand your customer and the better you can put yourself in his or her place, the better you will be able to come up with new products and services or adapt exisitng products and services to their needs. As Bill Gates stated it, frustrations and negative emotions are probably the greatest source of ideas and learning, since they provide insights in where added value can be created and where improvements are possible. 11

Part 2: Customer side

Therefore, in the process of trying to understand your future customers, it may be wise to ask them what their biggest headaches currently are in doing their daily jobs. The customers you envisage have certain jobs to be done. However, in every job they will have some frustrations: functionality that is not available, (too much) errors, too time consuming, It can be anything. If you manage to identify these frustrations, it will be much easier to come up with solutions that can mitigate or take away these negative emotions.

12Getting to know your customers, relates to 3 aspects:Needs they are trying to satisfyProblems they are trying to solveTasks they are trying to completePart 2: Customer side

Trying to understand your customers, relates to three core aspects. In the first place, it relates to needs these customers are trying to satisfy. These needs can be very diverse. They can for example relate to nature conservation to maintain biodiversity and healthy environments, to build a sustainable company that earn money to repay its investors and employ people or to researchers looking for funding to enable them to conduct a certain research project that helps them in feeding their intellectual curiosity.

When trying to satisfy these needs, these customers will encounter certain problems or obstacles. Again these problems can be very different in nature. It can be lack of knowledge, lack of good software tools or the absence of sufficient manpower for example.

The most basic aspect of the customer side relates to the individual jobs and tasks they are trying to complete. These can be manual or intellectual jobs of any kind, such as taking a sponge to clean a window, using a software system to design a new piece of equipment or moving from point A to point B to deliver a package.

The main challenge is to collect as much information as possible on all three levels on your customers. Sometimes you can obtain this information by observing your customers, by asking them directly or by analysing various studies and reports. Sometimes your customers wont be able to give you (most of) the information. And most often it is a combination of both.

13Customer jobsFunctional jobs (tasks)Social jobs (e.g. gain power / status)Emotional jobs (e.g. feel good)Basic needs (e.g. communication)

Part 2: Customer sidehttp://www.businessmodelalchemist.com

To understand the customer jobs to be done, ask yourself:What functional jobs is your customer trying get done? (e.g. perform or complete a specific task, solve a specific problem, ...)What social jobs is your customer trying to get done? (e.g. trying to look good, gain power or status, ...)What emotional jobs is your customer trying get done? (e.g. esthetics, feel good, security, ...)What basic needs is your customer trying to satisfy? (e.g. communication, sex, ...)

Often, tasks and jobs relate to more than one of these categories. The basic idea however is to think broader than just the function tasks and jobs a customer is doing.

14Customer painsNegative emotions (frustrations)Undesired costs and situations (time, money, underperformance, mistakes)Risks (technical, social, financial)

Part 2: Customer sidehttp://www.businessmodelalchemist.com

The second sub-part of the customer side relates to the customer pains. Again, the challenge is to think broad enough. Try to describe negative emotions, undesired costs and situations, and risks that your customer experiences or could experience before, during, and after getting the job done. Ask yourself:What does your customer find too costly? (e.g. takes a lot of time, costs too much money, requires substantial efforts, ...)What makes your customer feel bad?(e.g. frustrations, annoyances, things that give them a headache, ...)How are current solutions underperforming for your customer? (e.g. lack of features, performance, malfunctioning, ...)What are the main difficulties and challenges your customer encounters? (e.g. understanding how things work, difficulties getting things done, resistance, ...)What negative social consequences does your customer encounter or fear? (e.g. loss of face, power, trust, or status, ...)What risks does your customer fear? (e.g. financial, social, technical risks, or what could go awfully wrong, ...)Whats keeping your customer awake at night? (e.g. big issues, concerns, worries, ...)What common mistakes does your customer make? (e.g. usage mistakes, ...)What barriers are keeping your customer from adopting solutions? (e.g. upfront investment costs, learning curve, resistance to change, ...)

Once you have identified as much mains and negative emotions as possible, try to rank each pain according to the intensity it represents for your customer. Is it very intense or is it very light? Additionally, for each pain, try to get an estimation or indication how often it occurs. By doing this ranking, you can get an idea of which pains a customer would be happiest about when it gets resolved or taken away.

15Customer gainsBenefits customer expects, desires or would be surprised byIncl. functional utility, social gains, positive emotions and cost savings

Part 2: Customer sidehttp://www.businessmodelalchemist.com

The third and last sub-part of the customer side relates to the custom gains. Try to describe the benefits your customer expects, desires or would be surprised by. This includes functional utility, social gains, positive emotions, and cost savings. Often, you will come up with aspects that are relates to the pains customers experience. However, try to think out of the box and also identify gains that come on top of aspects taking away the pains.

To guide this discussion, ask yourself:Which savings would make your customer happy? (e.g. in terms of time, money and effort, ...)What outcomes does your customer expect and what would go beyond his/her expectations? (e.g. quality level, more of something, less of something, ...)How do current solutions delight your customer? (e.g. specific features, performance, quality, ...)What would make your customers job or life easier? (e.g. flatter learning curve, more services, lower cost of ownership, ...)What positive social consequences does your customer desire? (e.g. makes them look good, increase in power, status, ...)What are customers looking for? (e.g. good design, guarantees, specific or more features, ...)What do customers dream about? (e.g. big achievements, big reliefs, ...)How does your customer measure success and failure? (e.g. performance, cost, ...)What would increase the likelihood of adopting a solution? (e.g. lower cost, less investments, lower risk, better quality, performance, design, ...)

Once you have lined up these potential gains, it make sense to do a similar prioritisation effort as with the pains (in terms of importance of the gain and frequency of occurence). This again gives an indication of which elements are most likely to convice potential customers to use or buy your products and services.

16Part 2: Customer sideStatistics suggest that when customers complain, business owners and managers ought to get excited about it. The complaining customer represents a huge opportunity for more business. Zig Ziglar

Part 2: Customer sidehttp://www.businessmodelalchemist.com

Bringing the three sub-aspects of the customer side together, should give you a good idea of who your customers are, what they try to achieve, what frustrates them today and would could make them happy.

17Value Proposition Designer CanvasPart 1Background & aim

Part 2 Customer sidePart 3 Value proposition side

Part 4 Dealing with competing value propositions

18John EganThe absolute fundamental aim is to make money out of satisfying customersPart 3: Value Proposition side

Lets now turn our attention towards the value proposition side.

When a company develops products and services, they try to sell them to customers, who hopefully are willing to pay for them and even better are satisfied when using them and come back to buy them more than once.For non-profit organisations, the primary goal is (usually) not to make money, but rather to give a satisfying experience to its stakeholders, who hopefully return to the non-profit organisations (whether as customer, as future financer, as volunteer or in any other kind of role).

It is important to conduct the analysis on the value proposition side completely deconnected from the customer side. This is challenging, since you will have the tendency to refer to things youve written down during the exercise on the customer side. However, if you want an honest analysis, it is critical not to mix the two parts in first instance and make an objective analysis of your value proposition first.

The last part of using the value proposition designer canvas is evaluating if and to what extent a fit exists between your value proposition and what customers are looking for.19Value proposition=Product-service combination

Part 3: Value Proposition sidehttp://www.businessmodelalchemist.com

An organisations value proposition is what it has to offer to its customers. This can be a product, a service, an experience, Its the combination of elements an organisation, or even an individual, has to offer.

20Value proposition = Product-service combinationWhich products and services do you offer that help your customer get either a functional, social, or emotional job done, or help him/her satisfy basic needs?

Part 3: Value Proposition sidehttp://www.businessmodelalchemist.com

The question you should ask yourself is then which products and services (could) you offer that help your customer get either a functional, social, or emotional job done, or help him/her satisfy basic needs? In case you already have products and services in place, you can start from there and evaluate to what jobs these products and services correspond. The exercise to be done with this kind of approach will then eventually be to evaluate if these products and services fit with the expectations of the customers, as defined in the customer side. If the fit is absent or incomplete, the value proposition should be refined or even completely redesigned. If the fit is present, your value proposition is ready to try and make customers happy.

In case you dont have any value proposition yet, this part of the analysis can be used further on to start designing products and services that match the customers expectations and needs as good as possible. The advantage of this situation is that you can start thinking without too much constraints. If you already have some products and services in place, you are usually already bound to some limitations.

21Tangible (e.g. manufactured goods, face-to-face customer service)Digital/virtual (e.g. downloads, online recommendations)Intangible (e.g. copyrights, quality assurance)Financial (e.g. investment funds, financing services)

Part 3: Value Proposition sidehttp://www.businessmodelalchemist.com

Value propositions can be very different in nature and take may forms and shapes. Products and services may either by tangible (e.g. manufactured goods, face-to-face customer service), digital/virtual (e.g. downloads, online recommendations), intangible (e.g. copyrights, quality assurance), or financial (e.g. investment funds, financing services). Very often however, value propositions are combinations of two or more of these elements.

Related to defining what your value proposition will look like, is defining how important they are to your customer. Are they crucial or trivial to your customer? This importance relates amongst other things to how much evaluation a potential customer will undertake before taking his final decision. A good example could be the decision to buy a car versus a can of soda. The latter (usually) is a decision with low importance, which customers will be inclined to take much faster. However, buying a car has much deeper consequences over a longer timeframe. Therefore, this decision will require more evaluation, given its higher importance for the customer.

22Pain relieversHow do your products / services eliminate or reduce negative emotions, undesired costs and situations and risks?

Part 3: Value Proposition sidehttp://www.businessmodelalchemist.com

Now lets outline how your products and services create value. First, describe how your products and services alleviate customer pains, or at least how you think they do. How do they eliminate or reduce negative emotions, undesired costs and situations, and risks your customer experiences or could experience before, during, and after getting the job done? Ask yourself if they...... produce savings? (e.g. in terms of time, money, or efforts, ...)... make your customers feel better? (e.g. kills frustrations, annoyances, things that give them a headache, ...)... fix underperforming solutions? (e.g. new features, better performance, better quality, ...)... put an end to difficulties and challenges your customers encounter? (e.g. make things easier, helping them get done, eliminate resistance, ...)... wipe out negative social consequences your customers encounter or fear? (e.g. loss of face, power, trust, or status, ...)... eliminate risks your customers fear? (e.g. financial, social, technical risks, or what could go awfully wrong, ...)... help your customers better sleep at night? (e.g. by helping with big issues, diminishing concerns, or eliminating worries, ...)... limit or eradicate common mistakes customers make? (e.g. usage mistakes, ...)... get rid of barriers that are keeping your customer from adopting solutions? (e.g. lower or no upfront investment costs, flatter learning curve, less resistance to change, ...)

23Gain creatorsHow do your products / services create benefits your customer expects, desires or would be surprised by?

Part 3: Value Proposition sidehttp://www.businessmodelalchemist.com

The third part of the value proposition side relates to gain creators. Describe how your products and services create customer gains. How do they create benefits your customer expects, desires or would be surprised by, including functional utility, social gains, positive emotions, and cost savings? Ask yourself if they......create savings that make your customer happy? (e.g. in terms of time, money and effort, ...)... produce outcomes your customer expects or that go beyond their expectations? (e.g. better quality level, more of something, less of something, ...)... copy or outperform current solutions that delight your customer? (e.g. regarding specific features, performance, quality, ...)... make your customers job or life easier? (e.g. flatter learning curve, usability, accessibility, more services, lower cost of ownership, ...)... create positive social consequences that your customer desires? (e.g. makes them look good, produces an increase in power, status, ...)... do something customers are looking for? (e.g. good design, guarantees, specific or more features, ...)... fulfil something customers are dreaming about? (e.g. help big achievements, produce big reliefs, ...)... produce positive outcomes matching your customers success and failure criteria? (e.g. better performance, lower cost, ...)... help make adoption easier? (e.g. lower cost, less investments, lower risk, better quality, performance, design, ...)

The goal here is to identify what features or characteristics of your value proposition would make the difference for customers between choosing your value proposition or not, or choosing for your value proposition over a competitors.

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Part 3: Value Proposition sidehttp://www.businessmodelalchemist.com

If you have done a careful, critical and honest analysis of what your value proposition looks like, or could look like, you should now have a good view on what value you would like to offer to your customers. Ideally, for every different value proposition, this analysis would result in a different outcome. Different value propositions can relate to completely different products or services (for example motorbikes and cars at BMW), or to different versions of the same products or services (iPad and iPad Mini for example). As these different value propositions may appeal to different customers or customer segments, the exercise should ideally be done for every individual value proposition.

25Value Proposition Designer CanvasPart 1Background & aim

Part 2 Customer sidePart 3 Value proposition side

Part 4 Dealing with competing value propositions

26Whether its Google or Apple or free software, weve got some fantastic competitors and it keeps us on our toes.

Part 4: Competing value propositionsBill Gates

For (almost) each value proposition, there are other actors offering value proposition to the same customers for doing the same jobs. Competition basically has two consequences. The positive consequence is that customers are willing to use and/or pay for a certain value propsotion that helps them in doing certain jobs. It basically means there is a market for that kind of value propositions.The downside is that other actors are already trying to take a part of that market and they will try to convince customers to buy from them rather than from you.

However, the main message from Bill Gates quote is also that competitors force you to come up with a better or the best value proposition.

27Value Propositions compete with others for the same customer segment

Part 4: Competing value propositionshttp://www.businessmodelalchemist.com

Most Value Propositions compete with others for the same Customer Segment. You could think of it as an "open slot" that will be filled by the company with the best fit.

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Part 4: Competing value propositionshttp://www.businessmodelalchemist.com

If you sketch out competing value propositions, you can easily compare them by mapping out the same variables (e.g. price, performance, risk, service quality, etc.). Even though the variables on which customers finally base their choice differ from person to person, it is usually the value proposition with the best fit that manages to convince most customers.

29ConclusionLast question to answerIs there a real fit between your value proposition and what customers are looking for?

The ultimate question to be answered when using the value proposition designer canvas is how good of a fit is there between your value proposition and the needs and expectations of customers. As said before, the better this fit, the higher the likelihood customers will buy your products and services. Therefore, doing an analysis of both parts of the canvas the customer side and the value proposition side independently from one another is crucial in understanding ultimately if a real fit exists between the two parts. If this fit is absent or insufficient, you should reiterate on your value proposition and try to come up with better products and services to satisfy your customers.

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