What you could learn from ‘Value Proposition Design’ (2014, 272 pages)

Posted by Max on September 1, 2017 in Book reviews, strategy | 3 Comments

Whether you need to design a brand new product or compete in an existing market, the key to success is developing a product is that fulfills a customer need in such as way that customers are willing you pay you more than your costs.

Value Proposition Design, written by the Strategyzer group, has several fantastic tools to help.   The book is broken down into four chapters: Canvas, Design, Test and Evolve.

The Canvas chapter is divided into three areas.  The Customer Profile helps you clarify your understanding of key customer segments, while the Value Map allows you to articulate how you intend to create value for these customers and Fit help identify how values map across to customers (see below for an overview).

The Customer Profile is a great way to explore your customer segments in more detail.  Once you have an idea of your potential customer segments, you can then conduct the three areas of analysis.

1. Customer jobs – what customers are trying to do (in their own words).  These can be functional (mow the lawn), social (look trendy) and emotional (peace of mind)
2. Pains – bad outcomes, which include risks and obstacles related to their jobs and are mainly functional
3. Gains – outcomes customers want to achieve from their jobs.  Gains may include required (must have), expected (should have), desired (could have) or unexpected (or delight!)

The Value Map allows you to explore how your product/service will generate value.  The map is divided into three areas of analysis.

1. Products and services – the tangible, intangible, digital and financial product/service you offer
2. Pain relievers – how your product alleviates customer specific pains (from above)
3. Gain creators – how your product create customer specific gains (from above)

Once the Customer Profile and Value Map are drafted you can then compare them to see if your product has Fit, i.e., your product helps customers with their most important pains & gains.  If there is a theoretical fit, you can then move on to design.

The Design chapter focuses on getting from problem-solution fit (i.e., theoretically adding value to customers) to business model fit (i.e., customers paying you more for your product than your costs).

Once problem-solution fit is understood, it needs to be tested.  The main approaches to testing are:

• Ask customers in surveys/interviews
• Observe customers interacting with competitor products or prototypes
• Co-creation with customers
• Using data from customers interacting with launched products

The aim is to refine the design so that your product either: address more jobs, address more important jobs, goes beyond functional jobs, help more customers, or gets a job done better (preferably significantly better).  It is at about this stage where it is possible to explore how to make money – finding the right business model.

To ensure that your product is profitable, you need to iterate and test the possible options and assumptions for generating revenue and serving customers.   For example, do you make DIY tools and sell them to retailers, or do you outsource manufacture and create a platform to rent DIY tools direct to customers.  Analysing possible models the criteria below will help determine their attractiveness:

• Switching costs
• Reoccurring revenue
• Earning vs spending (aim for market share or profitability)
• Game-changing cost structure (e.g., freemium)
• Scalability
• Protection from competition

Once you have arrived at a short list of potential business models, they need to be tested.

The Test chapter outlines how to go from idea to business.   Busines models will need refinement.  Uber for example started by focusing only allow customers to hire limousines in SF before it pivoted to serve a much larger customer base.

For each Customer Profile you must validate:

• Jobs: which jobs matter most to your target customer
• Pains: which pains matter most to your target customer and which are the most extreme
• Gains: which pains matter most to your target customer and which are the most essential

You must validate the Value Map:

• Product: which product/services do customer really want, which ones do they want the most
• Pain killers: which help the most with customers headaches, which ones to they long for the most
• Gain creators: which gains creators do your customers really need//desire, which ones do they crave the  most

Until assumptions are validated they are just hypotheses.   You need to test these hypotheses as quickly and cheaply as possible.   Broadly you want answers to:

• Interest and relevance: see customers and partners beat a path to your door
• Priorities and preference:  see that customer’s actions match your anticipated prioritization
• Willingness to pay: get to a point where customers and partners buy/pre-order

The Evolve chapter shows how you can use the all the insight and material create so far to build alignment in your organization, and also measure and monitor so that you can constantly improve and reinvent.   Simply, it involves re-visiting the assumptions of the current business model and asking ‘what if?’ to see how changes in regulation, competition, and technology may affect the product.

The Value Proposition Book offers great tools and easy to follow advice on how to create successful products and is an essential read for those involved in product development especially product owners and entrepreneurs.

You can find a link to the book on Amazon UK here, and a link to the Strategizer website here.