Designing your Value Proposition by Alex Osterwalder at Mind the Product 2014

[Music] [Applause] [Music] so thank you hi everybody um let me just check are you hungry to learn please hands up if you are otherwise you can leave the room now okay I'm gonna try to get you to work a little bit so I'm gonna talk about tools to help you design test and build products and services customers want now that's what you all do right that's your profession so I'm going to try to help add something to the mix okay and I'm a bit of a tool geek which seems pretty weird but I really think conceptual tools and software tools can help us even with more strategic issues so together with each Pina we wrote this book business modernization was pretty successful now we created a software company called strategize err but what fascinated my team and myself is how these tools in particularly business small canvas are spreading around the world so here you have Tim Murphy former chief product officer of at MasterCard and they adopted the business model canvas first with 300 product managers and then they spread it out to marketing people 200 marketing people because they want a better language to collaborate they want a language to explain how they're creating value for their company and a language to explain how they're creating value for their customers and I'll tell you what I mean with language to share language so let me just check who view knows the business model canvas okay so a couple of you who's used it a lot and is really good at it okay anybody want to come on stage the doc and I can sit back so a MasterCard they spread this with an online course they wanted to get people trained so they would better collaborate now why do we need business tools like the business small canvas well I want you to picture this image here think of yourself you know having to go through heart surgery you have to go through heart surgery pretty dramatic heart surgery okay then you're carted into the operating theater and your surgeon shows up with one tool one tool a Swiss Army knife if you're laughing now imagine you're in that operating fear you wouldn't laugh right so in business we often use pretty basic tools I think we did a little bit of survey and one of the tools that was most popular SWAT nothing against SWAT but come on we can do better so surgeons have several tools to perform surgery because it's a profession and they're trained for 13 years to do so and I think when it comes to more strategic issues when it comes to innovation we should have these tools and we should be trained in these tools in the operational space of business we actually have this kind of tools second image before I move on anybody know what this is is the mobile phone is actually the first one the Motorola DynaTAC okay 1985 picture yourself in a meeting with your colleagues phone rings somebody pulls out this thing out of their pocket or out of their bag probably you think that's pretty weird phone from 1985 come on well that's what we do in business often we still have tools from 1985 now those tools were great for that era but today the world has changed it's fasters different technology globalization and so on so we need tools from today I think that's very important because often we have pretty difficult tasks in particular and product where we need to and where we need to understand and users and customers and create great stuff for them while the entire world is trying to do something similar so the competitive fresh was pretty high so let me draw if we can switch to the iPad for a second let me draw why we think business tools are important so you might have an idea with your team with this startup in a large company in case you didn't realize this is an idea and you want to go over here okay you want to get from here to here anybody know what this is on the right come on yeah it's a 1 billion dollar business you can see that ok so you go from here to here now traditionally we write something like a business plan or a product plan and then we execute right and we say it's a pretty linear undertaking but if you're honest is it really a linear journey going from the left to the right a new product improving product products it's more like this right who's lived this journey hands up if you live this journey right so this is actually a lie and what we're gonna do now is we're gonna look at tools ok now again like surgeons not just one tool that would be alive if I tell you hey business small canvas does everything I'd be the biggest player in the world so we actually made one more tool but I think we need many and this is the tool we're gonna explore together today got on your seats this is the value proposition canvas that's what we're going to look at together ok new tool from our new book if we can switch back to the slides please if we can switch back to the laptop right thanks so the business small canvas there's a couple of things we learned that really worked the share language aspect that I mentioned at MasterCard this is one that we really see across the world using a tool like this just for one task to describe how you're creating value for your organization is very powerful because you make your conversations tangible your strategic conversations become tangible because you put post-its up there something we underestimated it makes things concrete and this picture changes while you're trying to figure out what's the right business model right now why is why is this so powerful because if you look at how traditionally business conversations often happen your new product new value proposition new business model this is how the conversations usually look like you have a group of smart people around a table experience and somebody starts all we need a new value proposition ok we need to launch this new product with a great value proposition what does value proposition mean ok if you have no share language this is what happens hmm Goodman is the next person's turn yeah I think we should use this technology and we should do this and we should do that huh and we should hire that person I met at the conference you know really great person ok huh do you know how you call these kind of who's actually been in a meeting like that handsome who hasn't been ok that would be the luck dear the luckiest person in the world you know you call this you know you call this kind of phenomena yes it's a meeting but there's a specific term it's called bla bla bla okay Dan wrong friend of mine from San Francisco he wrote a book called bla bla bla what to do when words don't work so words are fine but it often degenerates into verbal diarrhea in meetings so you want to use other tools visual tools that complement that to get out of the land of bla bla bla to make things tangible now when we're in product design yes we have personas so we start making things more tangible those are the kind of tools I'm talking about ok so any problem can be made clear with the picture I always say for sona's that Katie said this morning we're not talking about stop photos okay talking about something else and I'll show you what I mean with that this makes the picture clear when it comes to business morals now is one tool enough of course not for those of you who use the canvas you also know its limitations doesn't know everything of course it's like surgery you need several tools to build a great product with a great business model because you also need a great culture and so on so we came up with the second tool which we're going to explore together now it's called the value proposition candidates okay value proposition canvas we wrote a book around it coming out in October value proposition design you can get hundred pages for free so the model everything you you have in front of you is supported with hundred free pages online so you can have a look and if you want a limited pre Edition version you're gonna start tweeting about this now it's a turn on your phones for go ahead so you can get you can get part of it for free if you want a limited edition you can you can tweet a bit about it so what's the value proposition canvas about it's about taking two pieces I'm not going to talk more about the business small canvas you can take two things here the customer you're targeting or the user you're targeting and what you're offering them the value proposition is fancy word value proposition is what you build around your products and services now that's pretty fuzzy yeah I can say who my customer is and I can say what my products and services are but can I really describe how my products and services are creating value now with this tool but what if we had a map that would allow us to zoom in and that's what we're gonna do now we're gonna zoom in to the customer and the value proposition and I'll show you why this is so important that we can articulate how we're creating value so we can't articulate the features we're building but can we really articulate how we're creating value I'll show you the parody here to show you how not to do it hey I've got a great idea for a business that's exciting tell me about it I've developed a chemical isomer that links to volatile organic compounds causing carbon bonds to rupture and ramps them in a nanotube coating huh that's a little confusing can you dumb it down for me sure what I do is I take a proprietary isomer that I developed with a picric acid wash that hollows out the carbon bonds and replaces them with a nanotubes wrapping okay so I guess it's pretty technical oh you know I've been working on this isomer for nine years so what's the business idea to sell it to who everybody will want one what for so they can wrap their volatile organic compounds in carbon nanotubes hmm I think you might need a target customer I don't think I need to wrap my compounds in your nanotubes well maybe not you so for people who buy it what's the value you are providing them I've developed a chemical isomer that makes two volatile organic compounds causing carbon bonds corruptor and wraps them in a nanotube coating you've said that already this is getting annoying why should anyone care about your isomer I spent nine years on this I know okay lieutenant and investor how can I make money off your product by selling it you're a smart guy but try not to think like a scientist think like a businessperson okay value-chain term-sheet I have to go now and answer that that's not your phone I know okay none of us would admit that sometimes we're not that far away from that right so of course if you're in science and research you get excited about your stuff but you know what when we build products I mean I co-founded to start up with you're trying to push and we get excited about our stuff but do we always articulate how we're really creating value for our customers how quickly do we get you know excited about our product and our features well it's normal right so I think we can do better so let's map out this customer and I'm not talking about the traditional persona I'm talking about a simple map that allows you to capture kind of the knowledge that you probably already have but organize it in a slightly more actionable way okay so you want to understand three things we want to map out three things for a particular target customer segment the first thing we heard a couple of times today jobs to be done what are the jobs our customers are really trying to get done so not how much do they earn and really what are the jobs are trying to get done remember the pizza image yes Barack Obama eats pizza everybody eats pizza right what are the jobs behind that then the second thing here is what are the what are the customers pains what are the things they hate what is it that doesn't work what are the obstacles what are the risks okay we'll get a little bit into that a bit more afterwards and what are the gains what are the outcomes that they want to achieve the expectations that they have that that the things that they expect from doing a job well okay so those three things now let's look at that a little bit with an example customer jobs it's a concept for those of you you know it was sort of customer jobs jobs to be done probably many of you for those who haven't have a look at it two groups kind of made this popular one around Tony Luuk who says the focus should be on customer jobs when you're trying to create value understand their jobs the other group is around Clayton Christensen known for disruptive innovation he thinks his jobs to be done concept she didn't which a couple of people developed is even more powerful he says we hire products to do certain jobs for us okay so jobs let's look at an example here Tesla okay potential buyer of a Tesla she look at the jobs of a potential buyer of a Tesla so who is it okay they're targeting actually upper middle class male hundred thousand dollars income or more what are the jobs these people are trying to get done so you make a list of the jobs you think they have and obviously gonna do your research to figure out what they really want commute to work personal mobility occasional long distance trip right all the functional jobs but then there's the emotional jobs right like convey an image of success so you want to figure out what are the really the jobs are trying to get done and then beyond the solution itself electric vehicle ur so I didn't mention Tesla Motors for those who don't know it's an electric car okay but a pretty fancy one so here you don't just look at the jobs related to an electric car or don't just look at the jobs related to to a car in general but think of the be customer more holistically what are all the things are trying to get done but then you move on and ask yourself well what are the pains here what are the things that are preventing a customer from doing the job well what's broken in the solution what do they fear what are the risks what are the obstacles so if we take the potential buyer of a Tesla what are all the things here some related to electric vehicles some a little bit less by lack of charging stations a fear of that fear of accident and harmed general stuff for a car buyer so map out for your customer all of the pains they have okay then the next step pretty straightforward the gains the outcomes that they want to achieve the things that they expect if they do this job well what are the gains that they get okay so this is more of a task this is an outcome to avoid and this is an outcome that they want to achieve maybe that they desire maybe that they expect from you okay so if we take the Tesla what are some of the things that they that they want the gains that they want from from a car from rollin electric vehicle from getting from A to B it could be public transportation well okay so car is designed that it performs like a sports car whatever car it actually is in case of electric cars that it has a certain minimum range so you ask yourself what are the gains that they expect where that they even drive a dream of like a self-driving car okay so this is stuff you know but do you organize it in a share language with a map like this that can be shared across the different parts of an organization technology marketing finance this gives you a way to map your customer okay now that picture alone is not enough what are you gonna do next so next thing you do you organize that into the most important jobs pains and gains because then you now know how you're gonna start addressing this and the more you can make it tangible and put numbers on it the more you actually have what do you have there measures of success and their measures of failure what prevents them from getting a job done and what do they want to actually get from completing one of these jobs okay so what I want you to do now since I'm a Swiss and I like others to get them to work I'm gonna get you to work now you are going to pick one customer and you're gonna sketch out a customer profile in six minutes okay and then you're going to create a product afterwards so it should look now we don't have enough time something like this when you do it in the real world can take 40 minutes or so you're gonna get six minutes since you're so smart and so fast I want you to choose one customer picture maybe even a concrete customer or user and then sketch out their profile but one thing first I want to remember individually do not think too much of what you're offering them because if she take a Tesla buyer potential Tesla buyer we had one like personal mobility they could get around with the bus in the Train maybe not in the US but in London okay so don't think of your solution you want a customer profile that allows you afterwards to come up with new solutions that might not have that much to do with what you already do call me on that okay so let's go I'll give you six minutes six minutes and I want you to do this exercise well because if you do it well we can do something cool afterwards okay so please do it let's get going six minutes hands-on hands-on and for those of you who don't do it who don't work it's a clear sign that you've never seen a customer and that you're not interested in creating value for them okay so can everybody listen everybody listen so what you're doing here is your mapping stuff that you probably already do but now you have this map and this map is a pretty good language to share your understanding of customers either across a team or across parts of your organization and this map will obviously evolve because you can start let's say you're you're you decide in a meeting room what we're gonna target this customer segment but you don't know them it doesn't matter if you start mapping it out with sticky notes and say I think these are the jobs pains the games they have that's your start and that's the basis for your user research afterwards your client restore customer research because then you're going to start to verify and this map will change the more customers you talk to until it becomes the reality and it's really important that you arrive at a stage where you can say these are the most important jobs pains and gains of our customers so this map evolved x' the shared understanding evolves now what I want you to do next I'll give you one minute I want you to order them in three columns with the most important jobs on top least important on the bottom most or most extreme pains on top least extreme on the bottom like I did for the Tesla we had three columns okay quick minute to sketch that out most important jobs at the top of course you would usually do this on a big poster or in a software okay that's fine that's fine let's continue together let's continue together doesn't matter if you're not totally finished okay to get that you get the point okay let's continue together so now we've mapped our customer we observed or customer we shaped their customer this is something that allows you to organize your research and then you will do segmentation you'll see that maybe different customer segments based on different jobs not based on their income not based on you know the place they live the geography but based on their jobs based on their pains based on their gains very different way of segmenting okay but now let's move to the value proposition okay now we're gonna ask ourselves how are we creating value for that particular customer so the first piece here is really easy it just zoom out to the business model back in the first piece is really easy here we're just going to describe three things the first one is your products and services it's just a list of the particular products and services you're offering to this customer segments okay but now that's where here's where it gets interesting now you're going to make explicit how your products and services connect with the jobs pains and gains of your customers it's not about listing the features no it's about explaining how there's how you're creating this connection so let's go back to the Tesla now we're going to explain here how do the products and services I took the Model S is a sixty or eighty five kilowatt battery eight your battery warranty and you add options on top in your car how does this create value for the people over here well let's look at the pain relievers couple of pain relievers here question is how do our products and services kill or relieve the pain over here that we mapped out and here we're not going to address everything no value proposition kills all the pains relieves all the other pains it's just something that we address we make a choice this is design this is not designed this is observation this is design so they're batteries charged in one hour they get 45 to 90 kilometres which means that if you charge for an hour you get 45 kilometres of Independence addresses here some of this stuff like frequent charging the fear of the dead battery in terms of space here the Tesla Model S five seats for adults two seats for children okay two more things here well the range 350 kilometers to 450 kilometers here's an exciting one it's the safest car in the world the safest car in the world least if you believe the National Highway Transportation something Administration Safety Administration there you go okay and then the gains and here is where they differentiate can use another tool to assess the differentiation now let's look at the top let's look at the gains the gains so anybody have you heard of better place who's sort of better place who's heard of the Nissan vernal leaf electric car a couple of you nobody wants a leaf because you can see they're an electric car they're ugly that their performance sucks if you take at least these people here would never buy a leaf why because they have other expectations here games okay so if you look at the Tesla it's closer to the performance of a sports car it actually goes from 0 to 100 kilometers in 4.4 seconds I have no clue of cars that had to do a lot search to understand this but the Model S doesn't look and feel like an electric car because they understand that jobs pains and gains of their customers they designed a car for that particular customer segment they focus on design looks more like a German car than an American car and definitely not like an electric car okay and then inside they have a 17 inch screen to give it a bit of the technology field so this really connects and this in the startup world some of you might know it's called product market fit right better place went out of business because their electric vehicle sucked and their business model was broken but they did not understand their customers and they definitely didn't test their customers okay so what I want you to do one thing one last exercise for today would just see if I still have time is now you're going to design a product a value proposition so what you're going to do now is you're going to take an existing product it just may be out of feature are you going to just put one product idea on a piece of paper you put it here okay so you're just going to put a feature here I would say features easier than an entire product a feature that you're adding to an existing product and then the next sticky note is going to be either how does it kill pains or how does it create gains can be either this or this or one here and one here but you'll have a maximum of three post-it notes okay this is a prototype brainstorming so I'm going to give you one minute come up with a product feature okay one product feature that you're going to add and you're gonna explain how it kills a pain that you should have on that right-hand side or how it creates a gain okay okay come up with one feature and and point out how it kills the pain alleviates a pain or creates a game great let's move on somebody told me we always need to put a gap like this in slides and everybody will love your presentation so I did this this is what you don't want right so basically this obviously needs to connect with this but what you're doing here is you're making it explicit and the power of explicitness is unbelievable because it brings you it gets you beyond the land of blah blah blah here you now have a map to tell everybody in your organization how are your products and services alleviating pains are creating gains here you're gonna have a limited number of things it's the choices you make of what to do and what not to do okay and here you're gonna have a whole lot of things here you make the choice to connect it with us okay so if we take the oops the test lock can't disappeared where did that one go sorry I have to pest loss somewhere but basically oh yeah we saw before the Tesla really makes this connection right this is something that better place electric vehicle company with battery swapping station didn't get right and that Nissan most electric cars don't get right okay they are maybe tech targeting a slightly different segment but it didn't work so here's the last piece and here's where all this stuff connects with the whole Lean Startup and customer development movement so you might know I'm Steve blanks work customer development who's heard of Steve Blank and customer development who's heard of Lean Startup and Eric Ries okay you should have both of those books from those authors together obviously with our books please as part of your methodological toolset okay when you do your methodological shopping the testing part is very very important what I mean with that is you're going to take this you're going to figure out what are the underlying hypothesis I'll give you one example from the first thing we did we created an iPad app which is long ago before we move to a SAS app to Sketch up business models okay we had hypothesis two things we said need to be true fried our idea to work first one was people need to use they need to want to use software to Sketch up business models the second one was we said they need to want to pay $29 for an iPad app that does that okay that was our hypothesis so what did we do we designed a test to prove if these hypothesis were right or wrong we did the traditional thing for us then that was revolutionary is the first time we really started testing put up a landing page it said it does one two three we asked people to sign up and then we asked them to pay hundred dollars fifty percent said you're criminals thirty percent said that's too much I'd pay 60 twenty ten twelve so we got their highest price and then the rest said we're gonna send you the money so we actually learned and from then on we started to test all the time but one thing that we learned is testing is damn hard it's really hard we did a lot of interviews and we didn't get really great results this one was good but then the testing we did afterwards in the enterprise space was not as good so we came up with a new tool this is the last concept and tool I'm going to throw at you I told you I'm a concept geek can't talk to my wife about concepts so I throw it up audiences so we came up with a test card and the task card allows you to test the hypothesis underline your ideas okay so I show you what I mean with that in our case one of the hypothesis was people are interested in using an iPad app to sketch up is the smalls kind of straightforward so we designed this test card where you give the test a name you sign it to somebody and then you start with describing what's your belief okay what's the one thing that has to be true for your idea to work so basically you come up with a lot of things then you pick the most important one the critical hypothesis so here I'll say we believe that people are interested in you an iPad app to Sketch up business models that was our belief before we designed or sold anything okay then and we didn't have the test card yet at that point unfortunately then we would say okay to verify this hypothesis what are we going to do we will create a landing page with email signup and then the next thing we're going to describe explicitly what are we going to measure so all I'm doing here is taking all the lean startup and customer development theory and putting it into a tool because there was no tool before so what are we gonna measure we're gonna measure the proportion of people who sign up compared to total website visitors and then we're going to put a threshold there saying we will write if we were right with our hypothesis we were right that people were interested if over 20 percent of visitors sign up okay so here you have it it's a simple way to sketch out the tests you're gonna perform and you can use it as a brainstorming tool you come up with 20 tests and then you ask yourself well what what's the test I'm gonna perform which one is the test I'm gonna perform first and these kind of tools I think is a more professional way to work than what we're doing to until now I think we're going to become like bit like surgeons what we do in strategy innovation and product managers are already using tools at the operational levels for sure but also with personas but I think we can do even more this is gonna become a real profession we're gonna have our tool box okay so for your idea it's the last exercise of four minutes to go so I want you to do one thing I want you to take your hypothesis now and ask yourself what needs to be true for this feature that you came up with to work and create value you probably can come up with 10 things just write one down write one down I want you to write it down just so you've done it because change only happens when we do things so I want you to write down for your you just have one thing that needs to be true for that feature that you put up for that idea that you put up for that to work okay just write down what needs to be true okay so we're gonna send you the organizers are going to send you this test card so you can actually try it out if you take the things you want to make the products you want to build the business malls around them you ask yourself what needs to be true for this to work and then you can sketch out some tests so what I try to get across here is just a couple more tools that help you do what you already do in a slightly more structured way but without stifling your creativity without stifling the experience that you have but I think sorry for the analogy we're going to become innovation accountants we're gonna work a lot more like accountants or surgeons because we're gonna have tools that allow us to almost account for the value we create for our companies or organizations and the value we're going to be able to explicitly show how we're creating value for our customers with tools like this so I hope you learned something thank you very much for paying attention and working actually [Applause] [Music] [Applause] you [Music]

Channel: Mind the Product

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Length: 36min 32sec (2192 seconds)

Published: Thu May 31 2018