How to Create Compelling Value Propositions That Turns Prospects into Customers

How to Create Compelling Value
Propositions That Turn
Prospects into Customers
October 2014 Presentation
Alex Osterwalder, Co-Founder strategyzer.com

Join the conversation on Twi!er
@ThueLMadsen #KISSwebinar

Alexander Osterwalder - Strategyzer.com - @alexosterwalder
Alex is an entrepreneur, speaker and business model innovator.
Together with Professor Yves Pigneur he invented the Business
Model Canvas, a practical tool to visualize, challenge and (re-) invent
business models. The Canvas is used by leading organizations
around the world, like GE, P&G, Ericsson, and 3M.
Alex is a frequent keynote speaker and has held guest lectures in top
universities around the world, including Stanford, Berkeley, MIT,
IESE and IMD.

Join Alex on Twi!er
@AlexOsterwalder #KISSwebinar

10m
or 1b+
The Business Model Canvas
Designed for: Designed by: Date: Version:
Key Partners Key Activities Value Propositions Customer Segments
Key Partners Customer Relationships
Key Activities Value Propositions Customer Segments
Channels
Gains
Revenue Streams
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com
Gains
Copyright Business Model Foundry AG
Channels
Gains
Channels
Gains
search execution
Channels
Gains
Revenue Streams
Key Resources
Cost Structure
designed by: Business Model Foundry GmbH, Switzerland
www.businessmodelgeneration.com
design testing
Revenue Streams
Key Resources
Cost Structure
Customer Relationships
com
Gain Creators
Pain Relievers Pains
Products
& Services
Customer
Job(s)
The Value Proposition Canvas
Value Proposition Customer Segment
The makers of Busines Model Generation and Strategyzer strategyzer.com
com
Gain Creators
Products
& Services
Customer
Job(s)
Channels
Key Resources
Cost Structure
com
Gain Creators
Products
& Services
Customer
Job(s)
Revenue Streams
Key Resources
Cost Structure
com
Gain Creators
Products
& Services
Customer
Job(s)
Revenue Streams
Key Resources
Cost Structure
com
Gain Creators
Products
& Services
Customer
Job(s)
Channels
Revenue Streams
Key Resources
Cost Structure
Gains
com
Gain Creators
Products
& Services
Customer
Job(s)
[Source: design squiggle adapted from Damien Newman, Central]

zoom out
zoom in
Canvas Design
customers want and then keeping them aligned with customers want in Post-Search.
Value Proposition Design shows you how to use the Proposition Canvas to Design and Test great value sitions in an iterative search for what customers want. proposition design is a never-ending process in which
need to Evolve your value proposition(s) constantly it relevant to customers.
Manage the messy and non-linear
process of value proposition design and
reduce risk by systematically applying
adequate tools and processes.
Test Evolve
Tools Search Post-Search
Progress
1 2 3

1
1.0 Context
1.1 Customer Profile
1.2 Value Map
1.4 Fit

1.0
Context: Business
Model Canvas

Channels
Revenue Streams
Key Resources
Cost Structure
tells the story of how
you create, deliver,
and capture value (for
your organization)

Channels
Revenue Streams
Key Resources
Cost Structure

Outcome
If a Pain reliever or Gain creator doesn't Fit
anything, it may not be creating customer
value. Don't worry if not all pains/gains are
checked – you can't satisfy them all. Ask
yourself, how well does your Value Proposi-tion
really fit your Customer?
71
zooming into the value proposition
Channels
Revenue Streams
Key Resources
Cost Structure

A VALUE PROPOSITION …
describes the benefits
customers can expect from
your products and services

Create Observe
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.
Fit
Outcome
If a Pain reliever or Gain creator anything, it may not be creating value. Don't worry if not all checked – you can't satisfy yourself, how well does your really fit your Customer?
value map customer profile

customer jobs
what customers are trying
to get done in their work
and in their lives
task to perform, problem to solve, needs to satisfy
Job context
Customer context may impose example, when are driving kids is Job importance
It is important not all important life because, to significant insignificant other find a or because felt or often, when consequences.

“ ”
Jobs-to-be-done offers a
clear way to innovate
– Clay Christensen, HBS

The focus should be on
what jobs customers
are trying to get done.
– Tony Ulwick, Founder Strategyn
“
”

Job context
Customer context may impose example, when are driving kids is Job importance
It is important not all important life because, to significant insignificant other find a or because felt or often, when consequences.
What are the jobs-to-be-done
of a potential Tesla
buyer?
Upper Middle
Class Male
$100k+ Income
commute
to work
personal
mobility
be different
from others
occasional
long dist.
trip
convey an
image of
success
in sync with
personal
values

The can customer ǃɲ What does much ǃɲ What are that ǃɲ How your missing, annoy ǃɲ What your getting certain ǃɲ What customers afraid ǃɲ What they or awfully ǃɲ What’s E.g. worries?
ǃɲ What make? way?
ǃɲ What from investment their customer pains
describe bad outcomes,
risks, and obstacles
related to customer jobs

The can customer ǃɲ What does much ǃɲ What are that ǃɲ How your missing, annoy ǃɲ What your getting certain ǃɲ What customers afraid ǃɲ What they or awfully ǃɲ What’s E.g. worries?
ǃɲ What make? way?
ǃɲ What from investment their What are the pains of
Tesla buyer? (i.e. his
problems, risks,
obstacles, frustrations…)
lack of
charging
stations
accident
and harm
buy before
price drop
fear of
dead
battery
laughed at
lack of
space
commute
to work
frequent
charging
above
average
maintenance
aircon
draining
battery
Upper Middle
Class Male
$100k+ Income
personal
mobility
be different
from others
occasional
long dist.
trip
convey an
image of
success
in sync with
personal
values

The can customer ǃɲ Which happy? money ǃɲ What would ǃɲ How what ǃɲ What easier? curve, ǃɲ What customers good, ǃɲ What searching or ǃɲ What they relief ǃɲ How failure? or ǃɲ What of lower quality?
Link xxx
customer gains
describe the more or less
expected benefits the
customers are seeking

Link xxx
What are the gains a
Tesla buyer wants? (e.g.
required or desired
outcomes and benefits)
design
high-end
battery
tech
brand
find my way recognition
(gps)
compliments
from friends
range of
250km to
350km
self-driving
seating 4-5
perform like
a sports car
high safety
ratings
Upper Middle
Class Male
$100k+ Income
commute
to work
personal
mobility
be different
from others
occasional
long dist.
trip
convey an
image of
success
in sync with
personal
values
lack of
charging
stations
accident
and harm
buy before
price drop
fear of
dead
battery
laughed at
lack of
space
frequent
charging
above
average
maintenance
aircon
draining
battery

Link xxx
Which jobs REALLY
matter to customers?
Upper Middle
Class Male
$100k+ Income
commute
to work
personal
mobility
be different
from others
occasional
long dist.
trip
convey an
image of
success
in sync with
personal
values
range of
250km to
350km
lack of
charging
stations
accident
and harm
buy before
price drop
fear of
dead
battery
laughed at
lack of
space
frequent
charging
above
average
maintenance
aircon
draining
battery
design
high-end
battery
tech
brand
find my way recognition
(gps)
compliments
from friends
self-driving
seating 4-5
perform like
a sports car
high safety
ratings

Link xxx
convey an
image of
success
personal
mobility
commute
to work
be different
from others
in sync with
personal
values
occasional
long dist.
trip
design
range of
250km to
350km
perform like
a sports car
high-end
battery
tech
brand
recognition
compliments
from friends
high safety
ratings
frequent
charging
fear of
dead
battery
accident
and harm
laughed at
lack of
space
aircon
draining
battery
Upper Middle
Class Male
$100k+ Income
Which jobs REALLY
matter to customers?

! REMEMBER
your solution is not part
of the customer profile!

com
Gain Creators
Gains
Products
& Services
Customer
Job(s)
The makers of Business Model Generation and Strategyzer strategyzer.com

products & services
A list of all the products
and services a value
proposition is built around

Link xxx
Model S
60-85 kWh
8 year
battery
warranty
options
convey an
image of
success
personal
mobility
commute
to work
be different
from others
in sync with
personal
values
occasional
long dist.
trip
design
range of
250km to
350km
perform like
a sports car
high-end
battery
tech
brand
recognition
compliments
from friends
high safety
ratings
frequent
charging
fear of
dead
battery
accident
and harm
laughed at
lack of
space
aircon
draining
battery
Upper Middle
Class Male
$100k+ Income

pain relievers
describe how your
products and services
alleviate customer pains

Link xxx
charging:
45-90 km/h
5+2 seats
range of
350km to
450km
Model S
60-85 kWh
how your products and
services kill your
customer’s pains
convey an
image of
success
personal
mobility
commute
to work
be different
from others
in sync with
personal
values
occasional
long dist.
trip
design
range of
250km to
350km
perform like
a sports car
high-end
battery
tech
brand
recognition
compliments
from friends
high safety
ratings
frequent
charging
fear of
dead
battery
accident
and harm
laughed at
lack of
space
aircon
draining
battery
highest
safety ever
by NHTSA
Upper Middle
Class Male
$100k+ Income
8 year
battery
warranty
options

gain creators
describe how your
products and services
create customer gains

Link xxx
how your products and
services create gains
your customers expect,
want, or desire
convey an
image of
success
personal
mobility
commute
to work
be different
from others
in sync with
personal
values
occasional
long dist.
trip
design
range of
250km to
350km
perform like
a sports car
high-end
battery
tech
brand
recognition
compliments
from friends
high safety
ratings
frequent
charging
fear of
dead
battery
accident
and harm
laughed at
lack of
space
aircon
draining
battery
focus on
design &
style
performance
0-100km/h
4.4s - 6.2s
high-tech
feel: 17’’
touch screen
Upper Middle
Class Male
$100k+ Income
Model S
60-85 kWh
8 year
battery
warranty
options
charging:
45-90 km/h
5+2 seats
range of
350km to
450km
highest
safety ever
by NHTSA

will
for
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 jury value merciless Are you
addressing
essential
customer
gains?
Are you
addressing
extreme
customer
pains?
Fit

will
for
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.
performance
0-100km/h
4.4s - 6.2s
Model S
60-85 kWh
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 jury value merciless Are you
addressing
essential
customer
gains?
Are you
addressing
extreme
customer
pains?
Fit
convey an
image of
success
personal
mobility
commute
to work
be different
from others
in sync with
personal
values
occasional
long dist.
trip
design
range of
250km to
350km
perform like
a sports car
high-end
battery
tech
brand
recognition
compliments
from friends
high safety
ratings
frequent
charging
fear of
dead
battery
accident
and harm
laughed at
lack of
space
aircon
draining
battery
focus on
design &
style
high-tech
feel: 17’’
touch screen
8 year
battery
warranty
options
charging:
45-90 km/h
5+2 seats
range of
350km to
450km
highest
safety ever
by NHTSA
Upper Middle
Class Male
$100k+ Income

Design, Test, Repeat
design
test

design
ASSESSMENT
OBSERVATION
PROTOTYPING
TO
TESTING
FAIL ED
FROM
TESTING
STARTING POINTS
BUSINESS MODEL
7 QUESTIONS

def.
prototyping
(pro·to·typ·ing)
* the process of building quick,
cheap, and rough study models
* to learn about the desirability,
feasibility and viability of
alternative solutions

? ?
?
?
?
?
?
-Zoom +Zoom
Zoom out to the
bigger picture to
analyze if you can
profitably create,
deliver, and capture
value around this
particular customer
value proposition.
Zoom in to the
detailed picture to
investigate if the
customer value
proposition in your
business model
really creates value
for your customer.
Are you creating value for your business?
The Business Model Canvas makes explicit how you
are creating and capturing value for your business.
Are you creating value for your customer?
The Value Proposition Canvas makes explicit how
you are creating value for your customers.
? ?
?
?
?
?
?
-Zoom +Zoom
Zoom out to the
bigger picture to
analyze if you can
profitably create,
value around this
particular customer
value proposition.
Zoom in to the
detailed picture to
investigate if the
customer value
proposition in your
business model
for your customer.
169
* Working preview content for private review only, do not distribute — © Copyright Osterwalder, Pigneur, Bernarda, Smith, and Papadakos
? ?
?
?
?
?
?
-Zoom +Zoom
Zoom out to the
bigger picture to
analyze if you can
profitably create,
value around this
particular customer
value proposition.
Zoom in to the
detailed picture to
investigate if the
customer value
proposition in your
business model
for your customer.
* Working preview content for private review only, do not distribute — © Copyright Osterwalder, Pigneur, Bernarda, Smith, and Papadakos
adapt the business model &
the value proposition

? ?
?
?
?
?
?
-Zoom +Zoom
Zoom out to the
bigger picture to
analyze if you can
profitably create,
value around this
particular customer
value proposition.
Zoom in to the
detailed picture to
investigate if the
customer value
proposition in your
business model
for your customer.
describes
how you
create value
for your
customer
describes
how you
create value
for your
business

Why do businesses fail ?
. Test those first!

2014
http://media.100firsthits.com/2013/11/Startup-Mistakes-Infographics.png

n
customer development & lean startup
en-re
customers
ou
customer
discovery
customer
validation
customer
creation
company
building
PIVOT
SEARCH EXECUTION
[Source: based on Startup Owner’s Manual (2013) Blank & Dorf]

3 3.1 What to test
3.2 Testing step-by-step
3.4. Testing library (in the book)
3.4 Bringing it all together

3.1
What to Test
TEST
214
215

Testing the circle
Provide evidence
showing “what”
customers care
about (the circle)
before focusing on
“how” to help them
(the square)

Provide evidence
showing that your
customers care
about how your
products and
services kill pains
and create gains
Testing the square

Testing the rectangle
Business Model Canvas
Key Partnerships
Cost Structure
Key Activities Value Propositions Customer
Relationships
Key Resources Channels
Customer
Segments
Revenue Streams
15
Provide evidence
showing that the
way you intend to
create, deliver, and
capture value is
likely to work

HYPOTHESIS
3.2
Testing
Step-by-Step
TEST
222
223

Test Card
+
-
Extract Hypotheses Prioritize Hypotheses Design Test
TESTING VALUE PROPOSTIONS

Learning Card
+
!
-
Prioritize Tests Run Tests Capture Learnings Make Progress

What needs to be true
for this feature to work
and create value? ->
Hypotheses
com
Gain Creators
SAVE 20% SALES Gains
ON
PROCESS
Products
& Services
Customer
Job(s)
The makers of Business Model Generation and Strategyzer strategyzer.com

customer segment X wants to
save 20% on sales process
talk to 40 potential customers and give
them a trackable link with more information
how many of the interviewees
clicked on the follow-up link
50% clicked the link

SUCCESS
3.3
Experiment
Library
TEST
240
241

A mix of experiments
Scientist
DIRECT CONTACT with customers
Learn why and how to improve
INDIRECT OBSERVATION of customers
Learn how many and how much
Lab studies
ǃɲ Learning prototype/MVP → p. 222
ǃɲ Life-size prototypes → p. 226
ǃɲ Wizard of Oz → p. 223
Anthropologist → p. 114
For field studies
Sale actions
ǃɲ Mock sales → p. 236
ǃɲ Pre sales → p. 237
ǃɲ Crowdfunding → p. 237
Tracking actions
ǃɲ Ad and link tracking → p. 220
ǃɲ Landing page → p. 228
ǃɲ Split testing → p. 230
Participatory design
and evaluation
ǃɲ Illustrations, storyboards,
and scenarios → p. 224
ǃɲ Speedboat → p. 233
ǃɲ Product box → p. 234
ǃɲ Buy a feature → p. 235
Journalist → p. 110
For interviews
Detective → p. 108
For data analysis
WHAT CUSTOMERS DO
Observe their behaviors
WHAT CUSTOMERS SAY
Observe their attitudes

3.4
Bringing it
all Together
ASSESSMENT
OBSERVATION
PROTOTYPING
TO
TESTING
FAIL ED
TEST
FROM
TESTING
STARTING POINTS
BUSINESS MODEL
7 QUESTIONS
SUCCESS
HYPOTHESIS 264
265

The
testing
process
2
Extract
your
Hypotheses
3
Design
Your
Tests
Test Card
4
Enter
the Learning
Loop
5A
UNCERTAIN
test
more
Learn
Measure
Build
1 (6)
(re)Shape your
ideas
5
Capture
Learnings
and Next
Actions
5C
INVALIDATED
iterate or pivot
Learning Card

3
Design
Your
Tests
4
Enter
the Learning
Loop
5
Capture
Learnings
and Next
Actions
6
Measure
Progress
Learn
Customer
Discovery
Customer
Validation
Customer
Creation
Company
Building
5C
INVALIDATED
iterate or pivot
5A
UNCERTAIN
test more
5B
VALIDATED
progress towards
next element
Measure
Build
2
Extract
your
Hypotheses
1 (6)
(re)Shape your
ideas
Learning Card Test Card
The
testing
process

Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
To verify that, we will
And measure
We are right if
Critical:
Test Cost: Data Reliability:
Time Required:
The makers of Busines Model Generation Copyright Business Model Foundry AG and Strategyzer
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Copyright Business Model Foundry AG The makers of Busines Model Generation and Strategyzer
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
Test Card
Test Name
Assigned to
We believe that
Deadline
Duration
And measure
We are right if
Critical:
Time Required:
invalidated
backlog build measure learn done
learn more
validated
back to the drawing
board: iterate or pivot
your design
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
step 3: learnings and insights
From that we learned that
step 4: decisions and actions
Therefore we will
Data Reliability:
Action Required:
Copyright Business Model Foundry AG The makers of Business Model Generation and Strategyzer
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
Therefore we will
Data Reliability:
Action Required:
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
Therefore we will
Data Reliability:
Action Required:
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
Therefore we will
Data Reliability:
Action Required:
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
Therefore we will
Data Reliability:
Action Required:
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
Therefore we will
Data Reliability:
Action Required:
Learning Card
Insight Name
Person Responsible
step 1: hypothesis
We believed that
Date of Learning
step 2: observation
We observed
Therefore we will
Data Reliability:
Action Required:
advance to next step:
move on in your quest to
turn your idea into reality
3
Tests
Learning Learning
Test Card
Card
Card
Learning
Card
Learning
Card
Learning
Card
Learning
Card
Learning
Card
Test Card
Test Card
Test Card
Test Card Test Card
Test Card
Test Card
Test Card
Test Card
Test Card
Test Card
4
Insights
& Actions
5
Measure Progress
2H
ypotheses
1 (5)
(re)Shape your
ideas
Progress board
(Kanban)

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Alexander Osterwalder
Entrepreneur and business model innovator
Strategyzer
@AlexOsterwalder
Thue Madsen
Marketing Associate
KISSmetrics
@ThueLMadsen

How to Create Compelling Value Propositions That Turns Prospects into Customers

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