Alex Osterwalder - Value Proposition Design (Summary): How to Create Products and Services Customers Want

You and your team work hard creating products and services you believe your customers need and want. You devote time and resources to product development. You define and refine a business plan according to customer-specific data. You debate the pros and cons of different ideas until you reach an agreement.

Put the value proposition and business model to work to create a shared language of value creation in your organization.

Unfortunately, this process can veer off the track. Sales and marketing can fall out of the loop, and confusion can unsettle team meetings. You start to worry that your efforts and ideas dont address the core of what your customers really want.

The Value Proposition Design process enables you and your team to analyze and organize customer information to reveal what your clientele does and doesnt want. Focus your teams efforts on creating customer value, and dont sidetrack into designing features or technologies that miss the mark. Test your ideas continually instead of watching them fail at the final launch.

Manage the messy and nonlinear process of value proposition design and reduce risk by systematically applying adequate tools and processes.

Put the Value Proposition Canvas tool at the center of your value proposition design process. Use it in concert with the Environment Map, which will help you define your context, and the Business Model Canvas, which will help you identify the activities and processes necessary for creating and delivering profitable offerings. Innovators creating new products or services, and existing organizations improving or adding to a suite of offerings, face different strategic challenges. The value proposition design works for both scenarios.

The elements of the Business Model Canvas include:

• Customer segments Identify the clusters of people or firms you hope to sell to and create value for them with a dedicated value proposition.
• Value propositions This is how you create value for a customer segment.
• Channels These communication streams inform customers about your value proposition and brings it to them.
• Customer relationships Consider how you form and keep your client connections.
• Revenue streams A successful value proposition will generate these earnings.
• Key resources Develop the assets you need to deliver your value proposition.
• Key activities Take the necessary steps to achieve high performance.
• Key partnerships Your network of suppliers and partners contributes external resources and activities.
• Cost structure Organize the money you have to pay to operate a business model.

A value proposition outlines the benefits your customers can expect from your products and services. The Value Proposition Canvas contains the Customer Profile and the Value Map. The Value Map analyzes your offering in relationship to the needs, or gains, it fulfills and the problems, or pains, it alleviates for your audiences, as defined by the Customer Profile.

In todays hypercompetitive world, customers are surrounded by an ocean of tempting value propositions that all compete for the same limited slots of attention.

Identify customer jobs to determine why people need and use your product or service. Jobs vary depending on context. Functional jobs are the products and services that customers use to perform specific tasks, such as mowing the lawn. The term social jobs refers to products and services people use to attract positive attention, such as wearing a designer watch. Personal or emotional jobs help users feel good, calm or secure. Supporting jobs help consumers compare prices and offers, provide feedback to suppliers or stop using a product such as canceling a magazine subscription.

Customer pains are any problems or obstacles people encounter when using a product or service. If a product doesnt work as promised, proves too expensive, takes too much time or involves a risk, your clients feel let down. Identify all potential customer pains by asking trigger questions what price do they feel is too high? What do they find challenging about using your product?

What customers do on a daily basis in their real settings often differs from what they believe they do or what they will tell you in an interview, survey or focus group.

Customer gains are the benefits consumers experience when using your product or service. Assess these benefits on a scale, beginning at the bottom with required gains. That means the product works. For example, your mobile phone works when you try to call someone.