Value Proposition Design Minder Chen, Ph.D. Professor of Management Information Systems Martin V. Smith School of Business and Economics CSU Channel Islands E-Mail: minder.chen@csuci.edu Web site: http://faculty.csuci.edu/minder.chen/

Central Theme: Value Propositions Definition: Value Proposition describes the benefits customers can expect from your products and services. Value Propositions are based on a bundle of products and services that create value for a Customer Segment. Osterwalder, Alexander; Pigneur, Yves; Bernarda, Gregory; Smith, Alan (2015-01-23). Value Proposition Design: How to Create Products and Services Customers Want

Customers Side Customer Segments are the groups of people and/ or organizations a company or organization aims to reach and create value for with a dedicated Value Proposition. Channels describe how a Value Proposition is communicated and delivered to a Customer Segment through communication, distribution, and sales Channels. Customer Relationships outline what type of relationship is established and maintained with each Customer Segment, and they explain how customers are acquired and retained.

Operational Side Key Activities are the most important activities an organization needs to perform well. Key Partnerships shows the network of suppliers and partners that bring in external resources and activities. Key Partnerships shows the network of suppliers and partners that bring in external resources and activities. Key Resources are the most important assets required to offer and deliver the previously described elements.

Profitability Side Cost Structure describes all costs incurred to operate a business model. Profit is calculated by subtracting the total of all costs in the Cost Structure from the total of all Revenue Streams. Revenue Streams result from a Value Proposition successfully offered to a Customer Segment. It is how an organization captures value with a price that customers are willing to pay. Profit is calculated by subtracting the total of all costs in the Cost Structure from the total of all Revenue Streams. Osterwalder, Alexander; Pigneur, Yves; Bernarda, Gregory; Smith, Alan (2015-01-23). Value Proposition Design: How to Create Products and Services Customers Want (Strategyzer) (Kindle Locations 179-180). Wiley. Kindle Edition.

Value Proposition Canvas Value Map Customer Profile http://www.businessmodelgeneration.com/downloads/value_proposition_canvas.pdf http://www.franciscopalao.com/english/value-proposition-canvas-get-to-know-your-customers-and-improve-your-value-proposition/

Create Value  Observe Customer Create Value  Fit  Observe Customer The set of value proposition benefits that you design to attract customers. The set of customer characteristics that you assume, observe, and verify in the market. Value Proposition: Describes the benefits customers can expect from your products and services. Osterwalder, Alexander; Pigneur, Yves; Bernarda, Gregory; Smith, Alan (2015-01-23). Value Proposition Design: How to Create Products and Services Customers Want

Value Proposition Canvas Fit Value Map Customer Profile Map

Create a Pitchable Sentences OBJECTIVE: Quickly shape potential value proposition directions OUTCOME: Alternative prototypes in the form of “pitchable” sentences

Partner 1 Partner 2 Partner 3 … Activity 1 Activity 2 Activity 3 … Proposition 1 Proposition 2 Proposition 3 … Segment 1 Segment 2 Segment 3 … Resource 1 Resource 2 Resource 3 … Channel 1 Channel 2 Channel 3 … Cost 1 Cost 2 Cost 3 … Stream 1 Stream 2 Stream 3 …

Push vs. Pull Start from an invention, innovation, or (technological) resource for which you develop a value proposition that addresses a customer job, pain, and gain. In simple terms, this is a solution in search of a problem. Technology Push Market Pull Start from a manifest customer job, pain, or gain for which you design a value proposition. In simple terms, this is a problem in search of a solution.

Lean Canvas Problem Solution Unique Value Proposition Unfair Advantage Project Name 01-Jan-2014 Iteration #x Problem Top 3 problems Solution Top 3 features Unique Value Proposition Single, clear, compelling message that states why you are different and worth paying attention  Pitchable Sentence Unfair Advantage Can’t be easily copied or bought Customer Segments Target customers Key Metrics Key activities you measure Channels Path to customers Cost Structure Customer Acquisition costs Distribution costs Hosting People, etc. Revenue Streams Revenue Model Life Time Value Revenue Gross Margin PRODUCT MARKET http://debane.org/franck/power-point-template-lean-canvas/ https://leanstack.com/lean-canvas/

Assess Your Value Proposition Design Skills Entrepreneurial Attitude and Ability: You enjoy trying out new things. You don’t see the risk of failing as a threat but an opportunity to learn and progress. You easily navigate between the strategic and the tactical. Customer Empathy: You relentlessly take a customer perspective and are even better at listening to customers then selling to them. Experimentation Skills: You systematically seek evidence that supports your ideas and tests your vision. You experiment at the earliest stages to learn what works and what doesn’t. Tool Skills Design Thinking Skills Osterwalder, Alexander; Pigneur, Yves; Bernarda, Gregory; Smith, Alan (2015-01-23). Value Proposition Design: How to Create Products and Services Customers Want

Customer Jobs Job Contexts Customer Jobs describe the things your customers are trying to get done in their work or in their life. A customer job could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy. Make sure you take the customer’s perspective when investigating jobs. Job Contexts 3 Main Job Types: Functional jobs Social Jobs Personal/Emotional jobs Supporting jobs Customers also perform supporting jobs in the context of purchasing and consuming value either as consumers or as professionals. Buyers of Value Co-Creator of Value Transferor of Value Job Importance

Jobs to Be Done Christensen, C. M., S. D. Anthony, G. Berstell, and D. Nitterhouse. "Finding the Right Job for Your Product,"  MIT Sloan Management Review, Spring 2007 2--11. http://innovatorstoolkit.com/content/technique-1-jobs-be-done

Customer Pains Customer Pains describe anything that annoys your customers before, during, and after trying to get a job done or simply prevents them from getting a job done. Pains also describe risks, that is, potential bad outcomes, related to getting a job done badly or not at all. Seek to identify three types of customer pains and how severe customers find them: Undesired outcomes, problems, and characteristics Obstacles Risks (undesired potential outcomes) Pain Severity To clearly differentiate jobs, pains, and gains, describe them as concretely as possible.

Customer Gains Customer Gains describe the outcomes and benefits your customers want. Some gains are required, expected, or desired by customers, and some would surprise them. Gains include functional utility, social gains, positive emotions, and cost savings. Required Gain Expected Gain Desired Gain Unexpected Gain Gain Relevance

Create and Prioritize Customer Profile Select customer segment that you want to profile. Create a list of jobs, pains, and gains (related to your potential value propositions). Prioritize jobs, pains, and gains. 1 2 3 4 5 6 7 8 9 10 - + Map out all your customers’ important jobs, extreme pains, and essential gains.

What Is a Job to Be Done? http://www.slideshare.net/marklittlewood/jobs-to-be-doneswitch-workshop http://www.slideshare.net/marklittlewood/turn-jobs-to-be-done-theory-into-practice

Job-to-Be-Done Analysis “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” Theodore Levitt, Professor of Marketing, Harvard Business School “Jobs-to-be-done"--addressing the basic problem a customer is facing and providing a product that can deliver the necessary result. Each job has functional, emotional, and social dimensions. The jobs-to-be-done point of view causes you to go with your customer as she goes about her day, always asking the question as she does something ask: “Why did you do it that way?” Source: http://hbswk.hbs.edu/item/5170.html "Marketing Malpractice: The Cause and the Cure," Harvard Business Review, Vol. 83, No. 12, December 2005.

Hire a Milkshake They were winning out over doughnuts, bagels, bananas, and boredom. If a company can discover a job-defined market, it will generally be much larger than one defined by product category. Create the Value Proposition Canvas for Milkshake! Watch **https://www.youtube.com/watch?v=f84LymEs67Y (video) A new researcher then spent a long day in a restaurant seeking to understand the jobs that customers were trying to get done when they hired a milk shake. He chronicled when each milk shake was bought, what other products the customers purchased, whether these consumers were alone or with a group, whether they consumed the shake on the premises or drove off with it, and so on. He was surprised to find that 40 percent of all milk shakes were purchased in the early morning. Most often, these early-morning customers were alone; they did not buy anything else; and they consumed their shakes in their cars. Milkshakes met their needs better than anything else. Bagels were dry; with cream cheese or jam, they resulted in sticky fingers. Doughnuts didn’t carry people past the 10 a.m. hunger attack. Bananas didn’t last long enough to solve the boring-commute problem. But it took 20 minutes to suck a viscous milkshake through a thin straw, hands remained clean and stomachs were satisfied until lunch. “Finding the Right Job for Your Product.” MIT Sloan Management Review, Spring 2007, pp. 38–47 http://newfaculty.mst.edu/media/campussupport/newfaculty/documents/2012/FindingRightJobForYourProduct.pdf

Job to Be Done Analysis **http://hbswk.hbs.edu/item/clay-christensens-milkshake-marketing (with Video) **https://www.youtube.com/watch?v=f84LymEs67Y (video) Clayton Christensen: "Where does Growth come from?" | Talks at Google https://www.youtube.com/watch?v=rHdS_4GsKmg more than 1 hour http://hbswk.hbs.edu/item/what-customers-want-from-your-products “Finding the Right Job for Your Product.” MIT Sloan Management Review, Spring 2007, pp. 38–47

Job as a Unit of Analysis Clayton Christensen: "The way we teach marketing is wrong, understanding the customer turns out to be the wrong unit of analysis. You really want to understand what causes the customer to buy the product and pull it into their lives. And what causes us to buy a product is we have a job to do and we have to go out and find something to buy to get the job done. Understanding the job rather than understanding the customer is what you really need to understand because then you can improve it." http://sloanreview.mit.edu/article/finding-the-right-job-for-your-product/

Hire a Product or Service The job, not the customer, is the fundamental unit of analysis. **The Customer-Centered Innovation Map by Lance A. Bettencourt and Anthony W. Ulwick, Harvard Business Review (link)

Outcome-Driven Innovation: Job-to-be-done

Outcome-Driven Innovation: Job-to-be-done

The Jobs-Opportunity Equation

Job-to-Be-Done Canvas https://www.linkedin.com/pulse/20140929071128-6657924-the-customer-jobs-to-be-done-canvas-prototype

Common Mistakes Mixing several customer segments into one profile. Mixing jobs and outcomes. Focusing on functional jobs only and forgetting social and emotional jobs. Listing jobs, pains, and gains with your value proposition in mind. Identifying too few jobs, pains, and gains. Being too vague in descriptions of pains and gains. Simply put the same ideas in pains and gains as opposites of each other.

Best Practices Jobs are the tasks customers are trying to perform, the problems they are trying to solve, or the needs they are trying to satisfy, whereas gains are the concrete outcomes they want to achieve— or avoid and eliminate in the case of pains. Make a Value Proposition Canvas for every different customer segment. Sometimes social or emotional jobs are even more important than the “visible” functional jobs. 5 Whys: Ask “why” several times until you really understand your customers’ jobs to be done. Don’t settle until you really understand the underlying jobs to be done that really drive customers.

Value Map It’s an enumeration of all the products and services your value proposition builds on. This bundle of products and services helps your customers complete either functional, social, or emotional jobs or helps them satisfy basic needs. It is crucial to acknowledge that products and services don’t create value alone–only in relationship to a specific customer segment and their jobs, pains, and gains

Types of Products and Services Your value proposition is likely to be composed of various types of products and services: Physical/ tangible Goods, such as manufactured products. Intangible Products such as copyrights or services such as after-sales assistance. Digital Products such as music downloads or services such as online recommendations. Financial Products such as investment funds and insurances or services such as the financing of a purchase. Decide the Relevance: Essential (+) to Nice to have (-)

Pain Relievers Pain relievers describe how exactly your products and services alleviate specific customer pains. They explicitly outline how you intend to eliminate or reduce some of the things that annoy your customers before, during, or after they are trying to complete a job. Great value propositions focus on pains that matter to customers, in particular extreme pains. Try not to do too much! Decide the Relevance: Essential (+) to Nice to have (-)

Gain Creators Gain creators describe how your products and services create customer gains via benefits that your customer expects, desires, or would be surprised by, including functional utility, social gains, positive emotions, and cost savings. Focus on features that are relevant to customers and where your products and services can make a difference. Decide the Relevance: Essential (+) to Nice to have (-)

Steps to Create the Value Map Select customer segment. Identify customer jobs. Identify customer pains. Identify customer gains. Prioritize jobs, pains, and gains. Use facilitation skills and creative problem solving process

Exercise: Create a Value Map For your products/services

(Different Approach) http://www.peterjthomson.com/2013/11/value-proposition-canvas/

Stakeholders Different stakeholders who involve in the search, evaluation, purchase, and use of a product or service may have different jobs, pains, and gains. Influencers Recommenders Decision makers Buyers End users Saboteurs

Common Mistakes List all your products and services rather than just those targeted at a specific segment. Add products and services to the pain reliever and gain creator fields. Offer pain relievers and gain creators that have nothing to do with the pains and gains in the customer profile. Make the unrealistic attempt to address all customer pains and gains.

Best Practices List only the bundle of products and services that jointly form a value proposition for a specific customer segment.  Target customers Pain relievers and gain creators are explanations or characteristics that make the value creation of your products and services explicit. Examples include “helps save time" and “well-designed.”  Features Products and services create value relative to customers’ jobs, pains, and gains. Realize that great value propositions are about making choices regarding which jobs, pains, and gains to address and which to forgo.  Trade-off Try not address all the jobs, pains, and gains in your customer profile.  Focus

Mapping the Value Proposition of Value Proposition Design Understand your customers beyond your solution. Unearth the jobs, pains, and gains that matter to them in order to understand how to improve your value proposition or invent new ones. It’s okay to aggregate several value propositions into one. List the products and services that your value proposition builds on to target a specific customer segment. Each pain reliever addresses at least one or more pains or gains. Don’t add products or services here. Each gain creator addresses at least one or more pains or gains. Don’t add products or services here.

3 Stages of Fits Problem-solution fit (on paper): Identify relevant customer jobs, pains, and gains you believe you can address with your value proposition.  Evidence that customers care about the jobs, pains, and gains you intend to address with your value proposition. Product-market fit (in the market): Evidence that customers positively react to your product and it gets traction in the market. Business model fit (in the bank): Evidence that the business model for your value proposition is scalable and profitable.

Multiple Fits: Platform AirBnB.com

The Rise of the Platform Enterprise http://thecge.net/wp-content/uploads/2016/01/PDF-WEB-Platform-Survey_01_12.pdf

**10 Characteristics of Great Value Propositions Are embedded in great business models Focus on the jobs, pains, and gains that matter most to customers Focus on unsatisfied jobs, unresolved pains, and unrealized gains Target few jobs, pains, and gains, but do so extremely well Go beyond functional jobs and address emotional and social jobs Align with how customers measure success Focus on jobs, pains, and gains that a lot of people have or that some will pay a lot of money for Differentiate from competition on jobs, pains, and gains that customers care about Outperform competition substantially on at least one dimension Are difficult to copy

The Process of Creating Business Model

Case Study IBMC 2013: Team Owlet - 1st Place ** https://www.youtube.com/watch?v=f-8v_RgwGe0 Short video https://vimeo.com/132213520 Rollins Center for Entrepreneurship & Technology  Concepts behind the Business Model Development process https://www.youtube.com/watch?v=z56F1nTSiMs

** https://www.youtube.com/watch?v=f-8v_RgwGe0 https://www.youtube.com/watch?v=i2WXN3udRww https://www.youtube.com/watch?v=eGLRHKAoJjk https://www.youtube.com/watch?v=Pp2A4btLbSU short demo https://www.owletcare.com/

Owlet Baby Monitor

DATA: Sudden infant death syndrome (SIDS) is the leading cause of infant deaths. a first pivot after one week.

Owlet Baby Monitor

Owlet Baby Monitor

Extra Slides

我們的產品 X 不同於 Y 能夠幫助 Z https://shanghong.wordpress.com/2015/06/13/

僱用奶昔是為了解決什麼問題: 奶昔Job-to-Be-Done 哈佛大學教授克里斯汀生有一次被麥當勞聘僱去提昇奶昔的銷量。他坐在餐廳裡觀察後發現，奶昔每天的購買高峰皆在早上八點以前，而且買的多半是隻身來店的男性上班族，買了上車就走。於是他跑去問這些消費者：「你僱用奶昔是為了解決什麼問題？」「若不是僱用奶昔，你會僱用誰？」 https://shanghong.wordpress.com/2015/06/13/

雇用奶昔:奶昔的價值地圖 https://shanghong.wordpress.com/2015/06/13/ 產品與服務創造的價值不是絕對的，價值端視顧客對任務、痛點和獲益的重要性而定。你不該嘗試面面俱到、處理所有的問題，專注在對顧客重要、特別有感的部分就好。當你回應顧客認為重要的任務、消除椎心之痛點、創造顧客重視的必要獲益，就達到了價值適配。 https://shanghong.wordpress.com/2015/06/13/