Building your Value Proposition

The business model canvas provides a great tool for working through your business model, but it says little about timing and prioritisation. When should you develop your resources model for instance, before or after your customer segments? Ash Maurya and others start out by looking at the value proposition and taking it from there.

In this great post by Alex Osterwalder, we are introduced to some tools for developing your value proposition in more detail. It is quite a detailed post, and certainly worth reading through when you have the time., but I thought I would summarise the key points here.

The Minimum Viable Product

One of your first steps in your search for a business model is to start playing with prototypes. The minimum viable product is a prototype of such simplicity it provides just enough of a feature to test your concept on early adopters. For a new book or film the minimum viable prototype might be a single web page or email outlining the concept and asking if people are interested. Other products might be prototyped with simple sketches or bits of cardboard. The main idea is to help your customers visualise your concept and give you some feedback. Think of it as a visual storytelling device

The Value Proposition Designer

Designed as an addition to the business model canvas, the VP designer focuses on two core areas, (i) the value proposition, and (ii) the customer segment. Here are the key considerations when sketching out your customer segment:

  1. What jobs is your customer trying to get done? e.g. paying their bills each month or searching for a new car
  2. What are the pain points your customer is experiencing the way they get those jobs done right now? e.g. online bill payments require a lot of numerical typing which is quite prone to error, and the search for a car requires that they talk to untrustworthy car salespeople
  3. What does your customer stand to gain out of getting the job done? This can range from their improved social status, emotional state, or the direct outcomes from getting the job done e.g. once the bills are paid you can relax a bit knowing you won’t get any more red bills or threats through the post

And here are the key points for your value proposition:

  1. What core features help get a customer job done? e.g. links to bank account, links to bills, makes payments
  2. What pain relief do these features provide? e.g. removing the need to type in the amount to be paid (and getting it wrong)
  3. What gains can your core features provide (and are they expected or unexpected)? e.g. it just works or I get notified of cheaper competitors if my bills could be reduced somehow


Competitive Advantage

In a departure from his normal position on competition, Alex suggests using a final slot to identify relative appeal to your customers against the competition. He suggests using a strategy canvas to compare different value propositions. Perhaps an alternative approach would be to simply state your point of competitive advantage (or unfair advantage in Ash Maurya’s terminology). Although this is part of your business environment and not the business model, it can be useful to keep a placeholder for identifying your point of competitive advantage (and developing one if you don’t already have one).


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