Value Proposition Canvas – SKCI Business Strategy Tool
The Value Proposition Canvas was created by Dr. Alexander Osterwalder as a tool to understand the relationship between an organisation’s value proposition and its customer profile.
It is a useful tool to make sure an organisation’s strategy is aligned with the market they wish to serve. It can be used when assessing a company’s current position but is more often used to assess how strategy would match up with the intended customer.
When To Use The Value Proposition Canvas
Whether you are looking to assess the current value proposition of your organisation, or if you are pursuing a new strategy, the Value Proposition Canvas is often a good place to start a discussion.
It clarifies what value current customers get from your products and services. If it is then reworked for potential new types of customers, it can be extended to clarify the extent to which the product or service is relevant to these new market segments.
How To Use The Value Proposition Canvas
Firstly, decide on which customer group you are targeting. Be as specific as possible, so that you can see exactly how that group of customers views the product.
It is better to do the canvas several times, for different customers, rather than attempting to shoehorn different groups into one category of ‘generic customer’.
Fill in the circle with their job requirements, pains and gains. Try to think about how this specific customer segment uses your product and how they would interact with this.
- Job to be done: The functional elements that the customer needs to be fulfilled and drives them to buy a product/service.
- Gains: Values that the customer wants to achieve and aspects that make them want to use it again.
- Pains: Negative aspects which customers go through when using other services and detract from the product. (Sometimes referred to as fears)
In the Square box list your product’s features, gain creators and pain relievers. Your product and service should ideally match up with the wants, pains and gains of your customer.
Analyse the way in which your product works with the values of the customer in order to understand what direction you need to go to please your ideal customer segment.
Another important element to consider is the organisations that could replace you by being better aligned with your customer’s values. It can be worth thinking about your competition and what features they supply.
At this point you will have a lot of information to consider, here are some questions to help spark discussion:
- What are the underlying jobs to be done, pains and gains of the selected customer?
- How do the benefits of our products and services address those jobs, pains and gains?
- How does the experience of using our product or service align with the customer’s expectations?
- What changes could we make to the way we describe our product that would make it a better fit with the customers?
Now let’s look at how this tool can be used in relation to our fictitious technology company NewTechNow. The first stage in using the tool is to decide on who our customer is.
NewTechNow creates software for industrial and commercial robotic process automation. While they have a range of customers, the canvas is most effective when we focus on one specific group, in this case an insurance firm looking to automate customer facing processes.
In this example the product fits exactly with what the customer needs to achieve. The pains are relieved and the gains will entice the insurance firm to continue to use the new software.
Therefore, the insurance company is an ideal market to target and open up a new revenue stream.
How Does This Fit Into The 5KQ Strategy Framework?
SKCI’s unique 5 Key Question (5KQ) strategy framework gives our clients an effective way of managing strategy development. The Value Proposition Canvas answers both question one, ‘Where are we now?’ and question three, ‘What are we going to do (differently?)’. But is most often used for question three as a way for an organisation to align strategy with its customer’s needs and clarify the value that customers get from the products and services they purchase.
Our framework allows you to ask the right questions at the right time and provides a clear structure for the development of your strategy. Question three is based on you deciding what strategy you want to pursue, and the Value Proposition Canvas is an effective way to consider how and whether the planned changes align with your customers’ needs and wants.
If your intended value proposition doesn’t align with the target market, then re-evaluate your strategy!
Additional Strategy resources, including blank worksheets in PowerPoint and Word format, are available from the SKCI website: www.skcinv.com/business-strategy-resources