Value Proposition Design – An Approach to Make Great Ideas Work
Are you curious about coming up with good business ideas that will eventually work?
In the book Value Proposition Design (VPD), Osterwalder and others offer valuable frameworks that intend to help businesses with value creation and implementation. These tools can serve from building new ventures for start-ups, to improving existing products for established organizations. Rather than seeing VPD as a once-for-all effort, the book proposes a continuous undertaking that keeps inventing and improving value propositions.
What was fascinating to me about this book is it really embeds value proposition in a viable business model to capture value. This is the Business Model Canvas to describe how organizations create, deliver, and capture value, and readers could zoom in and out to view the Value Proposition as a key component of the business model without losing sight of the bigger picture.
One of the highlights of this book which I found very helpful is the Value Proposition Canvas. To begin with, you might wonder, what is value proposition, exactly?
“Value Proposition describes the benefits customers can expect from your products and services.”
The goal of the Value Proposition Canvas is to search for a fit where designing value propositions around products and services that customers really care about. It has two sides. With the Customer Profile, you clarify your customer understanding. With the Value Map, you describe how you intend to create value for that customer. The magic happens when you achieve FIT between the two when one meets the other!
Customer Profile breaks down a specific customer segment in the business model into the customers’ jobs, pains, and gains.
To identify customer segments is important because different customer segments may have different jobs, pains, gains. If you are working on value creation, it’s useful to map out the customer segment you intend to create value for.
Let’s start by describing what the customers you are targeting, and what they are trying to get done. It could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy.
The book identifies three main types of jobs-to-be-done which I found illuminating:
- Functional jobs o This is when customers try to perform or complete a specific task, or solve a specific problem.
- Social jobs o When customers want to look good, gain power or status. This describe how customers want to be perceived by others.
- Personal/emotional jobs o When customers seek a specific emotional state, such as feeling secure.
Pains describe anything that annoys your customers before, during, and after getting the job-to-be-done. It generally covers undesired costs and situations, obstacles, and risks that your customers experience.
Gains describe the benefits your customers expect, desire or would be surprised by. This includes functional utility, social gains, positive emotions, and cost savings. Rank each pain/gain according to the intensity it represents for your customers. Is it very intense or is it very light? For each pain/gain indicate how often it occurs. Similarly, you could rank jobs according to their importance to customers.
Now that you sketched out a profile of your Customer, the Value Map aims to break down your value proposition down into products and services, pain relievers, and gain creators. Products & Services The first step is to list all the products and services your value proposition is built around. You could think about what products and services you offer help your customers get either a functional, social, or emotional jobs down, or help him/her satisfy basic needs.
How do your products and services alleviate specific customer pains, such as removing obstacles, reducing risks or undesired costs for customers? Gain Creators
How do you intend to product outcomes and benefits that your customer expects, desires, or would be surprised by, including functional utility, social gains, position emotions, and cost savings?
Remarkable value propositions focus on jobs, pains, and gains that mater to customers and achieve those exceedingly well. Again, the authors remind us that we should not try to address all pains or gains, but rather just focus on the ones that will make a difference.
In evaluating the fit between Customer Profile and Value Map, the authors ask three critical questions:
- Does the solution meet a critical customer need?
- Is there a market for the solution?
- Is there a business model to sustainably support an organization in delivering the solution?
Inspiringly, these questions correspond to three stages of “fit” of businesses proposed by the authors.
- “product – solution” fit where you validate your assumptions of customers
- “product – market” fit where you validate value propositions of products and services
- “business model” fit where you validate business models.
Test and Evolve Value Propositions
Great ideas don’t land well unless they are experimented, improved and evolved continuously. What is fascinating about this book to me, is that it connects the two realms of creating value for customers and creating value for businesses well together, so that business can be scalable and sustainable.
To achieve this, the book not only covers how to design value propositions, but also emphasizes testing them with quick experimentation, adapting them to business environments, and improving them relentlessly. The framework of testing and evaluating value propositions is very relevant and aligned with the testing principles of the Lean Startup movement.
Among the framework of testing, the tools of “test card” and “learning card” stood out for me as quick ways for UX professionals to design studies and accumulate learnings.
Structure experiments with a test card
Structure your insights with a learning card
These cards enable you to state a hypothesis, define the methods of testing, analyze the results and draw conclusions. This is a simple concept, but one that lends itself to progressively greater degrees of complexity and insight as a solution is more fully developed, piloted and ultimately launched.