Design Your Value Proposition with Alexander Osterwalder

Alex works at a company called Strategyzer that gives companies access to tools and techniques that will help them design better products and run better projects. He’s written books about value proposition design and business model generation.

How do companies avoid the Kodak moment, where they actually innovated themselves to death as Kodak realised too late that they had no business model for digital cameras.

How much goes into finding the right business models and value propositions where you work? How do you go from an idea to a business? Does the company appreciate that it’s not a linear line!
plans
Large companies that use a business plan, need to burn this! There is no chance you can make those exact numbers and you don’t want people to buy the numbers you want them to buy into the product. Companies need to search for the right business models, design something, test this (search), execute. Don’t only test out one idea but also think about what are the alternatives? Then test these out as well.
surgury
Look at surgeons, it is the age of the innovation surgeons, who use tools to do there job. They don’t use tools from 1985 as the world has changed. They also don’t use one tool for everything, there are specific tools for different surgeries. Would you let a surgeon operate on you with a Swiss Army knife? Probably not.

knife

Surgeons have also had many years of training before they qualify and they use this experience to make decisions to the best of their ability. What they would do in their first year as opposed to their last year it different. It is the same with other jobs, you need to learn from the time you have done the role but be aware that things are changing and what was right then may not be the best way to do it now.timeIMG_0281The Business model canvas tells the story of how you create, deliver and capture value for your organisation (not for product design).
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Again one tool doesn’t do the whole job and it’s not about industry specifics anymore. Different industries may have the same drivers that create value. There is the front, the theatre and the back part (spending money) of the canvas.
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People need to think big picture.
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There is also the value proposition canvas which has the customers at the centre. How does the product create value for the customer or for the business?
Instead of having a conversation, create a visual shared language, like a map.
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It is telling a story on how they are creating value for their customers.
IMG_0288What are the customer jobs to be done as these are the centre of value propositions.IMG_0289From here you create an empathy map, what are your customer’s pains and gains.

These should be actionable
1. What are people actually trying to get done (this should be a verb)
2. What does success look like – how do they measure that?
– for example increase sales by 5%
3. What does failure look like?

What are you trying to do?
Do you want to create a better book or is it so existing solution so broken we need to change the playing field? For example how are people learning, maybe a book isn’t what is best, maybe videos are a better media for?

Once we know the customer then create the value map
Learning about the customer is through observation
Giving them value is actionable items.

When you talk to your customers limit the options as people don’t know what they want. Don’t talk about wants or solutions but instead ask what are they trying to get done? Move the focus on the customer jobs. Personas can be job based segmentation, similar work means similar pains and gains which can be better than segmenting on socio-demographic profiles.
IMG_0290What are you going to pack for your business trip?
There are 3 jobs types
– Functional (change of clothes)
– Social (status symbols)
– Emotional (pictures of family)

Remember – jobs last, products don’t (value propositions don’t)
Think of the music industry, the job never changed (listening to music) but the solution didn’t.
IMG_0291 IMG_0293
Clayton Christensen talks about if you understand the jobs well then you understand how to improve the product. He talks about milkshakes for his example. the company talked to customers and implemented what they said they wanted but there no change in sales. So they got someone to observe the customers. What are the jobs customers are getting done? They figured out who bought milkshakes, and they tended  to buy it before 8am and they were alone in the car. So the company started thinking that this was a breakfast replacement, something on the go. They
made the milkshake thicker, the straw thinner and put fruit chunks in it. All these things made the milkshake last longer. They tripled the sales without talking to customers. They could sell this to more than just the milkshake market but for breakfast snacks market too.
IMG_0294IMG_0295Observe the customer, fit and map. The jobs don’t need to be linked to pains and gains but you do need to rank and prioritise them. The content will change but the value map won’t, keep iterating and improving when you get feedback. Make sure the issues are not too specific with a job as some people think jobs and gains are the same. The gains need to be measurable and jobs are a verb and a task. These jobs need to create value for customer and which pains/gains are they addressing?
IMG_0296If you look at Hilti – they make machine tools for builders.
They learnt about their customers and realised that the main issue is around maintaining the tools. There needed to be sound cost management. You need to make it explicit how you are creating value for your customer.
IMG_0297It should be visual and able to pivot the information. Focus on few jobs and do these well as you can’t address everything.
IMG_0299As the value changes you need to update business model, what’s the impact.
IMG_0300The challenge is to create a dual working practice. To improve or invent?
To improve incrementally is known and predictable but to invent and experiment, it’s new and unknown. You can’t predict or search for business models that work. Detailed plans are worthless. You need to test a hypotheses. To invent is a different system.
IMG_0301So why do businesses really fail?
IMG_0303Because they build the wrong thing..
IMG_0304Better place, a company that switched out batteries for electric cars lost $500 million and was failure.
IMG_0305Flow TV lost 1.6billion dollars
They are burning cash without the right information
The customer job is to decrease uncertainty. How do you sell it? Make big bets, big risks, where as innovate is cheaper.
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The first thing to do is to test the hypnosis – for example saving 20% on sales process.
IMG_0308Use test card to fill in learning card and then fill in the progress board. This helps to reduce the risk and uncertainty.
IMG_0312As Picasso said:
IMG_0313So how can we get companies to take smaller risks, focus on the customer job and delivering value? Make experiments in your project, use the map, understand your customer and do little experiments. Getting it working for one project and show the success.

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