Business Model Canvas

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ACHIEVE PRODUCT-

MARKET FIT WITH OUR

BRAND-NEW VALUE

PROPOSITION-Dt6ICNEft

CANVAS

HOW to create POdLCt5 OflO ervice ctorr want

Get started w'th.

Value Proposition*,'-_ Design

LE' i 9L NVBC-VAP Page 1

SPEAKING AND WORKSHOPS SITE

CANVAS -

I'm a big fan of the Lean Startup movement and love the underlying principle of testing, learning, and pivoting by experimenting with the most basic product prototypes imaginable - so-called Minimal Viable Products (MVP) - during the search for product-market fit. It helps companies avoid building stuff that customers don't want. Yet, there is no underlying conceptual tool that accompanies this process. There is no practical tool that helps business people map, think through, discuss, test, and pivot their company's value proposition in relationship to their customers' needs. So I came up with the Value Proposition Designer Canvas together with Yves Pigneur and Alan Smith.

The Value Proposition Diyiii Canvas is like a plug-in tool to the Business

Model Canvas. It helps you design, test, and build your company's Value

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Mode! Canvas. It helps you design, test, and build your company's Value

Proposition to Customers in a more structured and thoughtful way, just like

the Canvas assists you in the business model design process (I wrote more

about how we came up with this new tool previously).

The Canvas with its 9 building blocks focuses on the big picture. The Value

Proposition Dt'yteu Canvas zooms in on two of those building blocks, the

Value Proposition and the Customer Segment, so you can describe them in

more detail and analyze the 'fit' between them. Companies need to get

both right, the "fit" and the business model, if they don't want to go out of

business, as I described in an earlier post on failure. The tools work best in

combination. One does not replace the other.

TOOLS

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In this post I'll explain the conceptual tool. In my next post I'll outline how

you can use it for testing in combination with the Customer Development

RECENT POSTS

Value Proposition Design - Our Next Book

Launching This Fall

The Business Model Theater Can You Put

on a Show?

Wonted: Business Model Researcher

(submissions closed)

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In this post I'll explain the conceptual tool. In my next post I'll outline how (submissions closed)

you can use it for testing in combination with the Customer Development

process by Steve Blank and the Lean Start-up process by Eric Ries, The

Value Proposition benny, itf , Canvas will allow you to better describe the

hypotheses underlying Value Propositions and Customers, it will prepare Q.

you for customer interviews, and it will guide you in the testing and

pivoting. January 2014

January 2013

The Value Proposition Diyiitt Canvas November 2012

September 2012

As mentioned above, the Value Proposition Dciyi m, Canvas is composed August 2012

of two blocks from the Business Model Canvas, the Value Proposition and July 2012

the corresponding Customer Segment you are targeting. The purpose of May 2012

the tool is to help you sketch out both in more detail with a simple but March 2012

powerful structure. Through this visualization you will have better strategic February 2012

conversations and it will prepare you for testing both building blocks. January 2012

November 2011

Achieving Fit September 2011

May 2011

The goal of the Value Proposition Dy Canvas is to assist you in January 2011

designing great Value Propositions that match your Customer's needs and November 2010

jobs-to-be-done and helps them solve their problems. This is what the September 2010

start-up scene calls product-market fit or problem-solution fit. The Value August 2010

Proposition Deyi je, Canvas helps you work towards this fit in a more 1' 2010

systematic way. June 2010

May 2010

March 2010

February 2010

January 2010

December 2009

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Customer Jobs

First let us look at customers more closely by sketching out a customer

profile. I want you to took at three things. Start by describing what the

customers you are targeting are trying to get done. It could be the tasks

they are trying to perform and complete, the problems they ore trying to

solve, or the needs they are trying to satisfy.

CIJSTOr1R JOBS

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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 jabs is your customer trying to get done? (e.g. trying to

took 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.

commLlnication, sex, ...

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Customer Pains

Now describe negative emotions, undesirec costs ano siuotons, and risks

that your customer experiences or could experience before, during, and

after getting the job done.

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or PAINS

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.

Jock 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 tear? (e.g. financial, social, technical

risks, or what could go awfully wrong, ...)

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• 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.

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yourself:

• Which savings would make your customer happy? (e.g. in terms of

time, money and effort, ...)

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February 2005

January 2005

September 2004

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June 2004

• 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, I want you to look at three things. First, list all the

products and services your value proposition is built around.

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PPODUCTS S&VICES

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

get either o 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?

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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 on 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. Foss 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, ...)

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a 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?

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PAINS

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

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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 cast. ...

• ... 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. I like thinking of this as an open slot' that will be filled by the

company with the best fit. The visualization for this was on idea by Alan

Smith, one of my co-founders, and the designer of Business Model

Generation.

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OPEN SLOT

sketch out competing value propositions, you can easily compare them by

mopping out the some variables (e.g. price, performance, risk, service

quality, etc.) on a so-called strategy canvas.

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The Value Proposition DUSiylei Canvas Poster

You con use the Value Proposition Demy, on 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.

Contrary to the Canvas, the Value Proposition DtIyiltr Canvas poster and

methodology is copyrighted. However, you are free to use it and earn

money with it as an entrepreneur, consultant, or executive, as tong as you

are not a software company (the latter need to license it from us).

However, when you us it please reference and link to

BusinessModelGeneration.com.

Here is a downioudable draft poster version of the Value Proposition

Dtyi Canvas.

http:/fwww. busnessmodelgeneration .com/downloads/value proposition canvas.pdf

5EE.

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Testing and Pivoting

Using the Value Proposition Deyiiei Canvas as a thinking and design tool

is only a start. To get the best out of it you need to combine it with testing

and pivoting. In my next blogpost I explain how the Value Proposition

Deyi te, Canvas perfectly integrates with the Customer Development and

Lean Startup Process. I explain how it helps you substantially when you

'get out of the building' as Steve Blank would say.

Last But Not Least: Workshop Date Announcements

We have a couple of 2-day workshops coming up where you can learn

about all our tools:

• Save US$600.- with the super-early bird discount on our 2-day San

Francisco Workshop on Nov 29/30 2012 (this discount expires Sept

2, 2012)

• Save US$500.- with the early-bird discount on our 2-day Zurich

Workshop on Oct 25/26 (this discount expires Sept 9, 2012)

Hope to see you in either San Francisco or Zurich!

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