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Value Proposition Canvas

The Business Model Canvas is brilliant. It has been used for several years now and it's benefits are evident. Meanwhile some of it's drawbacks are evident as well. In my opinion the major drawbacks lie in the field of customer value and market, competition and alternatives. In this module, we will focus on the relation between value proposition and customer segments in the Business Model Canvas. I have based this module on the work of: Alexander Osterwalder and the team of Business Model Generation, Derek Abell end Peter J. Thomson (credit to them!)

Figure 1: evolution of the value proposition
Step 1:
Business Model Canvas
Step 2:
Abell
Step 3:
Osterwalder
Step 4:
Thomson
Step 5:
De Witte
Value Proposition
(business perspective)
Technology
(benefits & features)
Products & Services
Gains
Pains
Features
Benefits
Experience
Product Features
Customer Benefits
User Experience

Value to Customer
Costs to Customer
Customer Segments
(customer perspective)
Customer Groups &
Function
(needs and wants)
Jobs to be done
Gain creators
Pain relievers
Needs
Wants
Fears

Substitutes
Customer Desires
(needs and wants)
Customer Anxieties
(fears, worries and sorrow)
Jobs to be done

Competitors and
Alternatives
(substututes)

Urgency
Will to sacrifice
Availability of means
Link to Google Sheet

Quick links:

Step 1: The relation between value proposition and customer segments in Business Model Canvas:

In the Business Model Canvas, the relation between the Value Proposition (actually Customer Value) and the Customer Segments is very weak. Neither the "what" nor the "why" questions are properly answered. From the Business Model Canvas we take the Customer Segments field and use it to portray the customer perspective. We define the Customer Groups and define their desires and anxieties. We take the Value Proposition field and use it to portray the Value Proposition and define the features, benefits and user experience for our service or product.

Figure 2: advanced value proposition
Key Partners
Key Activities
Value Proposition

Product Features
Customer Benefits
User Experience

Value to customer
minus
Costs to customer
=
Value Proposition
Customer Relationships
Customer Segments

Customer Desires
Customer Anxieties
Jobs to be done

Competitors
and
Alternatives

Urgency
Will to sacrifice
Availability of means

Key Resources Channels
Costs Reveneus

Step 2: Adding "why" through Abell Analysis:

Initially I used the Abell Analysis to build the reasoning between:
  • "customer segments", 
  • the obvious and hidden "needs, wants and anxieties" (Function in Abell) and 
  • the "benefits, features and user experience" (Technology in Abell) 
The Function in Abell tells you "why" your customers are going to buy from you and not from your competitors. Its hard to figure out the "hidden" needs, wants and anxieties, so you need to check your assumptions by checking "why" your customers have placed an order with you or "why" they have decided not to buy from you or not to buy al all.

Always do the Abell Analysis and revisit it every day! It has proven to be my most powerful strategy tool.

Figure 3: Abell Analysis
Customer GroupCustomer Anxiety or Desire (need or want)Your Value PropositionCompetitors, alternatives and their value proposition
    
    
    
    

Step 3: Osterwalder adds the Value Map and Customer Value Canvas to his Business Model Canvas.

In January 2010, Alexander Osterwalder proposes an add-on for his Business Model Canvas, to strengthen the relation between Value Proposition and Customer Segments. He calls it the Value Map or the Customer Value Canvas. 

Read the following articles by Osterwalder, they are very useful:

Step 4: Thomson adds more Marketing and Psychology to the the Value Proposition Canvas

In 2013 Peter Thomson writes an article on how the Business Model Canvas and the Value Proposition Canvas by Osterwalder miss empathy for the customer and he comes up with different perspective on the Value Proposition Canvas that I really like. His objections to Osterwalders model are:
  • The product proposition side isn’t grounded enough in marketing, copywriting and persuasion techniques. It doesn’t guide the user into creative thinking and honest self-evaluation.
  • The customer side isn’t grounded enough in behavioural psychology or customer behaviour research. It doesn’t guide the user into deep empathy for their customers or draw out enough new insights.
    (Peter J. Thomson)
He has created a canvas to guide startups into examining the human experience of their customers. This canvas contains questions and sections that manoeuvre users of the canvas into thinking through the customer experience.

The customer side (always start on the customer side) Want, needs and fears, replace Jobs to be done, pains and gains. This is not strait translation, its just a different way of looking at the matter. Same goes for the product side whereby Product/services, Pain Relievers and Gain Creators are replaced by Features, Benefits en the User Experience. To me this model makes more sense than Osterwalders, but you can use either model. Read Peter J. Thomson's Article!

Step 5: Nils de Witte adjusts terms a bit and re-introduce "Job to be Done"

What I like most about Thomson's is the introduction of Fears (anxieties), User Experience (which I think is essential) and Substitutes (which are not addressed in the BMC at all). What I miss in Thomson's model is the "Job to be Done" (Excellent explanation of Job to be done by Clay Christensen) So I propose you use the hybrid model below, combining the models by Osterwalder and Thomson:


Edible version:
Value Proposition Canvas
ProductCustomer
Benefits:
Customer Experience:
Anxieties:
Job to be done:
Features:Desires:
Company:Competition:
Customer Group:Alternatives:
Value Proposition:Assumptions:
(c) StudentsInc. 2015

Step 6: Bringing it all together:

In the end it all comes together.

Customer Segments:
  • Needs and wants become Desires (De Witte)
  • Fears become Anxieties (De Witte)
  • Substitutes become Competitors and Alternatives (De Witte)
  • Urgency, Will to Sacrifice and Availability of Means are added (De Witte)
Value Proposition:
  • Features, Benefits and User Experience stay unchanged (Thomson)
  • Value to Customer and Costs to Customer are added (De Witte)
  • Value to Customer minus Costs to Customer = Value Proposition (De Witte)
Advanced value proposition
Key Partners
Key Activities
Value Proposition

Product Features
Customer Benefits
User Experience

Value to customer
minus
Costs to customer
=
Value Proposition
Customer Relationships
Customer Segments

Customer Desires
Customer Anxieties
Jobs to be done

Competitors
and
Alternatives

Urgency
Will to sacrifice
Availability of means

Key ResourcesChannels
CostsReveneus


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