Customer Jobs

• First: Sketch out a customer profile. Look at three things.

• Start by describing what jobs the targeted customers 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.

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, …)

Customer Pains

• Now 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, …)

• What’s 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, …)

Rank each pain according to the intensity it represents for your customer. Is it very intense or is it very light. For each pain indicate how often it occurs.

Customer Gains

• Now describe the benefits your customer expects, desires or would be surprised by. This includes functional utility, social gains, positive emotions, and cost savings.

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 customer’s 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, …)

• Rank each gain according to its relevance to your customer. Is it

substantial or is it insignificant? For each gain indicate how often it

occurs.

Products & Services

•Now that you sketched out a profile of your Customer, let’s tackle the Value Proposition. Again, look at three things.

•First, list all the products and services your value proposition is built around.

• Ask yourself which products and services you offer that help your

customer get either a functional, social, or emotional job done, or

help him/her satisfy basic needs?

• 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).

• Rank all products and services according to their importance to

your customer. Are they crucial or trivial to your customer?

Pain Relievers

• Now lets outline how your products and services create value.

• First, describe how your products and services alleviate customer pains.

• 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, …)

• Rank each pain your products and services kill according to their

intensity for your customer. Is it very intense or very light? For each

pain indicate how often it occurs.

Gain Creators

• Finally, 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 customer’s 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, …)

• … fulfill 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, …)

Rank each gain your products and services create according to its relevance to your customer. Is it substantial or insignificant? For each gain indicate how often it occurs.

Competing for Customers

•Most Value Propositions compete with others for the same Customer Segment.

•Think of this as an “open slot” that will be filled by the company with the best fit.

• Compare competing value propositions by mapping out the same variables (e.g. price, performance, risk, service quality, etc.) on a so-called strategy canvas.

Developing a Strategy canvas

High

Low

Price Use of enological terminology

Above-the-line marketing

Aging quality

Vineyard prestige and legacy

Wine complexity

Wine range

The Value Proposition Canvas Poster

• Use the Value Proposition Canvas like the Business Model Canvas: plot it as a poster, then stick it up on the wall, and then use sticky notes to start sketching.

TEST THE VALUE PROPOSITION

• The Value Proposition Canvas (VP Canvas) allows you to zoom into the details of the Value Proposition and the targeted Customer Segments.

• Use it as a poster (image below) to design better Value Propositions with sticky notes.

• To ensure your customers really want what you design, you need to test all the assumptions you make with the VP Canvas.

• We already now know how to do this kind of designing and testing for business models: by combining the Business Model Canvas with the Customer Development process.

• We can achieve the same for Value Propositions by combining the VP Canvas with the Lean Startup process.

• This will help us work towards achieving a product-market fit or problem solution fit.

• In other words, building/offering stuff that customers really want.

The Lean Startup process essentially consists of iterating through the “building” of, “measuring” of, and “learning” from product (and

service) prototypes. The Lean Startup movement calls these prototypes Minimum Viable Products (MVP).

• Firstly, the VP Canvas gives you a simple and practical way to rapidly sketch out:

– WHAT you are building and how you believe this will create customer value/benefits,

– as well as WHY your are building it:

– which customer jobs, pains, and gains you intend to address.

• Doing this BEFORE building an MVP, will help you better track and manage the testing, measuring, and learning process.

• Secondly, the VP Canvas helps you distinguish between Product/VP and Customer assumptions. If you “just” build an MVP to measure and learn, you won’t know if a negative outcome of your experiment is related to your MVP or to a lack of customer interest.

• In science such a significant bias would invalidate your results all together.

• Hence, you need to separate the testing of your product/VP assumptions (i.e. WHAT) and your customer assumptions (i.e. WHY) whenever possible.

• The latter is something you can observe and investigate even before designing an MVP.

USING THE VALUE PROPOSITION CANVAS – STEP BY STEP

•In reality these steps will be less sequential and much more messy. Adapt this process to your needs and circumstances.

Step 1. Fill Out Your VP Canvas.

•Describe the JOBS your customer is trying to get done and outline their PAINS and GAINS. List the PRODUCTS and SERVICES you intend to offer and describe how you believe they will ALLEVIATE your customer’s PAINS and CREATE GAINS.

Voilà, you now have a great list of Product/VP and Customer assumptions. You described who you think customers are and

what you think would create value for them. It’s your best guess – but still just your (smart) opinion.

Step 2. Test your Customer Assumptions

•Now it’s time to “get out of the building” – to verify your customer assumptions.

•Talk to as many (potential) customers as possible to verify if they really are trying to get those JOBS done that you described in the VP Canvas. Find out if those JOBS are crucial to them or unimportant?

•Find out if they really have those PAINS you believed they have. Are those PAINS severe or minor?

•Verify if they really value the GAINS you believed they value.

Step 3. Adjust your Customer Assumptions Based on Insights

•Now that you better know who your customers are, you should revisit the Customer Profile in your VP Canvas.

•Ideally you now understand the significance of your customers’ JOBS, the severity of their PAINS and the intensity of their desired GAINS.

Step 4. Redesign your Value Proposition Based on Insights

•Adjust which pains and gains you want to focus on, based on your customer insights. Then redesign your Value Proposition accordingly.

•Don’t forget that great Value Propositions rarely address all customer PAINS and GAINS. They address a few really well!

This will give you a readjusted VP Canvas.

Step 5. Start Testing your Value Proposition

Now it’s time to build your MVP and continuously test and adjust your Value Proposition based on what you learn.

• The VP Canvas will serve as your map to permanently track assumptions and tests, while you’re pivoting through the Lean Startup process.

• The moment this circle ends is when you’ve achieved a fit between your Value Proposition and what your Customers expect.

• This is what the startup movement calls product-market fit or problem-solution fit. It’s when you build stuff that customers really want!

GETTING TO PLAN B: MULLINS & KOMISAR

EXPANDING THE REVENUE AND COST BUILDING BLOCKS

• Revenue Model

• Gross Profit Model

• Operating Model

• Working Capital Model

• Financing Model

Revenue Model

• Who will buy? How often? How soon? At what cost?

• How much money will you receive each time a customer buys?

• And how often will they send you another check?

• This set of questions will not result in one, tidy number.

• It will produce many elements that should be supported by an analog or, if not, become a leap of faith and properly considered.

• Revenue Model

– Links with price and volume, given market segment

– Links with positioning in the market

– Links with established brand

– Links with growth strategy

– Links with profitability

– Banks: Big 4 versus Capitec Bank

– Clothing Retail: Pep Stores versus Stuttafords

Your gross margin model:

How much of your revenue will be left after you had paid the direct costs of what you have sold?

• Gross Profit Model

– Links with Revenue Model, Brand, Positioning

– Links with procurement policies

– Links with product mix

– Food Retail versus Clothing Retail

– Ideal: optimise GP Model

Your Operating Model:

Other than the cost of the goods or services you have sold, what else must you spend money on

to support the sale?

• Operating Model

– Links with Value Chain

– Links with Service Profit Chain

– Links with operating expenses

– Links with productivity

Your Working Capital Model:

How early can you encourage your customers to pay? Do you have to tie up money in lots of

inventory waiting for customers to buy? Can you pay your suppliers later, after the customer has

paid?

• Working Capital Model

– Links with credit policy to your clients/customers

– Links with inventory policy

– Links with creditors’ policy

– Links with cash conversion cycle

– Links with industry

– Woolworths, Edgars, Mr Price, Stuttafords, Martin Delport

Your Investment Model:

How much cash must you spend up front before enough customers give you enough business to

cover your operating costs?

• Financing Model

– Links with industry (retail vs mining)

– Links with capital structure

– Links with working capital model (Pick ‘n Pay & Shoprite)

– Sweating the assets

– Hotel industry vs Retail vs Mining

– McDonalds vs Kentucky Fried Chicken

Business Model Ontology

INNOVATING BUSINESS MODELS

Tips for Business Model Innovation – Anders Sundelin

1. Create a common understanding of the existing business model

2. Create a common understanding of what is core in the business model

3. Identify interrelationship between the different business model components

4. Identify drivers of change and trends affecting existing business model

5. Analyze strengths, weaknesses, opportunities and threats

6. Analyze theoretical ideal situation and contradictions for each business model

component

7. Analyze external alternatives that could take each business model component

closer to the ideal situation

8. Analyze what would happen if applying principles for innovation

9. Decide on ways to explore alternative business models with limited risk

10. Track progress and unexpected customer or partner behavior

Is this the right time to innovate your business model?

CHARACTERISTICS THAT STRONG BM INNOVATORS DEMONSTRATE CONSISTENTLY

Are you aligned? • How does your organization help ensure

internal alignment among your

customer value proposition and all

aspects of the organization, including

the pricing model, operating model, the

role you play in your industry and its

talent?

• Does your organization optimize

external partnerships and collaboration

as part of your business model?

• Does your organization leverage unique

existing assets as you design and

execute new business models?

Does your business model leverage

analytics for intelligence and insight?

• Do you regularly assess the strategic opportunities in your environment, based on new and disruptive models emerging in your industry?

• How detailed and accurate is your customer, supplier and partner information?

• Do you deeply understand what your customers want or how they value your current offerings?

• Does your organization have the means to understand the financial and business impact of different business model options?

• Are you able to assess information in real-time, both internally and externally, to allow dynamic course correction?

Is your business model adaptable?

• Does your organization have a leadership and change model that allows you to pursue new and emerging business opportunities while continuing to focus on your current business?

• Is your operating model flexible enough to shift quickly based on new customer and market opportunities?

Leaders will need to exhibit the following characteristics:

• Innovative leadership – Focused innovation leadership and a willingness to break with the status quo are key aspects of managing for the new while maintaining the old. This includes a willingness to explore breakthrough innovations that challenge the existing business. Strong leadership and perseverance help overcome inherent organizational inertia.

• Effective decisions to enable breakthrough innovation – In addition to innovative leadership, breakthrough innovation requires a culture of innovation and an entrepreneurial mindset. Well-known innovators like Google or Apple constantly re-instill entrepreneurial spirit within their organizations. For example, Apple started flying a pirate flag from its headquarters as a symbol of maintaining a “rebel spirit.”

• Dynamic course correction – In today’s fast-paced environment, dynamic course correction is required to bring new business models to market. Business models can be designed on the “drawing board,” but only the application and testing in the market – often in form of piloting – provides the insight needed to understand if and how the business model will succeed.

Operating model flexibility : A flexible operating model entails four elements:

• Lean and transparent processes – In increasingly complex environments, process optimization and end-to-end process visibility are required to build flexibility and change capabilities. Lean Six Sigma approaches, e.g. build continuous improvement into operational processes, allowing organizations to change and adapt the model based on new business model requirements.

• Flexible and scalable technology – While technology innovation enables or even creates new business models, flexibility in the underlying infrastructure is critical to allowing an organization to shift and adapt its business model, and deliver a platform for rapid growth and scaling.

• Globally optimized operations – This requires processes that are replicable and repeatable across different geographies, assets that are optimized based on a clear distinction of what is core and what is non-core, the ability to manage processes end-to-end and extensive partnering. Most importantly, global integration provides organizations with access to the right skills at the right cost at the right time, which supports the successful delivery of business model innovation.

• Asset and cost flexibility – Shifting from fixed to variable assets enables faster response to changes in market conditions. This requires a clear understanding of and focus on core activities, with a willingness to partner and collaborate for non-core activities.

annex I business model

template

a business model describes the value an

organization offers to various customers and

portrays the capabilities and partners required for

creating, marketing, and delivering this value and

relationship capital with the goal of generating

profitable and sustainable revenue streams

VALUE

PROPOSITION

COST

STRUCTURE

CUSTOMER

RELATIONSHIP

TARGET

CUSTOMER

DISTRIBUTION

CHANNEL

CORE

ACTIVITIES

CORE

RESOURCES

PARTNER

NETWORK

REVENUE

STREAMS

INFRASTRUCTURE CUSTOMER OFFER

FINANCE

VALUE

PROPOSITION

COST

STRUCTURE

CUSTOMER

RELATIONSHIP

TARGET

CUSTOMER

DISTRIBUTION

CHANNEL

REVENUE

STREAMS

gives an overall

view of a

company's

bundle of

products and

services

PARTNER

NETWORK

portrays the

network of

cooperative

agreements with

other companies describes the

channels to

communicate

and get in touch

with customers

CORE

ACTIVITIES

describes the

arrangement of

activities

explains the

relationships a

company

establishes with

its customers

sums up the

monetary

consequences

to run a

business model

describes the

revenue

streams through

which money is

earned

describes the

customers a

company wants

to offer value to CORE

RESOURCES

outlines the

resources

required to run a

company's

business model

INFRASTRUCTURE CUSTOMER

OFFER

FINANCE

describing a company’s business model

VALUE

PROPOSITION

value proposition 1

value proposition 2

…

OFFER

describing a company’s offer

VALUE

PROPOSITION

TARGET

CUSTOMER

value proposition 1

value proposition 2

…

target customer 1

target customer 2

…

CUSTOMER OFFER

describing who a company offers value to

VALUE

PROPOSITION

TARGET

CUSTOMER

DISTRIBUTION

CHANNEL

value proposition 1

value proposition 2

…

distribution channel 1

distribution channel 2

…

target customer 1

target customer 2

…

CUSTOMER OFFER

describing how a company reaches its customers

VALUE

PROPOSITION

TARGET

CUSTOMER

CUSTOMER

RELATIONSHIP

value proposition 1

value proposition 2

…

relationship type 1

relationship type 2

…

target customer 1

target customer 2

…

CUSTOMER OFFER

describing the relationships a company builds

TARGET

CUSTOMER

REVENUE

STREAM

revenue stream 1

revenue stream 2

…

target customer 1

target customer 2

…

FINANCE

VALUE

PROPOSITION

value proposition 1

value proposition 2

…

OFFER CUSTOMER

describing how a company makes money

CORE

RESOURCES

VALUE

PROPOSITION

core resource 1

core resource 2

…

value proposition 1

value proposition 2

…

OFFER INFRASTRUCTURE

describing what capabilities are required

describing what activities are required

VALUE

PROPOSITION

KEY

ACTIVITIES

CORE

RESOURCES

value proposition 1

value proposition 2

…

core resource 1

core resource 2

…

activity 1

activity 2

…

INFRASTRUCTURE OFFER

describing the partners that leverage the

business model

VALUE

PROPOSITION

PARTNER

NETWORK

CORE

RESOURCE

value proposition 1

value proposition 2

…

core resource 1

core resource 2

…

partner 1

partner 2

…

INFRASTRUCTURE OFFER

describing the costs of a business model

VALUE

PROPOSITION

COST

STRUCTURE

cost account 1

cost account 2

…

value proposition 1

value proposition 2

…

FINANCE INFRASTRUCTURE OFFER

CORE

RESOURCES

core resource 1

core resource 2

…