What is the Value Proposition for?

TL,DR;

The Strategyzer Value Proposition Canvas is one of the first tools that I use when working with start-ups. It’s an incredibly important tool because it is a great way to establish whether you have achieved Problem/Solution fit, a key component when considering the desirability of your solution.

This is not a lesson in how to run a Value Proposition session. It is an explanation of where the VP fits in the evolution of a business, why it is worth your while using it as a tool and what the consequences may be of not doing it properly or at all.

What are you doing and why?

A Value Proposition (VP) is a technique for establishing problem-solution fit. First, you define the problem you are trying to solve. Then you look at how well your proposed solution addresses that problem. You do this by using a diagram consisting of two halves; the problem half (also known as the Customer Profile) and the solution half (known as the Value Map).

You start with the Customer Profile. You can’t define a problem if you don’t know who your customer is. Different customers may well have different problems, so you may need several VPs for a complete definition.

Having chosen your customer, you then describe all the things that the customer currently does in the context of the problem you are trying to solve. These are referred to as customer ‘jobs’.

Once you have identified all the customer jobs you look at what causes them pain when doing them. Pains are the things relating to the jobs that frustrate customers, make them not want to undertake the job in the first place, that keep them up at night. They make customers feel bad.

You then think about gains that your solution can provide. These are things that don’t necessarily address a pain directly but which a customer may want or desire. They may be required but they may also be unexpected. They make customers feel good.

Why do we start with pains? Isn’t that a little negative? The answer is that it is the pains that define the problem you are addressing. Unless you are making luxury goods, like gold-plated taps or super-yachts, people are driven to become customers by the removal of pain rather than the achievement of a gain. Let’s face it, no-one ever bought Microsoft Office because it looks good!

You should complete the Customer Profile before you approach the Value Map. Why? Well, how can you provide an effective solution if you don’t properly understand the problem?

Now that you have defined the problem you are addressing you can start to list the products and services that comprise your solution. You can describe how features of those products and services relieve pain or that create gain. Finally, you can map products/services, pain relievers and gain creators onto the customer jobs, pains and gains. Now you know how much of the problem you are addressing and, just as importantly, how much you are not addressing.

The Value Proposition helps you focus on what you are doing, why you are doing it, who you are doing it for and how it helps them. It says nothing about how you implement your solution.

Does it really matter?

I consider a VP session to be something of a necessity when I work with start-ups. Founders sometimes object to this on the basis that they have already created a VP Canvas. However, I still need to understand their business if I am to offer appropriate help, and the VP is the best way I have found of doing this.

Creating a VP Canvas by and for yourself is a tricky business. The temptation to ignore difficulties is very high, as is the tendency to give responses that are too abstract. It’s hard work (and often quite boring!) to have to examine the smallest elements of everything you are doing but the devil, as they say, is in the detail. In this case, the devil is often the actual problem your potential customer is experiencing.

I’ll give you an example. I was working with a company who had conducted an investigation phase which included something they described as a VP. Following this, they had spent a year and £2.5m creating a solution for a very large customer only to find that the customer didn’t want it! In fact, the customer had ‘disappeared’. They weren’t responding to calls or emails.

They asked me to take a look at what they’d done to see if I could help. The product essentially consisted of a data set, which is what their customer had said they wanted. The issue was that the company I was advising was used to creating data sets, but not so used to creating products. The consequence of this is that when running their VP session they’d concentrated on what they knew - the data set - rather than on the related pains that the customer was experiencing.

When they did finally manage to make contact they discovered that the customer was already struggling with the 800 or so other data sets that they had yet to ingest into their systems (you read that right - 800 datasets!). Needless to say, they were somewhat unhappy at having to deal with - and pay for - the 801st data set, no matter how useful it might have been to them.

It didn’t take long to realise that the initial VP session was flawed because they didn’t look in detail at the jobs the customer had to undertake, one them being to ingest many data sets. Associated with this job was the considerable pain of the time and effort it took to import this data. My suggestion was that rather than simply creating a data set they could also create a tool for inputting that data into the customer’s systems with the least effort possible. They now have a happy customer!

Establish that there is a problem to be solved

There are 3 properties of a business solution that a startup needs to establish positively in order to have a chance of being successful:

1. Desirability - Will anyone pay for it?
2. Feasibility - Can we build it?
3. Viability - Will it make more money per customer than it costs to acquire that customer?

There are many examples of products that failed to embody one or more of these properties. Take, for example, the Sinclair C5. Designed by Sir Clive Sinclair (who pioneered the pocket calculator among other things) it boasted poor battery life, no weather protection, low speed and no storage space. Worst of all, it was a potential death-trap being so low to the ground that it couldn’t be seen by car drivers. No wonder no-one wanted it. Desirability nil!

The Juicero is a product which was built, but shouldn’t have been. It was a device for juicing fruits and vegetables. It cost $700 and contained over 500 different parts, but all it did was to squeeze the contents of a pre-prepared juice pack into a glass. The unfeasibility of the Juicero was highlighted by Bloomberg News, who discovered that it was easier to squeeze the contents of the packet into a glass by hand. We can build it, but we shouldn’t have!

There are plenty of examples of firms whose products which have become unviable over time, but the example which arguably characterises the start of the 21st Century is Kodak. Despite creating the world’s first electronic image sensor (thereby effectively creating the digital camera), Kodak spectacularly failed to grab the opportunity that digital presented. For many reasons, Kodak stuck with physical film production. As we now know, mobile phone cameras have become so ubiquitous, and the idea of printing out the digital image from them so unnecessary, that it is no wonder that the former by-word for photography nearly became bankrupt in 2012. Physical film was no longer viable.

Broadly speaking, you should aim to construct your business by establishing the degree to which your solution exhibits these properties in the order they are presented above. Feasibility and viability don’t matter if no-one wants to buy your solution. Let us start, then, with desirability.

Tell me what you want, what you really, really want

When it comes to determining desirability, there are a number of stages we would do well to pass through before we can say with any certainty that we have achieved it:

1. Investigation - What customer niche are you intending to target? How do you find them? How do you engage with them? Do they have the problem you think they have?
2. Observation - What are their habits, behaviours, relationships and environments in the context of the problem are you are investigating? In order to understand what they may do in the future how do you find out what they did in the past? What do you think their problem really is?
3. Validation - Are they telling you the truth? Have you listened properly? Does the problem you’ve identified really exist and how much is it worth to your niche to have it taken away?

A VP won’t help you with these three stages. It won’t tell you who your niche is, nor will it tell you what problem they are experiencing. What it will do is:

1. Concentrate your thoughts and help you achieve clarity once you have conducted these stages.
2. Help you to communicate with your team and with your customers/investors.
3. Help you target your solution and prioritise your activities.
4. Help you identify what you do and don’t know, and give you a path to finding the answers you need before you go any further.
5. Help you measure the degree to which you have achieved Problem/Solution fit.
6. Bridge the gap between Desirability and Feasibility.

You can run a VP session without running the investigation/observation/validation phase, but if you do you must be prepared to spend a great deal more time experimenting than if you didn’t. If you haven’t properly engaged with any potential customers by this point you run the risk of spending a lot of money creating the wrong solution, just like the company in my example above.

The most effective use of the VP session is to bridge the gap between desirability and feasibility. You know something of the customer and their problem and something of the solution you are proposing. How well do they fit together? The VP can help you work out the answer.

Don’t be fooled, though. You still have a lot of work left to do identifying all the assumptions you have made, creating hypotheses to test them and running experiments to get the answers. But these are the topics for future posts!

Why am I not already doing this?

The majority of startups I support are solution-led in the beginning, rather than problem-led. What is worse, however, is that most of the founders focus on how the solution is built and not on what the solution does. In some respects, this is not surprising: the vast majority of technologists spend most of their professional lives building for the sake of building - it’s generally someone else’s job to work out what to build. Very rarely do we build for the sake of learning, but this is a shift in thinking we must adopt to become successful entrepreneurs.

In my humble opinion the single most important feature of any solution is what it does, not how it’s built. It is my observation that the most successful entrepreneurs focus on what they are doing for their potential customers. How they build it comes later. As a technologist I can give you many different ways of building your solution but if the result doesn’t resonate with your customers, if it doesn’t properly address the what, then you are going to have a much harder time succeeding.

When I ask founders to describe their businesses the most common response I get is something similar to the following:

It’s an AI-enabled, Machine Learning driven mobile app based on Blockchain

OK. That’s not the question I asked. You’ve told me how it does it, not what it does. When I point this out, I may get a follow-up response like:

Oh, the app helps customers wrangle widgets

That’s better (still not good, but better). But why didn’t you tell me that first? In my experience, there are at least three common answers that explain why start-up founders are focused on how to build rather than what to build.

The first is that the entrepreneur just wants to do a thing. They’ve wanted to do the thing for some time and have finally found an opportunity to do it. They know how to do the thing, they’re good at it and they want to do it some more. In an ideal world they’d sit in a darkened room and just do the thing, present it to the world and find they have a business.

I call this Comfort Driven Development because feels good. It’s familiar. All the other things that should be done are hard and unknown and scary. Unfortunately, it is usually these hard, unknown, scary things that they should actually be doing.

The second reason is that they know how their problem affects them and they assume that it affects everyone else the same way. In consequence, they throw themselves into providing a solution without fully exploring the problem. Even if there are other people who share the same problem it is important to remember that you are not your customer. Just because you like your proposed solution that doesn’t mean anyone else will.

The third reason is that they simply don’t have the tools to do the job. They don’t know where to start, so they start wherever they happen to be rather than starting at the beginning.

This is one of the benefits I can bring. I have run literally hundreds of VP sessions and I am skilled at seeing the weaknesses and gaps in the founder’s knowledge in a way which helps them and makes them stronger. If you’re interested in running a VP session for your business, get in touch.

The take-away

The point of the Value Proposition is to understand what your customer needs and how your proposed solution addresses those needs.

By focusing on the problems your customer has and how your solution addresses those problems the Value Proposition can help you achieve clarity of purpose and intent, which are the pre-requisites for efficient execution.

If you’ve done it before the worst outcome is that doing it again will be faster. The best outcome is that, by being independent and ignorant of your thought processes, a facilitator can strengthen your proposition and surface important detail that would otherwise be missing.