MGT 420 Midterm

Create Value for Your Customer and Your Business

- Are you creating value for your business? - Are you creating value for your customer? The Business Model Canvas makes explicit how you are creating and capturing value for your business. The Value Proposition Canvas makes explicit how you are creating value for your customers.

Inclusion

Every idea counts. Give equal time and attention to discussing all ideas put forth by the team. Only after a thorough discussion, you should start narrowing down your list.

Pull

Indicates that you're beginning your design of your value proposition from a manifest customer job, pain, or gain.

Fit: Same Customer, Different Contexts

•Priorities change depending on a customer's context. •Taking this context into account before you think of a value proposition for that customer is crucial. With the jobs-to-be-done approach, you uncover the motivations of different customer segments. Yet, depending on the context, some jobs will become more important or matter less than others. •In fact, the context in which a person finds himself or herself often changes the nature of the jobs that the person aims to accomplish.. •For example, mobile phone user will have different job requirements when using the phone in a car, in a meeting, or at home. Hence, the features of your value proposition will be different depending on which context(s) you are focusing. •In today's hypercompetitive world, customers are surrounded by an ocean of tempting value propositions that all compete for the same limited slots of attention. •Very different value propositions may address similar jobs, pains, and gains Very different value propositions may address similar jobs, pains, and gains. •Strive to understand what your customers really care about. Investigate their jobs, pains, and gains beyond what your own value proposition directly addresses in order to imagine totally new or substantially improved ones.

Starting Points

- for new or improved value propositions may come from anywhere. It could be from your customer insights, from exploration of prototypes, or from many other sources. These trigger areas include asking yourself if you could: 1.Imitate and "import" a pioneering model from another sector or industry? (Business Model Environment) 2.Come up with a new value proposition based on a new partnership? (Business Model Environment) 3.Create value based on a new technology trend or turn a new regulation to your advantage? (Business Model Environment) 4.Come up with a new value proposition based on a new partnership? (Current Business Model) 5.Build on your existing activities and resources, including patents, infrastructure, skills, user base? (Current Business Model) 6.Dramatically alter your cost structure to lower your prices substantially? (Current Business Model) 7.Create a new gain creator for a given customer profile? (Your value proposition) 8.Imagine a new product or service? (Your value proposition) 9.Create a new pain reliver for a given customer profile? (Your value proposition)

Three Kinds of Fit

-Fit happens in three stages. 1.The first occurs when you identify relevant customer jobs, pains, and gains you believe you can address with your value proposition. 2.The second occurs when customers positively react to your value proposition and it gets traction in the market. The start-up movement calls these problem-solution fit and product-market fit, respectively. 3.The third occurs when you find a business model that is scalable and profitable. •Problem-Solution Fit: ( On Paper) At this stage you don't yet have evidence that customers actually care about your value proposition. This is when you strive to identify the jobs, pains, and gains that are most relevant to customers and design value propositions accordingly. You prototype multiple alternative value propositions to come up with the ones that produce the best fit. The fit you achieve is not yet proven and exists mainly on paper. Your next steps are to provide evidence that customers care about your value proposition or start over with designing a new one. •Product-Market Fit: (In the Market) During this second phase, you strive to validate or invalidate the assumptions underlying your value proposition. You will inevitably learn that many of your early ideas simply don't create customer value (i.e., customers don't care) and will have to design new value propositions. Finding this second type of fit is a long and iterative process; it doesn't happen overnight. •Business Model Fit (In the Bank) A great value proposition without a great business model may mean suboptimal financial success or even lead to failure. No value proposition-however great-can survive without a sound business model. The search for business model fit entails a laborious back and forth between designing a value proposition that creates value for customers and a business model that creates value for your organization. You don't have business model fit until you can generate more revenues with your value proposition than you incur costs to create and deliver it (or "them" in the case of platform models with more than one interdependent value propositions).

Presenting your VPD- Get Better Feedback

-Present your value proposition to others to gather feedback, get buy-in, and complement the more "analytical assessment" that we looked at up to this point and the experiments we will study in the testing chapter. •Present your ideas with simplicity and coherence: It would be a waste of time and resources to put all your energy into designing remarkable value propositions only to fail to present them in a convincing way when it matters. - Present early and rough prototypes before refining to get buy-in from different stakeholders. - Only work on more refined presentations later in the design process

How to Present your Value Proposition Design

1. Start with an empty canvas. Make sure listeners were given at least a short introduction to the canvas. 2. Begin your presentation wherever it makes most sense. You can start with products or with jobs. 3. Put up one sticky note after the other progressively to explain your value proposition so your audience doesn't experience cognitive murder. Synchronize what you say and what you put up. Tell a story of value creation by connecting products and services with customer jobs, pains, and gains

Prototyping Principles

1.Make it visual and tangible: These kinds of prototypes spark conversations and learning. Don't regress into the land of blah blah blah. 2. Embrace a beginner's mind: Prototype "what can't be done." Explore with a fresh mind-set. Don't let existing knowledge get in the way of exploration." 3. Don't fall in love with first ideas— create alternatives: Refining your idea(s) too early prevents you from creating and exploring alternatives. Don't fall in love too quickly. 4. Feel comfortable in a "liquid state": Early in the process the right direction is unclear. It's a liquid state. Don't panic and solidify things too early. 5. Start with low fidelity, iterate, and refine: Refined prototypes are hard to throw away. Keep them rough, quick, and cheap. Refine with increasing knowledge about what works and what doesn't." 6. Expose your work early—seek criticism: Seek feedback early and often before refining. Don't take negative feedback personally. It's worth gold to improve your prototype." 7. Learn faster by failing early, often, and cheaply: Fear of failure holds people back from exploring. Overcome that with a culture of rough and quick prototyping that keeps failure cheap and leads to faster learning. 8. Use creativity techniques: Use creativity techniques to explore groundbreaking prototypes. Dare to break out of how things are usually done in your company or industry. 9. Create "Shrek models": Shrek models are extreme or outrageous prototypes that you are unlikely to build. Use them to spark debate and learning." 10. Track learnings, insights, and progress: Keep track of all your alternative prototypes, learnings, and insights. You might use earlier ideas and insights later in the process.

The Data Detective

1.Secondary research reports and customer data you might already have provide a great foundation for getting started. Look also at data outside your industry and study analogs, opposites, or adjacencies. - Difficulty level: ★ - Strength: great foundation for further research - Weakness: static data from a different context"

Techniques to understanding customers: Secondary Data

1.Social Media Analytics: Spot the 10 most frequently mentioned positive and negative things said about them on social media. 2.Customer Relationship Management (CRM): List the top three questions, complaints, and requests that you are getting from your daily interactions with customers (e.g., support). 3.Tracking Customers on Your Website: Find the 10 most and least popular destinations on your website. 4.Data Mining: Existing company should mine their data to identify three patterns that could be useful to their new idea.

Seven Questions to Assess Your Business Model Design (1-3)

1.Switching costs: Are your customers locked in for several years, or does nothing hold them back from leaving? Apple's iPod got people to copy their entire music library into the iTunes software, which made switching more difficult for customers. 2. Recurring Revenues: Do 100% of your sales lead to automatically recurring revenues or are 100% your sales transactional? Nespresso turned the transactional industry of selling coffee into one with recurring revenues by selling single-portioned pods that fitted only into their machines. 3. Earn Before Spending: Do you earn 100% of your revenues before incurring CoGS or do you incur 100% of your costs of CoGS before earning revenues? Personal computers (PCs) used to be produced well ahead of selling them at the risk of inventory depreciation until Dell disrupted the industry, sold directly to consumers, and earned revenue before assembling PCs. . Game-changing Cost Structure: Is your cost structure at least 30% or lower or higher than your competitors? Skype and WhatsApp disrupted the telecom industry by using the Internet as a free infrastructure for calls and messages, while telecoms incurred heavy capital expenditures. 5. Others Who do the Work: Is all the value created in your business model created for free by external parties or will you incur costs for all value created? Most of the value in Facebook's business model comes from content produced for free by more than 1 billion users. Similarly, merchants and shoppers create value for free for credit card companies. 6. Scalability: Your business model either has virtually no limits to growth or it takes substantial resources and effort to grow your business. Licensing and franchising are extremely scalable, as are platforms like Facebook or WhatsApp that serve hundreds of millions of users with few employees. Credit card companies are also an interesting example of scalability 7. Protection from Competition: Does your business model provide substantial moats that are hard to overcome or is it vulnerable to competition? Powerful business models are often hard to compete with. Ikea has found few imitators. Similarly, platform models like Apple with the App Store provide powerful moats.

Value Map

: The Value (Proposition) Map describes the features of a specific value proposition in your business model in a more structured and detailed way. It breaks your value proposition down into products and services, pain relievers, and gain creators.

Brainstorm

After gaining insights of your user/customer and their needs/problems/pains, you and your team must brainstorm to develop a list of ideas to solve the problem. Encourage sharing of ideas and avoid

Window of Opportunity, S-Curve, and Niche Markets

After you assess the value you are creating, potential market size, uniqueness, and doability, you must quickly turn your attention to analyzing the competitors, industry, and market. •The window of opportunity describes the competitive environment and indicates if there is still an opportunity to enter the market and make profits or if that ship has sailed (that is, the window of opportunity has closed). - When you explore opportunities in social networking, e-retailing etc. you will notice that the players in this industry are well established and it will be hard for you to enter this market and displace them unless you can offer substantial better value by disrupting the dominant business model. - Typically such markets are in the late-takeoff stage or maturity stage of the Industry S-Curve. Researchers have noted that the industry lifecycle evolve as a S-curve over four stages: 1.Ferment 2.Takeoff 3.Maturity 4.Decline. 1. During the first stage, ferment, there is a high level of uncertainty and many innovations/ technologies are competing for dominance. -It is unclear which of the competing innovations/technologies will emerge as a winner and dominate the industry. -At this stage, many firms enter and exit the industry and the industry is in a state of flux. -Firms will have to spend significant capital in R&D to develop products based on the new technologies and market their products to outcompete other firms. 2. The second stage is the takeoff. At this point the uncertainties are largely resolved and it becomes clearer which innovation/technology will dominate the market. -The market begins to be established and firms start competing with each other to gain a dominant position. -As the market is new, those firms that have capital available to rapidly scale their operations will be at an advantage. 3. The third stage, maturity, is when firms start to establish themselves in the market and a few firms begin to dominate the market. -As the product/service is well established, firms begin to compete on the basis of price and begin to focus on improving operational efficiencies and consolidating (mergers and acquisitions). 4. The fourth and final stage is decline. At this point other new technologies/innovations begin to obsolete products based on existing technology and the demand for these products drops rapidly. -Firms seek to extend the life of their products by expanding geographically to less-developed countries where the product still has good demand. •For example, after the successful launch of iPod in North America and Europe, CD manufacturers focused on less developed markets in Africa, Asia, and Latin America where internet connectivity was still in infancy and a product like the iPod would not be particularly useful.

The Art of Critique:

Art of Feedback: Goes for feedback receivers who present ideas, as well as for feedback providers who give input on ideas. - Learn from the design professions, where people are trained to present ideas early and feedback providers are trained to provide effective design critiques. This contrasts with feedback providers in business who are often leaders in steering boards or advisory committees. They are trained to decide rather than to give feedback. If they cannot get to decisions fast, they often get nervous or become unsatisfied. - Teach feedback providers how to help ideas evolve (rather than to decide on them). Get them to understand that value proposition prototypes are still rough and evolving during the design and testing phase. Prototypes may radically change, in particular based on market facts that matter more than the opinion of feedback providers. - Teach feedback receivers that feedback providers are not as important as customers, however powerful they might be. Listening to feedback providers more than to customers and market facts only postpones failure. Don't: -Shoot people down for presenting new (bold) ideas. -Present only refined ideas to leadership and decision makers. -Having long, unstructured, free-flowing, time-consuming discussions -Allow for proliferation of pure opinion -Create a context that enables politics and personal agendas to supersede value creation -Create negative vibes that destroy positive creative energy -Foster culture in which feedback destroys big ideas because they're hard to implemented -Just ask "why?" - Do: -Create a safe environment in which people feel comfortable to present (bold) ideas -Foster a culture of early feedback on rapidly evolving ideas. -Run facilitated, structured feedback processes -Provide feedback based on experience or (market) facts -Encourage a customer-centered feedback culture that neutralizes politics. -Bring in fun and productive feedback processes. -Draw a distinction between hard to do and worth doing. -Ask, "Why not?" "What if?" and "What else?"

Optimist

Be passionate about solving problems and making lives better. Be positive that you can make a difference. Be a change maker, a problem-solver, and a job creator

Prototype

Build prototypes such as sketching, mockups, storyboards, wireframes, 3D printing etc. to elicit responses from user/customer (show, do not tell). Prototypes help you show you solution to your user/customers and observe their interactions with it. Build to learn, don't spend too much resources on perfecting a prototype. Iterate through prototypes by incorporating learnings from previous tests. In early stages, you should build prototypes that are quick and cheap to make (example, 30 minutes and $2) that can elicit useful feedback from users/customers. As you learn, you can progressively move towards higher quality prototypes

Earlyvangelist

Customers who are willing and able to take a risk on a new product or service Pay attention to earlyvangelists when researching potential customers and looking for patterns. The term was coined by Steve Blank* to describe customers who are willing and able to take a risk on a new product or service. Use earlyvangelists to build a foothold market and shape your value propositions via experimentation and learning.

Value Proposition

Describes the benefits customers can expect from your products and services

Collaborate

Design Thinking involves team work and collaboration. Involving team members and working together will help you in build a large list of possible solutions. Research indicates that teams outperform individuals. However, it is important to mitigate groupthink. This can be done by encouraging everyone of participate and creating a climate where team members feel comfortable disagreeing. Functional conflict (that is disagreement related to how to best solve the problem) can lead to better solution. This is 100X better than quickly agreeing on a solution just because one of your team members suggested it (such practice will lead to suboptimum solution).

Innovation

Desirability involves people (that is, do people want the product?) Feasibility involves technology (that is, is it possible to develop the product?) Viability involves organizations/businesses (that is, how financially sustainable is the entrepreneurial opportunity?) Emotional innovation occurs at the interface of desirability and viability Process innovation occurs at the interface of desirability and feasibility Functional innovation occurs at the interface of viability and feasibility

Technology Push

Explore value proposition prototypes that are based on your invention, innovation, or technological resource with potentially interested customer segments. Design a dedicated value map for each segment until you find problem-solution fit.

Other Sources of New Ideas

Federal Government -Files of the Patent Office can suggest new product possibilities. Research and Development (R&D) -A formal endeavor connected with one's employment or education

Fit

Fit happens when you address important jobs, alleviate extreme pains, and create essential gains that customers care about. Searching for fit is the process of designing value propositions around products and services that meet jobs, pains, and gains that customers really care about. -Customers expect and desire a lot from products and services, yet they also know they can't have it all. Focus on those gains that matter most to customers and make a difference. -Customers have a lot of pains. No organization can reasonably address all of them. Focus on those headaches that matter most and are insufficiently addressed. -Your customers are the judge, jury, and executioner of your value proposition. They will be merciless if you don't find fit!

The Scientist

Get customers to participate (knowingly or unknowingly) in an experiment. Learn from the outcome. Difficulty level: ★★★★ Strength: provides fact-based insights on real-world behavior; works particularly well for new ideas Weakness: can be hard to apply in existing organizations because of strict (customer) policies and guidelines

Understanding Customers

Imagine, observe, and understand your customers. Put yourself in their shoes. Learn what they are trying to get done in their work and in their lives. Understand what prevents them from getting this done well. Unearth which outcomes they are looking for.

Ideate

In this stage you are transitioning from problem identification, to solving the problem. This stage is not about coming up with the right idea, rather the objective is to come with a broad number of solutions that can solve the problem (Remember, your objective is to solve the problem). In this stage you are integrating your understanding of the problem with possible ways of solving the problem. Encourage sharing of all ideas, no such thing as bad idea at this point. Any idea that a team member believes can solve the problem should be shared. How to Ideate? Brainstorming could help you come up with a large list of possible solutions. Another way is by building prototypes.

Push

Indicates that you're starting the design of your value proposition from a technology or innovation you possess.

The Cocreator

Integrate customers into the process of value creation to learn with them. Work with customers to explore and develop new ideas Difficulty level: ★★★★★ Strength: the proximity with customers can help you gain deep insights Weakness: may not be generalized to all customers and segments

•Understanding Customers: Ground Rules for Interviewing Customers

It is an art to conduct good interviews that provide relevant insights for value proposition design. Make sure you focus on unearthing what matters to (potential) customers rather than trying to pitch them solutions. Follow the rules on this spread to conduct great interviews: 1.Rule 1: Adopt a beginner's mind: Listen with a "fresh pair of ears" and avoid interpretation. Explore unexpected jobs, pains, and gains in particular. 2. Rule 2: Listen more than you talk: Your goal is to listen and learn, not to inform, impress, or convince your customer of anything. Avoid wasting time talking about your own beliefs, because it's at the expense of learning about your customer. 3. Rule 3: Get facts, not opinions: Don't ask, "Would you...?" Ask, "When is the last time you have...? 4. Rule 4: Ask "why" to get real motivations: "Ask, "Why do you need to do...?" Ask, "Why is ___ important to you?" Ask, "Why is ___ such a pain? 5. Rule 5: The goal of customer insight interviews is not selling (even if a sale is involved); it's about learning: Don't ask, "Would you buy our solution?" Ask "what are your decision criteria when you make a purchase of...? 6. Rule 6: Don't mention solutions (i.e., your prototype value proposition) too early: Don't explain, "Our solution does..." Ask, "What are the most important things you are struggling with?" 7. Rule 7: Follow up: Get permission to keep your interviewee's contact information to come back for more questions and answers or testing prototypes 8. Rule 8: Always open doors at the end: Ask, "Who else should I talk to?"

The Journalist

It's a well-established practice. However, customers might tell you one thing in an interview but behave differently in the real world. - Difficulty level: ★★ - Strength: quick and cheap to get started with first learnings and insights - Weakness: customers Don't always know what they want and actual behavior differs from interview answers

Prototyping Examples

Napkin Sketches: Make alternatives tangible with napkin sketches. Use a single sketch for every potential direction your idea could take. Ad-libs: Pinpoint how different alternatives create value by filling in the blanks in short ad-libs. Value Proposition Canvases: Flesh out possible directions with the Value Proposition Canvas. Understand which jobs, pains, and gains each alternative is addressing. Representation of Value Proposition: Help customers and partners understand potential value propositions by bringing them to life without building them. Minimum Viable Product (MVP): Build a minimum feature set that brings your value proposition to life and allows testing it with customers and partners.

Understanding Customers

Never before have creators had more access to readily available information and data inside and outside their companies before even getting started with designing value. - Use available data sources as a launching pad to getting started with customer insights. The Data Detective: Get Started with Existing Information. This includes: 1.Google Trends: Compare three search terms representing three different trends related to your idea. 2.Google Keyword Planner: Learn what's popular with potential customers by finding the top five search terms related to your idea. How often are they searched for? 3.Government Census Data, World Bank, IMF, and more: Identify the (government) data that are relevant to your idea and at your fingertips via the web. 4.Third-party Research Reports: Identify three readily available research reports that can serve you as a starting point to prepare your own customer and value proposition research.

How to Map a Customer Profile

Objective: Visualize what matters to your customers in a shareable format Outcome: One-page actionable customer profile Steps: 1.Select a customer segment that you want to profile. 2.Ask what tasks your customers are trying to complete. Map out all of their jobs by writing each one on an individual sticky note. 3.What pains do your customers have? Write down as many as you can come up with, including obstacles and risks. 4.What outcomes and benefits do your customers want to achieve? Write down as many gains as you can come up with. 5.Order jobs, pains, and gains in a column, each with the most important jobs, most extreme pains, and essential gains on top and the moderate pains and nice-to-have gains at the bottom.

Define

Only after framing the problem correctly can we expect to develop the right solution You need to become an expert on the subject, this will help you in recognizing patterns and connecting the dots, and develop the problem statement. Your goal should be to craft a meaningful and actionable problem statement (that is, a point-of-view). This is a guiding statement that focuses on needs/pains/problems of a particular user/customer that you learn by engaging and observing them. If you notice or hear something interesting ask yourself why that might be and discuss with team to glean insights. Simply put, you must define the challenge you are taking on, based on what you have learned about your user/customer and their jobs (context). Your problem statement should inspire your team, sets boundary for evaluating competing ideas, solves the most important problem(s) the user/customer experiences, is focused on solving specific problem for specific user/customer (that is, it is not broad).

Observation-Fueled Opportunities

Paying attention - consumers, users, distributors Unsolved problems Market gaps ?Examples: Jitterbug, Inogen, Panera, ?Discovery Toys Another good way of identifying potential business opportunities is by observing things happening around us. There are many things we fail to pay attention to thereby missing potential business opportunities. Observing our colleagues, neighbors, friends using things and/or performing tasks can help us in identifying trends, market gaps, and problems that can lead to business opportunities.

Platforms Business Model

Platforms function only when two or more actors interact and draw value within the same interdependent business model Airbnb is an example of a double-sided platform. It is a website that connects local residents with extra space to rent out and travelers looking for alternatives to hotels as a place to stay. In such a case, the business model needs to hold two value propositions, one for local residents (called hosts) and one for travelers." Platforms are called double-sided when there are two such actors and multisided when there are more than two. A platform exists only when all sides are present in the model.

Prototyping Possibilities

Rapidly prototype alternative value propositions and business models. Don't fall in love with your first ideas. Keep your early models rough enough to throw away without regret so that they can evolve and improve.

Finding the Right Business Model

Search for the right value proposition embedded in the right business model, because every product, service, and technology can have many different models. Even the best value propositions can fail without a sound business model. The right business model can be the difference between success and failure.

The Impersonator

Spend a day or more in your customer's shoes. Draw from your experience as an (unsatisfied) customer." - Difficulty level: ★★ - Strength: firsthand experience of jobs, pains, and gains - Weakness: not always representative of your real customer or possible to apply

(Factors of a Value Map) - Map How Your Products and Services Create Value:

Steps: 1.List all the products and services of your existing value proposition 2.Outline how your products and services currently help customers alleviate pains by eliminating undesired outcomes, obstacles, or risks. Use one sticky note per pain reliever. 3.Explain how your products and services currently create expected or desired outcomes and benefits for customers. Use one sticky note per gain creator. 4.Rank products and services, pain relievers, and gain creators according to how essential they are to customers.

The Anthropologist

Study which jobs they focus on and how they get them done. Note which pains upset them and which gains they aim to achieve. - Difficulty level: ★★★ - Strength: data provide unbiased view and allow discovering real-world behavior - Weakness: difficult to gain customer insights related to new ideas

Factors of a Customer Profile (Customer Jobs, Supporting Jobs)

Supporting jobs: Customers perform supporting jobs in the context of purchasing and consuming value either as consumers or as professionals. Supporting jobs Include: 1.Buyer of Value - Jobs related to buying value, such as comparing offers, deciding which products to buy, standing in a checkout line, completing a purchase, or taking delivery of a product or service. 2.Cocreator of Value - Jobs related to co-creating value with your organization, such as posting product reviews and feedback or even participating in the design of a product or service. 3.Transferer of Value - Jobs related to the end of a value proposition life cycle, such as canceling a subscription, disposing of a product, transferring it to others, or reselling it.

Customer Profile

The Customer (Segment) Profile describes a specific customer segment in your business model in a more structured and detailed way. It breaks the customer down into its jobs, pains, and gains.

Uniqueness Index Vs. Doability Index

The most attractive opportunities are those that are high on both uniqueness and doability. -Take the case of the coffee sleeve, this is a simple product to make and is protected by a patent. It is unique, solves a problem, and easy to make - which makes it a winner. More importantly, it capitalizes on the trend of coffee drinking (and coffee shops like Starbucks). While you might be tempted to focus on other doable opportunities that are low in uniqueness to quickly pursue your entrepreneurial dreams, such opportunities are unattractive as the only way to offer value to customers would be to offer a similar product/service as your competitors at a lower price. The economies of scale and distribution networks come into play in such situations, which might be difficult of a start-up to achieve.

Prototyping

The practice of building quick, inexpensive, and rough study models to learn about the desirability, feasibility, and viability of alternative value propositions and business models. -Use the activity of making quick and rough study models of your idea to explore alternatives, shape your value proposition, and find the best opportunities. Prototyping is common in the design professions for physical artifacts. We apply it to the concept of value propositions to rapidly explore possibilities before testing and building real products and services. •Prototyping Examples: Napkin Sketches: Make alternatives tangible with napkin sketches. Use a single sketch for every potential direction your idea could take. Ad-libs: Pinpoint how different alternatives create value by filling in the blanks in short ad-libs. Value Proposition Canvases: Flesh out possible directions with the Value Proposition Canvas. Understand which jobs, pains, and gains each alternative is addressing. Representation of Value Proposition: Help customers and partners understand potential value propositions by bringing them to life without building them. Minimum Viable Product: Build a minimum feature set that brings your value proposition to life and allows testing it with customers and partners. •When prototyping: o Spend a maximum of 5 to 15 minutes on sketching out your early prototypes. o Always use a visible timer and stick to a predefined time frame. o Don't discuss too long which one of several possible directions to prototype. Prototype several of them quickly and then compare. oRemember constantly that prototyping is an exploratory tool. Don't spend time on the details of a prototype that is likely to change radically anyway. •Prototyping Principles: 1. Make it visual and tangible: These kinds of prototypes spark conversations and learning. Don't regress into the land of blah blah blah. 2. Embrace a beginner's mind: Prototype "what can't be done." Explore with a fresh mind-set. Don't let existing knowledge get in the way of exploration." 3. Don't fall in love with first ideas— create alternatives: Refining your idea(s) too early prevents you from creating and exploring alternatives. Don't fall in love too quickly. 4. Feel comfortable in a "liquid state": Early in the process the right direction is unclear. It's a liquid state. Don't panic and solidify things too early. 5. Start with low fidelity, iterate, and refine: Refined prototypes are hard to throw away. Keep them rough, quick, and cheap. Refine with increasing knowledge about what works and what doesn't." 6. Expose your work early—seek criticism: Seek feedback early and often before refining. Don't take negative feedback personally. It's worth gold to improve your prototype." 7. Learn faster by failing early, often, and cheaply: Fear of failure holds people back from exploring. Overcome that with a culture of rough and quick prototyping that keeps failure cheap and leads to faster learning. 8. Use creativity techniques: Use creativity techniques to explore groundbreaking prototypes. Dare to break out of how things are usually done in your company or industry. 9. Create "Shrek models": Shrek models are extreme or outrageous prototypes that you are unlikely to build. Use them to spark debate and learning." 10. Track learnings, insights, and progress: Keep track of all your alternative prototypes, learnings, and insights. You might use earlier ideas and insights later in the process.

Trends

The start of a trend that lasts for a considerable period of time provides one of the greatest opportunities for starting a new venture. Trends - Environmental - Economic - Social - Technological - Regulatory

Empathy

Understanding problems from the users perspective. Walk a mile in their shoes. Be non-judgmental. You need to know your target users/customers and care about their lives, there is no way around this. How to do this? Interact with users/customers, engage with them (have a conversation, get them to tell you stories about the issues they experience) and observe them. As much as possible you should observe your target users/customers in relevant contexts in addition to conducting interviews. Your most powerful insights could come from noticing a disconnect between what someone says and what they do, by noticing the work-around they have created which may be something that you did not consider and are surprises you Have them walk you through the steps. For example, if you are interested in solving a problem for young travelers, have them walk you through the steps of how the planned their, the activities they engage in etc.

Test

Use the prototype and conduct test/experiment. Experiments will let you know what works and what does not. This is accelerate your learning. The objective is to fail fast so that you can succeed sooner. Build prototype you believe will work (solve the problem), test the prototype as if this will not work. This will help you in understanding the problem-solution fit, rather than focusing on proving your prototype works. Be creative in designing experiments that will help you learn the most in the shortest possible time.

Understand the Context

Value propositions and business models are always designed in a context. Zoom out from your models to map the environment in which you are designing and making choices about the prototypes to pursue. The environment is made up of competition, technology change, legal constraints, changing customer desires, and other elements. •Industry Forces: Key actors in your space, such as competitors, value chain actors, technology providers, and more. •Macroeconomic Forces: Macro trends, such as global market conditions, access to resources, commodities prices, and more. •Key Trends: Key trends shaping your space, such as technology innovations, regulatory constraints, social trends, and more. •Market Forces: Key Customer issues in your space, such as growing segments; customer switching costs; changing jobs, pains and gains; and more. Key Players: 1.Customers: Take the customers' point of view and focus on customer jobs, pains, and gains and competing value propositions. In a B2B context think of end users, influencers, economic buyers, decision makers, and saboteurs. ● 2.Chief executive officer (CEO), senior leaders, and board members: Take the company leadership's point of view (e.g., CEO, chief financial officer [CFO], chief operations officer [COO]). Give feedback from the perspective of the company's vision, direction, and strategy. ● 3. Other internal stakeholders: Who else's buy-in in the company do you need for your idea to succeed? Does production play a role? Do you need to convince sales or marketing? 4.Strategic partners: Your value proposition may rely on the collaboration with strategic partners. Are you offering them value? ● 5. Government officials: What role does the government play? Is it an enabler or a barrier? 6. Investors/shareholders: Will they support or resist your ideas? 7. Local community: Are they affected by your ideas? 8. The planet!: What effect does your value proposition have on the environment?

Customer Profiles in B2B

Value propositions in business-to-business (B2B) transactions typically involve several stakeholders in the search, evaluation, purchase, and use of a product or service. Each one has a different profile with different jobs, pains, and gains. Stakeholders can tilt the purchasing decision in one direction or another. Identify the most important ones and sketch out a Value Proposition Canvas for each one of them. Profiles vary according to the sector and size of organization, but they typically include the following roles: 1.Influencers: Individuals or groups whose opinions might count and whom the decision maker might listen to, even in an informal way. ● 2.Recommenders: The people carrying out the search and evaluation process and who make a formal recommendation for or against a purchase. ● 3.Economic buyers: The individual or group who controls the budget and who makes the actual purchase. Their concerns are typically about financial performance and budgetary efficiency. ● 4.Decision Makers: The person or group ultimately responsible for the choice of a product/service and for ordering the purchase decision. Decision makers usually have ultimate authority over the budget. ● 5.End Users: The ultimate beneficiaries of a product or service. For a business customer, end users can either be within their own organization (a manufacturer buying software for its designers), or they can be external customers (a device manufacturer buying chips for the smartphones it sells to consumers). ● 6.Saboteurs: The people and groups who can obstruct or derail the process of searching, evaluating, and purchasing a product or a service. ● Decision makers typically sit inside the customer's organization, whereas Influencers, recommenders, economic buyers, end users, and saboteurs can sit inside or outside the organization.

Intermediary Business Model:

When a business sells a product or service through an intermediary, it effectively needs to cater to two customers: the end customer and the intermediary itself. 1.Chinese firm Haier sells home appliances and electronics to households globally. It does this largely through retailers such as Carrefour, Walmart, and others. To be successful, Haier needs to craft an appealing value proposition both to households (the end customer) and to intermediary distributors. Without a clear value proposition to the intermediary, the offer might not reach the end customer at all, or at least not with the same impact.

Design Thinking

is a creative problem solving process that is human-centered. It is a nonlinear, iterative process that involves understanding the customers/users, (re)defining problems, and challenging assumptions to build innovative solutions. The first step is the empathize stage. In this stage you should focus on understanding the needs of , users/customers (that is, people you are designing the product/service for) and see the problem you are trying to solve through their eyes. See their world, understand their feelings

Factors of Design

the activity of turning your ideas into value proposition prototypes. It is a continuous cycle of prototyping, researching customers, and reshaping your ideas Kick-start value proposition design with Prototyping Possibilities for one of your Starting Points. Shape your value propositions by Understanding Customers, then select which ones you want to further explore by Making Choices and Finding the Right Business Model. If you are an existing company, discover the particularities of Designing in Established Organizations •Design may start with prototyping or with customer discovery. 1. Ideas, Staring Points, and Insights: Starting points for new or improved value propositions may come from anywhere. It could be from your customer insights, from exploration of prototypes, or from many other sources. Be sure not to fall in love with your early ideas, because they are certain to transform radically during prototyping, customer research, and testing. 2. Prototype Possibilities: Shape your ideas with quick, cheap, and rough prototypes. Make them tangible with napkin sketches, ad-libs, and Value Proposition Canvases. Don't get attached to a prototype too early. Keep your prototypes light so you can explore possibilities, easily throw them away again, and then find the best ones that survive a rigorous testing process with customers. 3. Understand Customers: Inform your ideas and prototypes with early customer research. Plough through available data, talk to customers, and immerse yourself in their world. Don't show customers your value proposition prototypes too early. Use early research to deeply understand your customers' jobs, pains, and gains. Unearth what really matters to them to prototype value propositions that are likely to survive rigorous testing with customers. 10 Characteristics of Great Value Propositions Great Value Propositions: ● 1. Are embedded in great business models 2. Focus on the jobs, pains, and gains that matter most to customers 3. Focus on unsatisfied jobs, unresolved pains, and unrealized gains 4. Target few jobs, pains, and gains, but do so extremely well 5. Go beyond functional jobs and address emotional and social jobs 6. Align with how customers measure success 7. Focus on jobs, pains, and gains that a lot of people have or that some will pay a lot of money for 8. Differentiate from competition on jobs, pains, and gains that customers care about 9. Outperform competition substantially on at least one dimension 10. Are difficult to copy

Customer Jobs:

•: Describe what customers are trying to get done in their work and in their lives, as expressed in their own words. 1.Functional Jobs: When your customers try to perform or complete a specific task or solve a specific problem. Mow the lawn, eat healthy as a consumer, write a report, or help clients as a professional ● 2.Social Jobs: When your customers want to look good or gain power or status. These jobs describe how customers want to be perceived by others. Look trendy as a consumer or be perceived as competent as a professional ● 3.Personal/Emotional Jobs: When your customers seek a specific emotional state, such as feeling good or secure. Seeking peace of mind regarding one's investments as a consumer or achieving the feeling of job security at one's workplace ● 4.Supporting Jobs: Customers perform supporting jobs in the context of purchasing and consuming value either as consumers or as professionals. Such jobs arise from three different roles (see next slide) - Job importance: It is important to acknowledge that not all jobs have the same importance to your customer.

Conducting Customer Interviews

•Conduct interviews as an entrepreneurs (not a student) •Introduce yourself properly and the purpose of the interview (what job are you trying to understand. Example: I am trying to understand how your company manages temps) •Entrepreneur Life - You might have to break some norms to conduct customer interviews •Be proactive and aggressive (don't make excuses) •Don't cheat or harm anyone

Factors of a Customer Profile (Gains)

•Customer Gains: Seek to identify four types of customer gains in terms of outcomes and benefits: 1.Required gains: These are gains without which a solution wouldn't work. 2.Expected gains: These are relatively basic gains that we expect from a solution, even if it could work without them. 3.Desired gains: These are gains that go beyond what we expect from a solution but would love to have if we could. 4.Unexpected gains: These are gains that go beyond customer expectations and desires. ● - Gain relevance: A customer gain can feel essential or nice to have, just like pains can feel extreme or moderate to them.

Factors of a Customer Profile (Pains)

•Customer Pains: Seek to ("identify three types of customer pains and how severe customers find them: 1.Undesired outcomes, problems, and characteristics: Pains are functional (e.g., a solution doesn't work, doesn't work well, or has negative side effects), social ("I look bad doing this"), emotional ("I feel bad every time I do this"), or ancillary It's annoying to go to the store for this"). This may also involve undesired characteristics customers don't like (e.g., "Running at the gym is boring," or "This design is ugly"). 2.Obstacles: These are things that prevent customers from even getting started with a job or that slow them down (e.g., "I lack the time to get this job done accurately," or "I can't afford any of the existing solutions"). 3. Risks: What could go wrong and have important negative consequences. I might lose credibility when using this type of solution," or "A security breach would be disastrous for us")

Moving from Problem to Solution

•Design Thinking •Human-centered •Recognize the problems users/customers experience (empathize and define) •Develop solutions that solves users/customers problems (ideate and prototype) •Experimentation - Testing •Build prototype as if you know what the customer wants (based on insights you previously gleaned), test as if you know that you are wrong

Checking Your Guess

•Develop pass/fail test •Guess the reaction you will receive from particular type of customers •Have a threshold •Compare your findings with your guess and threshold •Initially it might be interviews (face-to-face, Zoom), but the tests you conduct to check your guess becomes more sophisticated (e.g. Landing page)

Go with Flow

•Don't be rigid in your interviews •Go with the flow, listen to the feedback your customers are providing and structure your conversation accordingly •Ensure you have gathered all the important information you were seeking •Ask questions if needed •Don't take the discussion into a tangent •Don't lead your customers to give you specific responses

Opportunity Sources

•Each one of us is uniquely shaped by our interests and experiences that leads us to identify certain opportunities. That is, the opportunities that are visible to us might not be visible to others unless they have the same interests and experiences. While there may be many sources that influence opportunity identification (e.g., work, hobbies, research etc.), on a broad-level they can be classified as: 1. Interest-driven 2. Problem-focused 3. Observation-fueled - For instance, the founders of Rover.com, a platform that connects dog owners with service providers such as dog walking, boarding etc., were motivated to start their business because of their love for their pooches, and this passion turned into a $300 million business. Whereas in the case of HearGlass, a company that seeks to develop a better hearing aid, the founder's experience with existing hearing aids led him to identify a business opportunity and develop HearGlass. -Still others like the co-founder of Veridesk, Jason McCann, saw an opportunity and got the product idea when he observed one of his office colleagues putting his computer on top of cardboard box so that he could stand up and work instead of sitting all day working on his computer. While these three opportunities have different sources, it should be noted that there could be an overlap between these opportunity sources. For instance, a business idea could be both interest-driven as well as problem-focused. Below we discuss some of the advantages and drawbacks of the above listed opportunity sources.

Customer Types

•Individual Vs. Company •Customer Vs. User •One-sided market or multi-sided market

Types of Entrepreneurship

•Necessity-based •Self-employment Job Substitution •Opportunity-based •Growth oriented •Job Creation

Factors of a Value Map

•Products and Services: Your value proposition is likely to be composed of various types of products and services: 1.Physical/tangible: Goods, such as manufactured products 2.Intangible: Products such as copyrights or services such as after-sales assistance 3.Digital: Products such as music downloads or services such as online recommendations 4.Financial: Products such as investment funds and insurances or services such as the financing of a purchase

Interest-Driven Opportunities

•The advantage of starting a business based on your interests is that you probably have good knowledge about that domain and are passionate enough to put time and effort into executing the business idea. This could help you in understanding the entrepreneurial activities that you should perform to execute your business idea. Researchers have suggested that passion towards a domain can help fuel entrepreneurial activities and keep one motivated when things get tough. An added advantage of being driven by your passion is that you already have a better understanding of your customer's needs and this could help you in serving them well. •A good example of an entrepreneur who started a venture based on his interest is the founder of Birdhouse skateboard company, Tony Hawk. So far in his career, Tony has successfully identified several other business opportunities and ventures, including his philanthropic Tony Hawk foundation that helps to build skate parks in underprivileged areas. •On the downside, passion towards the domain could obscure your perspective and constrain your ability to adjust your business idea and/or strategy based on feedback. You could become emotionally invested in your idea and might be unwilling to change or discard the idea even after you receive negative feedback. This unwillingness to adapt entrepreneurial actions based on the feedback received will likely lead to failure. •As mentioned previously, interest-driven opportunities could overlap with problem-focused opportunities. Based on your interest and experience in that domain you might have noticed a problem or identified a market gap that you can potentially exploit.

Problem-Focused opportunities

•While some problem-focused opportunities might overlap with your interests, there is a strong likelihood that you might identify a problem in an area in which you have low interest but the challenge of solving the problem might have gotten your inventor juices flowing. Inventors and scientists typically have cognitive frames that help them identify and solve problems, however, everyday entrepreneurs could also have this mindset. A frequent or chance encounter with a problem could get you thinking about a better way to do something. There are many examples around us that provide evidence that entrepreneurs can turn out to be good inventors, or vice versa. ❖It is important to note here that inventors are different from entrepreneurs in that inventors invent (make/design) new products, whereas entrepreneurs might not only could make/buy a new product but also identify a market for it and sell the product, in the process creating a company. Can you think about any examples of this? I will provide you with a hint, the guy who designed and built the Apple-1 personal computer and the guy who marketed and sold it, can you guess who they are? •As the identification of problem focused opportunities are triggered by a problem that you have personally encountered (or by seeing someone close to you experiencing the problem), you already have good knowledge of the existing problems and potential ways through which it can be solved. The advantage of working on problem-focused opportunity is that you have a chance to solve a vexing problem that is bothering a number of other individuals and your solution could make life better for many. You might find the pursuit of such opportunities meaningful and this might motivate you to expend effort and attention towards solving the problem leading to the development of unique solution(s). Working on problem-focused opportunities can be challenging and would likely require a lot of experimentation to develop various iterations of the solution that properly address the problem. You might not necessarily have the skill set to solve the problem and must be willing to learn and acquire new knowledge and/or assemble a team that can work together. Also the problem could be misidentified and assumed to be bigger than it actually is. As individuals we experience biases, which might lead us to assume that many others are also experiencing the same problem as we are. The reality could be that only a few other individuals perceive that as a problem

Pain Relievers

•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 or that prevent them from doing so. • - Relevance: A pain reliever can be more or less valuable to the customer. Make sure you differentiate between essential pain relievers and ones that are nice to have.

Gain Creators

•explicitly outline how you intend to produce outcomes and benefits that your customer expects, desires, or would be surprised by, including functional utility, social gains, positive emotions, and cost savings. • - Relevance: A gain creator can produce more or less relevant outcomes and benefits for the customer just like we have seen for pain relievers. Make sure you differentiate between essential and nice to have gain creators.