how to create compelling value propositions that turns prospects into customers

Alex Osterwalder, Co-Founder strategyzer.com

How to Create Compelling Value Propositions That Turn Prospects into Customers October 2014 Presentation

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Alexander Osterwalder - Strategyzer.com - @alexosterwalder

Alex is an entrepreneur, speaker and business model innovator. Together with Professor Yves Pigneur he invented the Business Model Canvas, a practical tool to visualize, challenge and (re-) invent business models. The Canvas is used by leading organizations around the world, like GE, P&G, Ericsson, and 3M.

Alex is a frequent keynote speaker and has held guest lectures in top universities around the world, including Stanford, Berkeley, MIT, IESE and IMD.

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10m or 1b+

search execution

design testing

The Business Model Canvas

Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Business Model Foundry GmbH, Switzerland www.businessmodelgeneration.com

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com

strategyzer.com

Gain Creators

Pain Relievers Pains

Gains

Products& Services

CustomerJob(s)

The Value Proposition Canvas

Value Proposition Customer Segment

strategyzer.comThe makers of Business Model Generation and StrategyzerCopyright Business Model Foundry AG


Revenue Streams

Channels


Key Resources

Cost Structure





strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)





Revenue Streams

Channels


Key Resources

Cost Structure





strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)





Revenue Streams

Channels


Key Resources

Cost Structure





strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)





Revenue Streams

Channels


Key Resources

Cost Structure





strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)





Revenue Streams

Channels


Key Resources

Cost Structure





strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)




[Source: design squiggle adapted from Damien Newman, Central]

4y+4y+5y=13y

zoom out

zoom in

Canvas Design

Search Post-SearchTools

Test Evolve

customers want and then keeping them aligned with whcustomers want in Post-Search.

Value Proposition Design shows you how to use the VProposition Canvas to Design and Test great value propositions in an iterative search for what customers want. Vproposition design is a never-ending process in which need to Evolve your value proposition(s) constantly to keep it relevant to customers.

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

Progress

1 2 3

canvas

11.0 Context

1.1 Customer Profile

1.2 Value Map

1.4 Fit

1.0 Context: Business Model Canvas


Revenue Streams

Channels


Key Resources

Cost Structure





tells the story of how you create, deliver,

and capture value (for your organization)


Revenue Streams

Channels


Key Resources

Cost Structure





OutcomeIf a Pain reliever or Gain creator doesn't Fit anything, it may not be creating customer value. Don't worry if not all pains/gains are checked you can't satisfy them all. Ask yourself, how well does your Value Proposi-tion really fit your Customer?

71


Revenue Streams

Channels


Key Resources

Cost Structure





zooming into the value proposition

describes the benefits customers canexpectfrom your products and services

A VALUE PROPOSITION

The set of value proposition benefits that you design to attract customers.

Create ObserveThe set of customer characteristics that you assume, observe, and verify in the market.

Fit

3130

CO

NC

EP

T

30

OutcomeIf a Pain reliever or Gain creator doesn't Fit anything, it may not be creating customer value. Don't worry if not all pains/gains are checked you can't satisfy them all. Ask yourself, how well does your Value Proposi-tion really fit your Customer?

71

customer profilevalue map

onealt.onealtCustomerProfile

customer jobs

what customers are trying to get done in their work and in their lives

task to perform, problem to solve, needs to satisfy

Job contextCustomer jobs often depend on the specific

context in which they are performed. The context

may impose certain constraints or limitations. For

example, calling somebody on the y is different

when you are traveling on the train or when you

are driving a car. Or, going to the movies with your

kids is different than going with your partner.

* The jobs-to-be-done concept was invented, refined, and popu-larized by two consulting companies, Innosight and Strategyn.

+

-

important

insignificant

Job importanceIt is important to acknowledge that

not all jobs have the same impor-

tance to your customer. Some are

important in a customers work or

life because, for example, fail-

ing to get them done could have

signicant ramications. Some are

insignicant because the customer cares about

other things more. Sometimes a customer might

nd a job important because it occurs frequently

or because its bad or desired outcome can be

felt or experienced immediately. Customers

often, but not always perceive jobs as important

when the failure to get them done has signicant

consequences.

37

Jobs-to-be-done offers a clear way to innovate Clay Christensen, HBS

The focus should be on what jobs customers are trying to get done. Tony Ulwick, Founder Strategyn

Job contextCustomer jobs often depend on the specific

context in which they are performed. The context

may impose certain constraints or limitations. For

example, calling somebody on the y is different

when you are traveling on the train or when you

are driving a car. Or, going to the movies with your

kids is different than going with your partner.

* The jobs-to-be-done concept was invented, refined, and popu-larized by two consulting companies, Innosight and Strategyn.

+

-

important

insignificant

Job importanceIt is important to acknowledge that

not all jobs have the same impor-

tance to your customer. Some are

important in a customers work or

life because, for example, fail-

ing to get them done could have

signicant ramications. Some are

insignicant because the customer cares about

other things more. Sometimes a customer might

nd a job important because it occurs frequently

or because its bad or desired outcome can be

felt or experienced immediately. Customers

often, but not always perceive jobs as important

when the failure to get them done has signicant

consequences.

37

What are the jobs-to-be-done of a potential Tesla buyer?

personal mobility

be different from others

occasional long dist.

trip

convey an image of success

commute to work

in sync with personal values

Upper Middle Class Male $100k+ Income

The following list of trigger questions can help you think of different potential customer pains:

What does your customer find too costly? E.g. does it take them a lot of time, cost them too

much money, or require substantial efforts?

What makes your customer feel bad? E.g. what are their frustrations, annoyances, or the things

that give them a headache?

How are current solutions underperforming for your customer? E.g. which features are they

missing, are there performance issues that

annoy them, or malfunctions they mention?

What are the main difficulties and challenges your customers encounter? E.g. do they under-

stand how things work, do they have difficulties

getting certain things done, or do they resist

certain jobs for specific reasons?

What negative social consequences do your customers encounter or fear? E.g. Are they

afraid of a loss of face, power, trust, or status.

What risks do your customers fear? E.g. Are they afraid of financial, social, or technical risks,

or are they asking themselves what could go

awfully wrong?

Whats keeping your customers awake at night? E.g. What are their big issues, concerns, and

worries?

What common mistakes do your customers make? E.g. Are they using a solution the wrong

way?

What barriers are keeping your customers from adopting a solution? E.g. Are there upfront

investment costs, a steep learning curve, or are

their other obstacles preventing adoption?

Link to these trigger questions online: 39

customer pains

describe bad outcomes, risks, and obstacles related to customer jobs

The following list of trigger questions can help you think of different potential customer pains:

What does your customer find too costly? E.g. does it take them a lot of time, cost them too

much money, or require substantial efforts?

What makes your customer feel bad? E.g. what are their frustrations, annoyances, or the things

that give them a headache?

How are current solutions underperforming for your customer? E.g. which features are they

missing, are there performance issues that

annoy them, or malfunctions they mention?

What are the main difficulties and challenges your customers encounter? E.g. do they under-

stand how things work, do they have difficulties

getting certain things done, or do they resist

certain jobs for specific reasons?

What negative social consequences do your customers encounter or fear? E.g. Are they

afraid of a loss of face, power, trust, or status.

What risks do your customers fear? E.g. Are they afraid of financial, social, or technical risks,

or are they asking themselves what could go

awfully wrong?

Whats keeping your customers awake at night? E.g. What are their big issues, concerns, and

worries?

What common mistakes do your customers make? E.g. Are they using a solution the wrong

way?

What barriers are keeping your customers from adopting a solution? E.g. Are there upfront

investment costs, a steep learning curve, or are

their other obstacles preventing adoption?

Link to these trigger questions online: 39

What are the pains of Tesla buyer? (i.e. his problems, risks, obstacles, frustrations)

accident and harm

lack of charging stations

buy before price drop

fear of dead

battery

laughed at

lack of space

frequent charging

above average

maintenance

aircon draining battery


personal mobility



trip


commute to work


The following list of trigger questions can help you think of different potential customer gains:

Which savings would make your customers happy? E.g. which savings in terms of time,

money and effort would they value?

What quality levels do they expect and what would they wish for more or less of?

How do current solutions delight your custom-ers? E.g. Which specific features do they enjoy,

what performance and quality do they expect?

What would make your customers jobs or life easier? E.g. Could there be a atter learning

curve, more services, or lower costs of owner-

ship?

What positive social consequences do your customers desire? E.g. what makes them look

good, increase their power or their status?

What are customers looking for most? Are they searching for good design, guarantees, specific

or more features?

What do customers dream about? E.g. What do they aspire to achieve or what would be a big

relief to them?

How do your customers measure success and failure? E.g. How do they measure performance

or cost?

What would increase your customers likelihood of adopting a solution? E.g. do they desire

lower cost, less investment, lower risk, or better

quality?

Link to these trigger questions online: xxx

41

customer gains

describe the more or less expected benefits the customers are seeking









ship?




or more features?


relief to them?


or cost?



quality?


41

What are the gains a Tesla buyer wants? (e.g. required or desired outcomes and benefits)

design

high-end battery

tech

brand recognitionfind my way (gps)

compliments from friends

self-driving

range of 250km to

350km

seating 4-5

perform like a sports car

high safety ratings


personal mobility



trip


commute to work


accident and harm



fear of dead

battery

laughed at

lack of space

frequent charging

above average

maintenance










ship?




or more features?


relief to them?


or cost?



quality?


41

Which jobs REALLY matter to customers?


personal mobility



trip


commute to work


accident and harm



fear of dead

battery

laughed at

lack of space

frequent charging

above average

maintenance


design

high-end battery

tech

brand recognitionfind my way (gps)


self-driving

range of 250km to

350km

seating 4-5


high safety ratings









ship?




or more features?


relief to them?


or cost?



quality?


41

personal mobility



trip


commute to work


design

high-end battery

tech

brand recognition


range of 250km to

350km


high safety ratings

accident and harm

fear of dead

battery

laughed at

lack of space

frequent charging



Which jobs REALLY matter to customers?

Your Customer Profile

!REMEMBER your solution is not part of the customer profile!

strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)




onealt.2Value Map

products & services

A list of all the products and services a value

proposition is built around

52

CO

NC

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UST

OM

ER

52









ship?




or more features?


relief to them?


or cost?



quality?


4152

CO

NC

EP

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UST

OM

ER

52

8 year battery

warranty

options

Model S 60-85 kWh

personal mobility



trip


commute to work


design

high-end battery

tech

brand recognition


range of 250km to

350km


high safety ratings

accident and harm

fear of dead

battery

laughed at

lack of space

frequent charging



54

CO

NC

EP

T V

ALU

E P

RO

PO

SITI

ON

54

pain relievers

describe how your products and services

alleviate customer pains









ship?




or more features?


relief to them?


or cost?



quality?


4154

CO

NC

EP

T V

ALU

E P

RO

PO

SITI

ON

54

how your products and services kill your customers pains

charging: 45-90 km/h

5+2 seats

range of 350km to

450km

personal mobility



trip


commute to work


design

high-end battery

tech

brand recognition


range of 250km to

350km


high safety ratings

accident and harm

fear of dead

battery

laughed at

lack of space

frequent charging


highest safety ever by NHTSA


8 year battery

warranty

options

Model S 60-85 kWh

56

CO

NC

EP

T V

ALU

E P

RO

PO

SITI

ON

56

gain creators

describe how your products and services create customer gains









ship?




or more features?


relief to them?


or cost?



quality?


4154

CO

NC

EP

T V

ALU

E P

RO

PO

SITI

ON

54

how your products and services create gains

your customers expect, want, or desire

personal mobility



trip


commute to work


design

high-end battery

tech

brand recognition


range of 250km to

350km


high safety ratings

accident and harm

fear of dead

battery

laughed at

lack of space

frequent charging


focus on design &

style

high-tech feel: 17

touch screen

performance 0-100km/h 4.4s - 6.2s


8 year battery

warranty

options

Model S 60-85 kWh


5+2 seats

range of 350km to

450km


onealt.3Fit

FitYou achieve fit when customers get excited about your value proposition which happens when you address important jobs, alleviate extreme pains, and create essential gains that customers care about. As we will explain throughout the book, Fit is hard to find and maintain. Striving for fit is the essence of value proposition design.

Customers expect and desire a lot from products

and services. Yet, they also know they cant have

it all. Focus on those gains that matter most to

customers and make a difference.

Customers have a lot of pains. No organization

can reasonably address all of them. Focus on

those headaches that matter most and are

insufficiently addressed.

Your customers are the judge, jury and executioner of your value proposition. They will be merciless if you dont find fit!

Are you addressing essential customer gains?

Are you addressing extreme customer pains?

Fit

6766

CO

NC

EP

T 1

.3

66













Fit

6766

CO

NC

EP

T 1

.3

66

personal mobility



trip


commute to work


design

high-end battery

tech

brand recognition


range of 250km to

350km


high safety ratings

accident and harm

fear of dead

battery

laughed at

lack of space

frequent charging


focus on design &

style

high-tech feel: 17

touch screen

performance 0-100km/h 4.4s - 6.2s

8 year battery

warranty

options

Model S 60-85 kWh


5+2 seats

range of 350km to

450km















Fit

6766

CO

NC

EP

T 1

.3

66

Design, Test, Repeat

design

test

strategyzer.com

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Gains

Products& Services

CustomerJob(s)



8584

CO

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.3

84

design

ASSESSME

NTOBSE

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prototyping(prototyping)

def.

* the process of building quick, cheap, and rough study models

* to learn about the desirability, feasibility and viability of

alternative solutions

??

?

?

? ??

+Zoom-Zoom

Zoom out to the bigger picture to analyze if you can profitably create, deliver, and capture value around this particular customer value proposition.

Zoom in to the detailed picture to investigate if the customer value proposition in your business model really creates value for your customer.

Are you creating value for your business?The Business Model Canvas makes explicit how you

are creating and capturing value for your business.

Are you creating value for your customer?The Value Proposition Canvas makes explicit how

you are creating value for your customers.

169

* Working preview content for private review only, do not distribute Copyright Osterwalder, Pigneur, Bernarda, Smith, and Papadakos

?

?

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+Zoom-Zoom







169


?

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?

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+Zoom-Zoom







169


adapt the business model & the value proposition

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+Zoom-Zoom







169


describes how you create value for your customer

describes how you

create value for your

business

Design, Test, Repeat

design

test

strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)



8584

CO

NC

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.3

84

test

SUCCESS

HYPOTHESIS

Why do businesses fail ?

. Test those first!

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customer discovery

customer validation

customer creation

company building

SEARCH EXECUTION

customer development & lean startup

PIVOT

[Source: based on Startup Owners Manual (2013) Blank & Dorf]

33.1 What to test

3.2 Testing step-by-step

3.4. Testing library (in the book)

3.4 Bringing it all together

3.onealtWhat to Test

215214

TEST

214

Provide evidence showing what customers care about (the circle) before focusing on how to help them (the square)

Testing the circle

Provide evidence showing that your

customers care about how your

products and services kill pains and create gains

Testing the square

Business Model Canvas

Cost Structure

Key Partnerships

Key Resources Channels

Key Activities Value Propositions Customer Relationships

Customer Segments

Revenue Streams

15

Provide evidence showing that the way you intend to create, deliver, and capture value is likely to work

Testing the rectangle

HYPOTHESIS

3.2Testing Step-by-Step

223222

TEST

222

Testing Overview

Test Card

+

-Extract Hypotheses Prioritize Hypotheses Design Test

Design Testing220

TEST

ING

VA

LUE

PR

OP

OST

ION

S

220


Learning Card

+

!-

Prioritize Tests Run Tests Capture Learnings Make Progress

221

Write Your Own Test Card

strategyzer.com

Gain Creators


Gains

Products& Services

CustomerJob(s)




What needs to be true for this feature to work and create value? -> Hypotheses

SAVE 20% ON SALES PROCESS

customer segment X wants to save 20% on sales process

how many of the interviewees clicked on the follow-up link

50% clicked the link

talk to 40 potential customers and give them a trackable link with more information

SUCCESS3.3

Experiment Library

241240

TEST

240

A mix of experiments

Scientist

DIRECT CONTACT with customersLearn why and how to improve

INDIRECT OBSERVATION of customersLearn how many and how much

Lab studies Learning prototype/MVP p. 222 Life-size prototypes p. 226 Wizard of Oz p. 223

Anthropologist p. 114For field studies

Sale actions Mock sales p. 236 Pre sales p. 237 Crowdfunding p. 237

Tracking actions Ad and link tracking p. 220 Landing page p. 228 Split testing p. 230

Participatory design and evaluation Illustrations, storyboards,

and scenarios p. 224

Speedboat p. 233 Product box p. 234 Buy a feature p. 235

Journalist p. 110For interviews

Detective p. 108For data analysis

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STARTING PO

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265264

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The testing process

2ExtractyourHypotheses

3DesignYourTests


Test Card

4Enter

the LearningLoop

Learn

5A

UNCERTAIN

test more

Measure

Build

5Capture

Learnings and Next

Actions

5C

INVALIDATED

iterate or pivot

5A

UNCERTAIN

test

1 (6)(re)Shape yourideas

Learning Card

5A

UNCERTAIN

test more

3DesignYourTests

4Enter

the LearningLoop

5Capture

Learnings and Next

Actions

6MeasureProgress

Learn

CustomerDiscovery

CustomerValidation

CustomerCreation

CompanyBuilding

5C

INVALIDATED

iterate or pivot

5A

UNCERTAIN

test more

5B

VALIDATED

progress towards

next element

Measure

Build



Test CardLearning Card

The testing process


Test Card

We believe that

Test Name

Assigned to

Deadline

Duration

And measure

To verify that, we will

We are right if

The makers of Business Model Generation and StrategyzerCopyright Business Model Foundry AG

Test Cost: Data Reliability:

Critical:

Time Required:

Test Card

We believe that

Test Name

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We believed thatstep 1: hypothesis

Insight Name

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Date of Learning





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Date of Learning





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Date of Learning





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Date of Learning





Data Reliability:

Action Required:

back to the drawing

board: iterate or pivot

your design

advance to next step:

move on in your quest to

turn your idea into reality

3 Tests

Test CardLearning Card

Learning Card

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4Insights

& Actions

5Measure Progress

2Hypotheses


273

Progress board (Kanban)

#VPDesign Strategyzer.com

zoom out

zoom in

Canvas Design

Search Post-SearchTools

Test Evolve

customers want and then keeping them aligned with whcustomers want in Post-Search.

Value Proposition Design shows you how to use the VProposition Canvas to Design and Test great value propositions in an iterative search for what customers want. Vproposition design is a never-ending process in which need to Evolve your value proposition(s) constantly to keep it relevant to customers.

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

Progress

1 2 3

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