Value Proposition

Why care about customer validation, did Apple not launch the iPhone with no validation?

I’ve heard this a few times, and just recently at an incubator Lean Startup meeting. Entrepreneurs can be miffed by the Lean Startup requirements to spend so much time looking for customer validation. After all, Steve Jobs (as well as Akio Morita, Mr Sony) are known for rejecting customer research, stating that customers do not know what they want until you build it for them.

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It is a myth to believe that Steve Jobs built the iPhone in isolation of customer validation. Steve Jobs was very much aware of the needs and problems of mobile phone users. And he built the iPhone to respond to those needs. I was at MacWorld’s iPhone announcement and saw first hnd how Steve was in tune with that users wanted – from a phone, an iPod and a mobile internet device (the three pillars of the iPhone as he described it). He clearly spoke of the complexity of the UI of mobile phones, boasting a bunch of features like address books and cameras that no one knew how to turn on or use. He knew the need that people had to be able to do simple internet queries while away from their desk, to find the address of a restaurant, get a map of their location, or some quick fact-checking.

The foundation of the iPhone had strong customer validation. The reliance on touch however (and the lack of a physical keyboard) was a bet however, one that could not easily have gotten customer validation (besides internal beta users). Several tech CEOs saw that as a wild failing bet (Mr Ballmer’s for example), because they thought that they had sufficient customer validation that a physical keyboard was a requirement. Apple’s genius was in changing the conversation from “physical vs touch keyboard” (which they would likely have lost) and to “complete touch interface with intuitive powerful new gesture-based interactions (pinching, zooming, swiping, etc)” that was so compelling overall that people were willing to trade off the accuracy of the physical keyboard for the power and versatility of the all-touch interface.

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Customer validation and engineering creativity both have their place in great product development – external customer validation is needed to understand the problem area and need, from a customer perspective; internal engineering creativity is needed to deliver a unique innovative implementation of a solution to those needs.

Visually build your Value Proposition with a Value Proposition Canvas

Building a good value proposition can be challenging. There are various models available for going about it, and I’ve used some over my years of experience in planning new products and businesses at Microsoft. I found that many are fine models to explain a value proposition, but are poor tools to build one from scratch.

I use a slightly modified version of the Value Proposition Canvas to coach value prop development. The original canvas was set up from Business Model Generation author Alex Osterwalder.

    • it is a customer-centric tool for matching customer pains and gains with product benefits (many value prop models tend to be product-centric and result in a “all-benefits” approach to value prop definition);
    • it is a visual tool that makes it straightforward to develop your value prop step-by-step.

The (Visual) Value Proposition Canvas

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On the lef side of the canvas you will detail your audience or your customer side of the value proposition:

      • who is your customer are and what their overall intent is ((not in an abstract way but in the context of the business relationship you want to establish with them);
      • what jobs or tasks they will undertake in their role, what needs they will have to do so and what problems they encounter;
      • their gains or what will make them more successful, gets them to celebrate, that will they seek to get more of;
      • their pains or what will impede their success, keeps them up at night, that they will seek to get less of
      • The right side is all about you and your offer. This is where you will list:

        • what market you operate in, who your competitors, or alternatives your customer could substitute for your services if you did not exist;
        • the specific features and benefits that your product/offer delivers that tie directly to the Jobs/Tasks/Needs?problems of your audience;
        • the gains boosters, or ways in which your offer enables or increases the stated customer gains & successes;
        • the pain relievers, or ways in which your offer prevents or decreases the stated customer pains or failures
        • The middle area is where you make the connection between the pains and gains of your audience and the boosters and relievers of your offer to arrive at your value proposition.

Here is an example of a value proposition canvas filled out for Tesla Motors Model S (you may need to open the image in a new browser window to see the text in larger font):

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Finding your Product Market Fit and Value Proposition

Have you achieved Product-Market Fit? Do you have your Value Proposition? And what is the difference anyway?

Value propositions and Product-market fit are related. You can’t have one if you don’t have the other.

Product-market-fit is a development milestone. In the Lean Startup approach, you reach that milestone when you’ve iterated through a build-measure-learn loop and have found the sweet spot for your product, when it responds clearly to the needs of your audience, the feedback you are getting is positive and your product adoption becomes much easier and starts to accelerate. In other words, you are no longer pushing a square peg in a round hole!

Value proposition is a fundamental building block of your business model, a foundational element for all your marketing, communication and sales tools. Value proposition is a statement:

  • of the benefits your customers get from your offer, and you differ from the competition
  • of why they should buy, from you
  • of how your customers are getting their ROI from your offering
Your Value Proposition is an internal-only “tool”. Companies do not communicate their Value Proposition statements. You use a value proposition to inform your marketing (messaging and positioning), advertising and sales efforts.

An example – the original iPod

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Product-Market Fit: when Apple decided to enter the portable music player, they went through build-measure-learn loops to arrive at their final design. They tried models with different UI models and mechanisms.. They acquired and improved music management software to facilitate the transfer of music files from a Mac/PC to the device. They also looked at different models to buy new songs to add to the library and device. And at some point, the loop produced the product-market-fit equilibrium they launched with: a device based on a tiny hard drive, capable of storing 1,000 songs, managed with a scroll wheel interface, connecting to a Mac/PC music library managed by dedicated, simple to use, software (iTunes) with access to an online store for the purchase of individual songs at $0.99 in addition to whole albums.

Value Proposition: the original iPod value proposition would have been “Fit 1000 songs in your pocket, with a simple UI to manage your music on the device and your PC, and a store with millions of individual songs available for $0.99)”.

Some other great value propositions

  • Pizza Hut: “Fresh, hot pizza delivered to your door in 30 minutes or less, or it’s free”
  • Square: “Accept credit cards and increase your business revenue, without the hassle and expenses of dedicated equipment and fees, using your smartphone”
Having a great value proposition is must-have for your product or business success. They will prove to be an essential building block of any communication you will generate, and they help focus your efforts on the elements that will really matter and make a difference in your marketplace.