... where visionaries, game changers, and challengers discuss business models
For those who may not yet have seen the blog post, Alex has created a new tool as an addition to the canvas - the customer value canvas. It can be found through the link at the bottom of the Hub home page, or here
One of the most difficult challenges an innovation practitioner faces is reconciling all the different theoretical approaches, and variations on leading approaches. Often we are faced with incompatible or contradictory approaches and are left to reconcile the differences or adapt the approaches to make them compatible.
A great example of how approaches can be integrated is the collaboration between Alex Osterwalder and Steve Blank. The addition of the business model canvas to the customer development model (CDM) provided a strong tool to describe what Steve Blank instinctively knew was a key component of the model. The addition of the CDM to the business model canvas provided a process for the business model innovation in a start-up, entrepreneurial environment, to complement the existing business model innovation process in BMG. Steve Blank further extended the integration by the addition of the Lean/Agile product development as a method in "The Start-up Stack".
This new canvas tool takes integration in a different direction, vertical, by creating a 'plug-in' that helps one work out the details of the overall business canvas. Think of it as taking a portion of the canvas (value prop and customer segments) and blowing them up to focus on the details of that relationship. It is also is of great assistance in helping the client to focus on that part of the canvas and to identify and comprehend the relationship.
For some time now I have been experimenting with a couple of plug-ins to help clients work out the details of their value proposition in the business model. I have used the Value Mapping tool from the Board of Innovation, and the Whiteboard value map that is described in Cooper & Valskovitz's Entrepreneur's Guide to Customer Development. I have also experimented with some of the approaches in Ash Maurya's Running Lean; in particular, identifying three key problems and three solutions.
One of the best approaches I have plugged into the customer-value proposition analysis is the 'job-to-be-done' approach of Clayton Christensen and Mark Johnson. I use it in a table that has three columns. The first identifies the potential customers. The second column identifies the job each of these has to get done with which we can help, The third column identifies the need that customer has to get the job done. The 'need' becomes the value proposition in the model. By looking at column one we can identify key groupings of customers with similar jobs to form segments. Column three allows us to group based on value proposition and develop bundles of products and services.
I like this new tool by Alex and will be interested to see what the Hub community thinks of it and how it can evolve.
I am new to this discussion so I may be addressing things that have already been bashed out, and if that is the case please bear with me.
I note in your comments, that one of the three columns in your analysis tool is labelled 'Need'.
One of the problems I wrestle with regularly are the differences between need, which is often readily identified, demand and desire, both of which are less easily identified. In my experience people are more interested in their desires than their needs, unless those needs are within the lower echelons of Maslow's heirarchy of needs, and I'm not sure there is a driving level of demand or desire to resolve these higher needs.
As an example, it is well recognised that there is a strong need for improved numeracy skills in UK businesses. Govenmental bodies and academic institutions regularly state the size of the need and quote various statistical measure to justify that this need is real, but I do not see much desire from those lacking in numeracy skills to improve them. There are some who actively seek to improve, but the need clearly outstrips desire. Additionally where does demand fit into the equation? I do not see demand to be the same as desire and the demand for numeracy skills is clearly from businesses and institutions who recognise the need. So my question is: Can we really use need as the basis for value proposition, when it is desire that we need to measure?
Okay, this is not an easy one to work through simply. There is an unfortunate complexity that can be created by using a term such as "need" which can be used in so many different ways and contexts. So let me be clear about the context in which I am using it.
The focus on need (an essential or very important requirement) stems from the work of Clayton Christensen, Mark Johnson and others at Harvard Business School around the shift in thinking about the "job-to-be-done". This concept is to have the job the person is trying to accomplish as the fundamental unit of analysis, rather than the customer (demographics or characteristics) being the focus. The classic case study here is Hilti, a construction tool manufacturer. For those unfamiliar with it, the position is people don't buy drills because they want to own a drill. They buy a drill because they have a job to do - drill a hole. It is that job the product manufacturer has to address.
Christensen has also discussed this in light of a fast food chain that wanted to improve its sales of its milkshakes. I won't go into the details here but there are lots of links available on You Tube. The important factor is to focus on here is what the person 'needs' (requires) to get that job done effectively.
Steve Jobs had his own version of this relating to solving people's problems. His take was on understanding what problems, or pains, a person has related to a product or service, or what they hope to gain by an improved product or service. He was adamant you should never ask what your customer 'wants' (desires) as they don't know the art of the possible when it comes to solutions. There was a great quote (apocryphal or not) from Ford "If I had asked my customers what they wanted, they would have said 'faster horses'."
When it comes to designing a value proposition, one should never ask the customer what they want as a solution, for the most part they don't know what is possible only what is currently available. You should focus on what jobs they are trying to accomplish or problems they are trying to solve and what they need (require) from you in order to do that job or solve that problem.
Understanding the particular pains and gains related to that job or problem associated with a client segment becomes your deeper understanding of the customer, and how the value proposition has to be designed to create the most value for that customer segment.
Thanks for explaining. I am aware of the needs in the context explained, and I can see why you wouldn't ask the customer. I guess I was being devil's advocate with respect to desire and demand. What you have highlighted is that what people 'need' is a solution to a problem, I would see that as a desire to have the problem solved. Your second column positions a product/service that satisfies their 'need'. In the context you portray I would find your analysis tool very helpful.
It's funny how things evolve. This new integration to the BMC addresses questions that I posted here a while ago about "interests" and how to create some sort of mechanism to negotiate a potential client's interests with one or more value propositions. The approach Alex takes here nails it and, frankly, answers those earlier questions. It also provides opportunities for businesses to create KPIs that will help gauge how well products and services are responding to customer needs, etc. Bravo!
As an experiment, I've attempted to integrate the BMC and the VPC...
Note that I've adapted the "Financial Perspective" to more of a "Measurement Perspective" using a Triple Bottom Line framework (Planet, People, Profit) on the bottom.
Note also that I've shifted the Key Partner window (consideration) to the middle of the diagram to symbolize how KPs might be leveraged for almost anything.
I like it Kenneth.
I find the VPC visually daunting (too much going on). Placing it "inside" the traditional canvas gives it context and makes it easier for me.
Also like you adapted measurements.
I might re-draw it a little. One concern that I have already is that I've placed the VPC within that upper portion of the drawing in a way that might suggest that there is only one VP or CS but overall, I think integrating the drawings might help.
The adapted measurements are straight out of Triple Bottom Line (Planet, People, Profit) which is how I'm now using the larger BMC with clients.
Think it is better as it retains the original canvas layout.
Something has been lost in translation of the ideas I stated in my original post.
The integration to which I referred is the inter-connectivity of ideas and tools. How one set of ideas or different tools support and extend each other to develop a more comprehensive understanding. That should not be confuse with the desire to create a single comprehensive view that combines these tools and views.
Making an approach or tool more complex in the interest of being more 'comprehensive', does not necessarily make it better. Often it makes it more difficult to work with and the value of the approach, i.e. its simplicity, can be compromised. One can even lose the underlying structure that is core to the conceptual model. Frequently I see this happening when people reconfigure the canvas based on their logic.
I believe it is better to keep these tools separate and use them to extend the analysis by separating out and studying, as in the case of the value-proposition canvas, or by adding in dimensions, as in the customer development model.
I didn't personally take on the idea of integrating the two models from the original post. I came up with that idea on my own and it's something that I do often to test how models or ideas might relate to one another. In this case, I think it is important to try and do that for a few reasons:
a) The VPC has elements that relate directly to the BMC;
b) Entrepreneurs who may be considering how/when to launch or who may be using a lean launch approach may want to try and connect these models in the context of such thinking; and,
c) There is definitely a conceptual framework in the VPC that is implied but not really explored in considering the same major elements within the BMC.
It is for this last reason that I often asked myself "How does the BMC relate to the 'interests' between a VP and CS?" The VPC model answers that question by showing how the interests align by digging deeper or perhaps "earlier" in the process.
I'm not sure that it is better to use the tools separately. I think that it's best to explore how they can be used to better serve the entrepreneur in the discovering of an emerging business. For that to happen, integrative thinking may actually be more important than anything. How they might best fit together remains another question. My own personal conclusion, so far, is that the VPC precedes the BMC in terms of "launch viability" and can be best though of as a multiple layer above or before the BMC's completion.
As for adding triple bottom line to the measurement perspective (which Alex originally calls the financial perspective), I think that's completely reasonable. After all, emerging sustainable (or even not-for-profit enterprises) need to measure their success and where else would such long-term metrics go? In my view, they belong along the "bottom" of the model.
It's a little bit limiting, in my view, to suggest otherwise. Now, I personally think that the original BMC configuration (with TBL added) makes the most sense... But that's just my own opinion. Trying out other positions, patterns, or representations can help others arrive at their own conclusions, of course, but suggesting that people NOT do that doesn't sound right to me. After all, if people didn't try things differently how would innovation happen?