Small Business & Startups

Value proposition design

May 31, 2015
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Contrary to popular belief among many entrepreneurs, not every product or service is valuable to every customer. Figuring out what different customers want and then providing a solution that addresses those needs is really hard to do.

A new book, "Value Proposition Design," was created to help entrepreneurs avoid failure due to lack of a clear, compelling value proposition.

Alex Ostewalder, co-author of the wildly popular book "Business Model Generation," or BMG, has done it again. In October 2014, his new book "Value Proposition Design" or VPD, hit the market, and it is a fabulous follow-up to "Business Model Generation." Like BMG, VPD is a tool-based book full of practical ideas and useful worksheets that aid in the development of a robust value proposition. Here are some of the highlights.

Designed to be used in tandem with BMG, VPD focuses on two critical aspects of any business model canvas: the customer segments and the value propositions. VPD helps hone in on the precise value proposition for each customer segment and uses the customer discovery process, so critical in the business model canvas process, to accomplish it. The book points out this approach is useful for people working with startups as well as for people working in established organizations.

The book contains 4 sections: Canvas, Design, Test and Evolve.

The Canvas section provides an overview of the concepts behind the value proposition canvas: a customer profile and a value map. A customer profile is a visual representation of the customer jobs (things customers are trying to get done), the customer pains (things that annoy customers before, during or after trying to complete jobs) and the customer gains (outcomes and benefits customers want). The book provides examples as well as detailed activities for how to determine and prioritize this information. The value map is also broken down into three sections: the products/services (what will be offered to customers), the pain relievers (how the product offerings solve customer problems) and gain creators (how the product offerings provide customer benefits). Again, there are examples and step-by-step instructions for how to create a value map. The last part of this section covers something called “fit,” the strong match between the content of the value map and the information on the customer profile. It is critical that the value map actually addresses the issues on the customer profile. A poor fit will result in a weak value proposition.

The Design section of the book focuses on how to prepare prototypes, or rough models of the business concept. Prototypes don’t have to be detailed or even physically created. In fact, the starting point is the “napkin sketch.” This section goes beyond just creating the prototype that you envision, however. It utilizes the customer discovery process to refine and develop prototypes from the numerous early rough napkin sketches to a small number of viable options to be tested. In this section, the business model canvas is re-visited to make sure there is a strong fit between the business model and the value proposition. After all, a fabulous value proposition that provides great value to the customer is useless if the business model cannot generate revenue in excess of costs. This section of the book walks through the iterative process of tweaking the value proposition and the business model until they align.

The third section of the book discusses how to reduce risk through testing of the value proposition. This section explains what to test as well as how to test. It includes a very useful “experiment library” as well as many worksheets that can be downloaded and used to keep track of test information. While this section seems to cover the least amount of material, it is one of the most helpful in terms of resources, examples and tools.

The last section is titled Evolve, and it explains how to use the value proposition design and the business model canvas together to create alignment and move a business forward. The concepts of measure and monitor are described and the challenge to constantly innovate and reinvent.

There are so many things to like about this book! It is easy to read with straightforward language, lots of visuals and engaging language. I appreciate the vast amount of practical activities and worksheets that I can use with my clients — small business owners struggling to develop strong value propositions and business models. One cool thing is that owning the book allows access to restricted parts of the Strategyzer website. Access to those areas is gained by answering questions that can only be answered with the book in front of you (like “What is the Trendsetter example on page 90?”). Once inside the site, however, you are able to download worksheets, complete exercises from the book, take tests on book content and obtain posters.

I can’t think of anything I did not like about this book. Seriously. This book in now going on my recommended reading list for all startup companies, right alongside "Business Model Generation" and "The Startup Owner’s Manual." Anyone who is struggling to create a viable business based on a strong business model and a compelling value proposition should read this book.

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